Which Florida aircraft repair and modification sales-tax exemptions applied to a registered Florida defense contractor?

Plain-English summary

A Florida registered dealer repaired, refurbished, and upgraded aircraft and components in connection with defense-related work. It asked whether several aircraft and industrial-equipment exemptions applied.

The Department approved the exemptions in Fla. Stat. Sec. 212.08(7)(ee) and (rr). Labor for repair and maintenance of qualifying aircraft—including aircraft over 2,000 pounds maximum certified takeoff weight—was exempt. Replacement engines, parts, and equipment were also exempt when installed in Florida on qualifying aircraft being repaired or maintained.

Three other claims were not currently available:

• Sec. 212.08(5)(i): the taxpayer had not shown that the modifications were performed under an FAA supplemental type certificate, and the FAA database did not identify it as an STC holder.
• Sec. 212.08(5)(j)1.b.: the taxpayer had not completed the required defense-technology facility certification and did not hold the tax-exemption permit.
• Sec. 212.08(7)(fff): the taxpayer was a registered Florida dealer, not a qualifying nonresident aircraft owner.

The TAA said the taxpayer could potentially qualify for the first two after completing the statutory requirements and might also qualify under Sec. 212.08(5)(d), which it had not requested.

What this means for you

Aircraft repair businesses

Separate ordinary repair and maintenance from FAA-certified modifications. Repair labor and installed replacement parts can qualify under (ee) and (rr), while the modification exemption requires STC documentation.

Defense contractors

Defense-related work alone did not establish the machinery exemption. Certification and a tax-exemption permit were required.

Common questions

Were qualifying aircraft repair labor and installed parts exempt? Yes, under Sec. 212.08(7)(ee) and (rr) on the stated facts.

Did the taxpayer qualify for the aircraft-modification exemption? Not yet; it had not shown that it held the required FAA supplemental type certificate.

Could it use the nonresident-aircraft exemption? No. It was a registered Florida dealer.

Citations and references

• Fla. Stat. Sec. 212.08(7)(ee), (rr), and (fff)
• Fla. Stat. Sec. 212.08(5)(i), (j)1.b., and (d)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 22A-016R

Original ruling text

Florida Department of Revenue Jim Zingale
Technical Assistance and Dispute Resolution Executive Director

EPARTMENT OF REVENUE

FLORIDA

5050 West Tennessee Street, Tallahassee, FL 32399 floridarevenue.com

Question: Whether Taxpayer qualifies for the exemptions provided in ss. 212.08(5)(i) and (j)1.b.,
212.08(7)(ee), (rr), and (fff), F.S., as provided in the Department of Revenue’s previously issued
Letter of Technical Advice (LTA) dated February 7, 2019' and as discussed during the February 22,
2022, Revenue Estimating Conference?

Answer: Based upon the information provided and the applicable statutory provisions, Taxpayer
qualifies for the exemptions provided under s. 212.08(7)(ee) and (rr), F.S.

Taxpayer does not currently qualify for the exemptions provided under s. 212.08(5)(i) and (j)1.b.,
F.S., but may qualify upon completion of the requirements set forth in the statute.

Taxpayer is a registered dealer engaged in business in Florida, and therefore, does not qualify for the
exemption to nonresidents as provided in s. 212.08(7)(fff), F.S.

October 21, 2022

Via email:

Re: Technical Assistance Advisement — TAA #: 22A-016R
Sales and Use Tax — Aircraft Modifications
(Taxpayer)
Sections 212.02, 212.05, 212.06, 212.07, 212.08, 212.0801, and 212.21, Florida Statutes
(F.S.)
Rules 12A-1.007 and 12A-1.014, Florida Administrative Code (F.A.C.)

BP +:
Dear a:

This is in response to your letter dated, June 21, 2022, requesting this Department’s issuance of a
Technical Assistance Advisement (TAA) pursuant to Section (s.) 213.22, F.S., and Rule Chapter 12-
11 F.A.C., regarding the matter discussed below. Your request has been carefully examined, and the
Department finds it to be in compliance with the requisite criteria set forth in Chapter 12-11, F.A.C.
This response to your request constitutes a TAA and is issued to you under the authority of s. 213.22,
F.S.

‘Reference Ctrl No. aa

Technical Assistance Advisement
October 21, 2022
Page 2

REQUESTED ADVISEMENTS

You request an advisement that addresses whether Taxpayer qualifies for the exemptions provided
in ss. 212.08(5)(i) and (j)1.b., and 212.08(7)(ee), (rr), and (fff), F.S., as provided in the Department
of Revenue’s previously issued Letter of Technical Advice (LTA) dated February 7, 2019? and as
discussed during the February 22, 2022, Revenue Estimating Conference.

FACTS

Your request states that Taxpayer specializes in advanced concepts and expert-solutions consulting

and commercial services to provide ES training to the ES

es . | 2Xpayer provides specialized x at multiple Florida
HE «0 addition to training, Taxpayer purchases aircraft and aircraft components from yg

(0 vefurbish, repair and upgrade aircraft in Florida for the refurbishment of jy
MEE @sscts as part of the i contract.

You submitted copies of the following documentation and information with your request:

1) Acopy of the February 7, 2019, LTA issued to Taxpayer. Based on the information presented at
that time, the Department determined that Taxpayer would be eligible for the exemptions from
Florida sales and use tax for repairs to aircraft used in its training activities as provided under s.
212.08(7)(ee) and (rr), F.S.

2) A copy Of te iS (SS) -
1
SS GE) 2O0'87.

3) AEN. article published on the [iE website
related to Taxpayer's Si Contract award.

4) | EES. 2cticle criitled ' imme
ES” 0Sishoc by

5) A copy of the February 22, 2022, Revenue Estimating Conference - Analysis on Proposed
Language Sought during the 2022 Legislative Session.

6) Certain documents related tO x Use tax paid in error.

According to the documentation provi, [Ills
ES NS .(S ©esponsible for managing the gy upgrades
used in the J program for ground and flight tests.

To improve and enhance jj aircraft safety and mission effectiveness and to meet existing and
emerging requirements, i 7% GME released a request for white papers (qa
Eder 10 United States Code (U.S.C.) §2371b, Other Transaction (OT) Prototypes via

? Reference Ctrl No. aa.

Technical Assistance Advisement
October 21, 2022
Page 3

OT Agreement aS. with the [iS Following a
technical evaluation of the white papers received, Project Agreement x was
competitively awarded to Taxpayer.*

The BB authorizes and approves J's award of an
@@B contract on a sole-source basis to Taxpayer. The contract supports the
es

program as well as the integration of the into the

legac i aircratt.

supplies and services provided under the J Program include the
HM), inspection, and modification efforts necessary to upgrade

aircraft which include and i Accitionly,
associated I engines from (i (HB will be reconfigured to a
Re Gee) Configuration. As part of the repatriation, the

GE aircraft will undergo comprehensive inspections, repairs, and modifications including:

According to the

1) performing full airframe and engine material condition inspections and resulting repairs;

2) procuring and replacing all airframe and engine high-time components;
3) procurin kits airframe conversion

lengine conversion/overhaul kits;
of which EE will be provided

Ee: en
airframe conversion kits and PO

5) integrating
conversion/overhaul kits.

In addition to the efforts, the resulting contract scope will include the ability to procure and
install kits for, and into, up to ea to ensure
greater standardization, maintainability, sustainability, and pilot safety through a uniform configuration

across the J inventory.

According to the I. EJ contracts article, Taxpayer was awarded a
fixed-price contract, which provides for the procurement of yy

TR errr me The
work is expected to be completed in I. Thirty percent (30%) is to be performed in

with 28% to be completed in J and 2% to be completed in ggg. The remaining work

was to be performed as follOS lll

firm-
kits,

The February 2022 Revenue Estimating Conference addressed proposed changes related to
exemptions for aircraft and aircraft equipment with regard to Florida’s sales and use laws. According
to your request, during the Revenue Estimating Conference, several members expressed that the

Rd
5

Technical Assistance Advisement
October 21, 2022
Page 4

proposed legislative statute changes were redundant because Taxpayer is already exempt under
current law.

With regard to x tax remitted on equipment used in the repair and

maintenance of aircraft, pursuant to s. 212.08(7)(rr), F.S., you submitted sample invoices and a copy

Fa

Based on publicly available information, a typica gg aircraft has a maximum takeoff weight of 24,675
pounds.

LAW AND DISCUSSION

Florida law provides for the imposition of a sales tax upon retail sales of tangible personal property in
this state; the tax is imposed on the sales price of the item sold, unless specifically exempt. See ss.
212.05(1)(a)1.a. and 212.21(2), F.S. The term “sales price” means the total amount paid for tangible
personal property, including any services that are a part of the sale. See s. 212.02(16), F.S. The term
“sales price” also includes “the consideration for a transaction which requires both labor and material
to alter, remodel, maintain, adjust, or repair tangible personal property.” See s. 212.02(16), F.S.
Florida law requires the selling dealer? to collect the Florida sales tax from the purchaser and to remit
the collected tax to the Department. See ss. 212.06(3)(a) and 212.07(2), F.S.

Section 212.06(8)(a), F.S., imposes a use tax on tangible personal property imported or caused to
be imported into Florida for use, consumption, distribution, or storage to be used or consumed in
Florida. It is presumed that tangible personal property used in another state, territory, or the District
of Columbia for six (6) months or longer before being imported into Florida was not purchased for
use in Florida.

Section 212.08, F.S., provides specifically enumerated exemptions to the general rule of taxability,
including several exemptions relating to aircraft.

Section 212.08(5)(d), F.S., provides an exemption from sales and use tax for industrial machinery
and equipment purchased by an expanding business which manufactures tangible personal property
pursuant to federal procurement regulations at fixed locations in Florida. The exemption is
conditioned upon an affirmative showing by the taxpayer to the Department’s satisfaction that the
items are used to increase the implicit productive output of the expanded business by not less than
10 percent (10%).

Under s. 212.08(5)(i), F.S., and Rule 12A-1.007(10)(f), F.A.C., all charges for aircraft modification
services, including charges for parts, equipment, labor and installation performed under authority of
a Supplemental Type Certificate issued by the Federal Aviation Administration (FAA) under 14 C.F.R.
ss. 21.111-21.119 are exempt. The aircraft modifications subject to this exemption are those in which

5 Section 212.06, F.S., defines “dealer” to include “every person who manufactures or produces tangible personal property
for sale at retail; for use, consumption, or distribution; or for storage to be used or consumed in this state.” That section
further defines the term “dealer” as “every person who solicits business through representatives or agents and as a result
receives orders for tangible personal property from consumers for use in this state.” The term “dealer” is further defined to
mean “any person, as used in this chapter, who maintains or has within this state, directly or by a subsidiary, an office,
distributing house, salesroom, or house, warehouse, or other place of business.” See s. 212.06(2)(a), (f), and (g), F.S.

Technical Assistance Advisement
October 21, 2022
Page 5

a product is altered by introducing a major change in design type not great enough to require a new
application for a new type of certificate, as required under 14 C.F.R. s. 21.19. These major changes
require the issuance of Form 337, Major Repair & Alteration (Airframe, Power Plant, Propeller, or
Appliance) and inspection of the changes to the aircraft by the Administrator of the FAA.

Section 212.08(5)(j)1.b.,F.S., provides that industrial machinery and equipment used in defense
technology facilities certified by the Department of Economic Opportunity (DEO) to design,
manufacture, assemble, process, compound, or produce defense technology products® for sale or
for use by these facilities are exempt from Florida sales and use tax. To be eligible to receive the
exemption provided, a qualifying business must apply to Enterprise Florida, Inc. and be certified by
the Florida DEO.

Under s. 212.08(7)(ee), F.S., all labor charges for the repair and maintenance of qualified aircraft
and aircraft of more than 2,000 pounds maximum certified takeoff weight, including rotary wing
aircraft, are exempt from the tax imposed under this chapter. Except as otherwise provided in this
chapter, charges for parts and equipment furnished in connection with such labor charges are
taxable.

Additionally, replacement engines, parts, and equipment used in the repair or maintenance of
qualified aircraft and aircraft of more than 2,000 pounds maximum certified takeoff weight, including
rotary wing aircraft, are exempt from the tax imposed under this chapter if such parts or equipment
are installed on such aircraft that is being repaired or maintained in this state. See s. 212.08(7)(rr),
F.S.

The exemption provided in s. 212.08(7)(fff)2., F.S., pertaining to aircraft owned by a nonresident and
is applicable when the nonresident’s aircraft enters or remains in this state exclusively for purposes
of flight training, repairs, alterations, refitting, or modification. Such purposes shall be supported by
written documentation issued by in-state vendors or suppliers which clearly and specifically identifies
the aircraft.

Taxpayer may request a refund for any tax paid on machinery and equipment qualifying for exemption
under the provisions of s. 212.08(5)(j), F.S. To make a claim for refund, Taxpayer may file an
Application for Refund, Form DR-26S, with the Department. Alternatively, Taxpayer may file a claim
for refund online at https://floridarevenue.com/taxes/compliance/Pages/refunds.aspx. Taxpayer must
file the application for refund within 3 years after the date of payment of the tax.

In this case, Taxpayer provides i training at various J in Florida as

part of a U.S. Department of Defense contract. Based on the documentation and information
provided, Taxpayer’s purchases of labor, replacement engines, parts, and equipment would qualify
for the exemption from Florida sales and use tax provided under s. 212.08(7)(ee) and (rr), F.S., when
used in the repair and maintenance of qualified aircraft and aircraft of more than 2,000 pounds

® “Defense technology products” means “products that have a military application, including, but not limited to, weapons,
weapons systems, guidance systems, surveillance systems, communications or information systems, munitions, aircraft,
vessels, or boats, or components thereof, which are intended for military use and manufactured in performance of a contract
with the United States Department of Defense or the military branch of a recognized foreign government or a subcontract
thereunder which relates to matters of national defense.” See s. 212.08(5)(j)7.c., F.S.

Technical Assistance Advisement
October 21, 2022
Page 6

maximum certified takeoff weight, including rotary wing aircraft (helicopters), ifthe parts or equipment
are installed on the aircraft in Florida.

To qualify for the exemption of aircraft modification as provided in s. 212.08(5)(i), F.S., Taxpayer must
establish that the purchases of parts and equipment furnished or installed in connection with the
modification of an aircraft under an FAA supplemental type certificate (STC) are exempt from Florida
sales and use tax. Taxpayer has not provided documentation indicating that it holds an FAA
supplemental type certificate. Additionally, based on search of the of the FAA’s Supplemental Type
Certificates database’, Taxpayer is not a holder of an STC.

To qualify for the exemption from tax on its qualifying purchases or lease of industrial machinery and
equipment used to design, manufacture, assemble, process, compound, or produce defense
technology products for sales or use by such facilities, Taxpayer must complete the certification
application with Enterprise Florida, which in turn reports its recommendation to the DEO for a final
decision on the certification. There is no record that Taxpayer is certified with the DEO and holds a
tax exemption permit. If approved, the certification will be transmitted to the Department of Revenue
for issuance of the tax exemption permit. For additional assistance, Taxpayer may wish to contact
Enterprise Florida at:

Enterprise Florida (https://www.enterpriseflorida.com)
800 North Magnolia Avenue, Suite 1100

Orlando, FL 32803

Telephone Number: 407-956-5600

Fax Number: 407-956-5599

The exemption provided in s. 212.08(7)(fff)2., F.S., pertains to aircraft owned by a nonresident is
applicable when the nonresident’s aircraft enters or remains in Florida exclusively for flight training,
repairs alterations, refitting, or modifications. As previously discussed, Taxpayer is a registered
Florida dealer, and therefore, would not qualify for an exemption available to “nonresidents.”

CONCLUSION

Based upon the information provided and the applicable statutory provisions, Taxpayer qualifies for
the exemptions provided under s. 212.08(7)(ee) and (rr), F.S.

Taxpayer does not currently qualify for the exemptions provided under s. 212.08(5)(i) and (j)1.b.,
F.S., but may qualify upon completion of the requirements set forth in the statute. Although not
referenced in your request, Taxpayer may also qualify for the exemption provided in s. 212.08(5)(d),
F.S.

Taxpayer is a registered dealer engaged in business in Florida, and therefore, does not qualify for the
exemption to nonresidents as provided in s. 212.08(7)(fff), F.S.

This response constitutes a Technical Assistance Advisement under s. 213.22, F.S., which is binding
on the Department only under the facts and circumstances described in the request for this advice,

’ Airworthiness Directives (faa.gov)

Technical Assistance Advisement
October 21, 2022
Page /

as specified in s. 213.22, F.S. Our response is predicated on those facts and the specific situation
summarized above. You are advised that subsequent statutory or administrative rule changes, or
judicial interpretations of the statutes or rules, upon which this advice is based, may subject similar
future transactions to a different treatment than expressed in this response.

You are further advised that this response, your request and related backup documents are public
records under Chapter 119, F.S., and are subject to disclosure to the public under the conditions of
s. 213.22, F.S. Confidential information must be deleted before public disclosure. In an effort to
protect confidentiality, we request you provide the undersigned with an edited copy of your request
for Technical Assistance Advisement, the backup material and this response, deleting names,
addresses and any other details which might lead to identification of the Taxpayer. Your response
should be received by the Department within ten (10) days of the date of this letter.

If you have any further questions with regard to this matter and wish to discuss them, you may contact
me directly at (850)717-6701.

Best Regards,

Shundia McClean

Shundra McClean

Tax Law Specialist

Technical Assistance & Dispute Resolution

Record ID #7000745325