Could a county facilities manager buy janitorial services for resale and provide repair materials tax-free?

Plain-English summary

Florida rejected the proposed resale treatment for subcontracted janitorial services. The facilities manager was not primarily engaged in selling janitorial services and was not registered as a Florida dealer, so it could not issue a valid resale certificate to the janitorial provider.

Repairs to tangible personal property involving materials and labor could be exempt when the manager accepted the county's valid consumer's certificate of exemption and the county paid the manager directly.

Materials incorporated into real property required a stricter direct-purchase structure: the county had to pay directly, take title, and assume the risk of loss before incorporation into the realty.

Common questions

Could the manager buy janitorial services tax-free for resale? No.

Could tangible-property repairs be exempt? Yes, with a valid county exemption certificate and direct county payment.

What was required for real-property materials? Direct county purchase, title, payment, and risk of loss before installation.

Citations and references

• Fla. Stat. § 212.08(6)
• Fla. Admin. Code R. 12A-1.0161
• Fla. Admin. Code R. 12A-1.094
• Fla. Stat. § 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99A-010

Original ruling text

SUMMARY

The Taxpayer was engaged in the business of real estate
management. The Taxpayer was contemplating bidding on a
contract to perform services to the County. The Taxpayer
would enter into a fixed fee contract to provide a range of
products and services to the County in support of a County
owned parcel of improved real estate. The services include
janitorial, maintenance, repair, management and
administration of the facility, window cleaning, grounds
maintenance, roof repair, trash disposal, etc. Many of the
services would be subcontracted. The Taxpayer was not
registered to collect and remit tax in Florida.

The Taxpayer sought advisement on whether it could purchase
janitorial services for resale to the County. This TAA
ruled that since the Taxpayer was not primarily engaged in
the business of selling janitorial services and furthermore
was not registered in Florida, the Taxpayer could not
extend a valid resale certificate to the janitorial service
provider and purchase the janitorial services for resale to
the County.

The Taxpayer also sought advisement on whether materials
and supplies provided directly by the Taxpayer as part of
the contract with the County were subject to tax. This TAA
explained that charges for repairs of tangible personal
property involving materials and labor would not be subject
to tax as long as the Taxpayer accepted a valid consumer's
certificate of exemption at the time of sale and payment
was made directly to the Taxpayer by the County. For real
property transactions, this TAA explained that in order for
a sale to the County to be exempt, payment must be made
directly to the Taxpayer by the County and, the County must
directly purchase, hold title to and assume the risk of
loss of the tangible personal property prior to its
incorporation into realty.

The Taxpayer was engaged in the business of real estate
management. The Taxpayer was contemplating bidding on a
contract to perform services to the County. The Taxpayer

would enter into a fixed fee contract to provide a range of
products and services to the County in support of a County
owned parcel of improved real estate. The services include
janitorial, maintenance, repair, management and
administration of the facility, window cleaning, grounds
maintenance, roof repair, trash disposal, etc. Many of the
services would be subcontracted. The Taxpayer was not
registered to collect and remit tax in Florida.

The Taxpayer sought advisement on whether it could purchase
janitorial services for resale to the County. This TAA
ruled that since the Taxpayer was not primarily engaged in
the business of selling janitorial services and furthermore
was not registered in Florida, the Taxpayer could not
extend a valid resale certificate to the janitorial service
provider and purchase the janitorial services for resale to
the County.

The Taxpayer also sought advisement on whether materials
and supplies provided directly by the Taxpayer as part of
the contract with the County were subject to tax. This TAA
explained that charges for repairs of tangible personal
property involving materials and labor would not be subject
to tax as long as the Taxpayer accepted a valid consumer's
certificate of exemption at the time of sale and payment
was made directly to the Taxpayer by the County. For real
property transactions, this TAA explained that in order for
a sale to the County to be exempt, payment must be made
directly to the Taxpayer by the County and, the County must
directly purchase, hold title to and assume the risk of
loss of the tangible personal property prior to its
incorporation into realty.

Mar 05, 1999

Re: Technical Assistance Advisement 99(A)-010
Sales and Use Tax - Services Provided to County Government
Sections: 212.05, 212.08, F.S.

Rules: 12A-1.001, 12A-1.0091, 12A-1.0161, 12A-1.051, F.A.C.
Petitioner: XXX (herein "Taxpayer")
FEI#: XX
XXX ("County")

Dear :

This letter is in response to your petition received
January 4, 1999, for the Department's issuance of a Technical
Assistance Advisement ("TAA") concerning the above referenced
party and matter. Your petition 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.

DISCUSSION OF FACTS

You provided the Department with the following information
concerning the matter under advisement:

Taxpayer is an S corporation engaged in the business of
real estate management. The Taxpayer is contemplating
bidding on a contract to provide services to County.
County is an exempt governmental entity. The Taxpayer
would enter into a fixed fee contract to provide a range of
products and services to the County in support of a County
owned parcel of improved real estate. The services include
janitorial, maintenance, repair, management and
administration of the facility, window cleaning, grounds
maintenance, roof repair, trash disposal, etc. Many of the
services are subcontracted. The products supplied would
include light bulbs, filters, plumbing and electrical
supplies, janitorial supplies, etc. In bidding on the
project, the Taxpayer is required to specify its charges
for services by category (e.g., janitorial, trash, repairs,
etc.). The Taxpayer is not registered in Florida to collect
and remit tax.

REQUESTED ADVISEMENTS

You seek advisement on the following: 1) Can the Taxpayer
purchase taxable services such as janitorial services for
resale to the County? 2) Are the materials and supplies
provided directly by the Taxpayer as part of the contract with
the County subject to sales or use tax?

DISCUSSION, ANALYSIS, AND CONCLUSION OF LAW

Section 212.05, F.S., provides in pertinent part:

It is hereby declared to be the legislative intent that
every person is exercising a taxable privilege who engages
in the business of selling tangible personal property at
retail in this state... or who... furnishes any of the
things or services taxable under this chapter....

(1) For the exercise of such privilege, a tax is levied on
each taxable transaction or incident, which tax is due and
payable as follows:...

(j) 1. At the rate of 6 percent on charges for all:...

b. Nonresidential cleaning... services (SIC Industry Group
Number 734).

Rule 12A-1.0091, F.A.C., provides in pertinent part:

(1)(a) ... [N]onresidential cleaning services are subject
to tax. Nonresidential cleaning services are those
services (not involving repair) rendered to maintain the
clean and sanitary appearance and operating condition of a
nonresidential building and include, but are not limited
to, the following services which are subject to the State's
sales and use tax:...

2. Building cleaning services, interior;...

3. Housekeeping (cleaning services) on a contract or fee
   basis;...

4. Janitorial services on a contract or fee basis;

12. Lighting maintenance services (bulb replacement and
cleaning);
...

14. Maintenance of buildings (except repairs);...

15. Window cleaning (interior or exterior)....

Rule 12A-1.0161, F.A.C., provides in pertinent part:

(4)(a) Sales of services made directly to... any county...
are exempt from tax....

(5)(a) A sale of a service is a sale for resale and is
exempt from sales tax when the service is later sold under
the following conditions:

1. The service provides a direct and identifiable benefit
   to a single client or customer of the purchaser; and

2. The purchaser of the service buys the service pursuant
   to a written contract (or other evidence sufficient
   for audit purposes) with the seller which specifically
   designates the client or customer on whose behalf the
   purchaser is buying the service; and

3. The purchaser of the service separately states the
   value of the service in the charge for the service
   when it is subsequently sold to the purchaser's client
   or customer; and

4. The selling dealer obtains a resale certificate from a
   purchasing dealer who is primarily engaged in the
   business of selling taxable services. In order to
   purchase a service tax exempt as a sale for resale,
   the purchaser's sales tax number must end in digits 92
   or 93.

5. When a sale of a service is made to a person who
   claims to be entitled to purchase services for resale,
   the seller of the service being a duly registered

dealer pursuant to Chapter 212, F.S., shall obtain
from the purchaser of the service a resale
certificate.
...

You have requested advice on whether the Taxpayer is
allowed to purchase taxable services for resale. From the facts
presented, it appears that the Taxpayer is engaged in the
business of real estate management. The facts further provide
that the Taxpayer is contracting with a janitorial service
provider to provide cleaning services on the County's premises.
Pursuant to s. 212.05(1)(j), F.S., nonresidential cleaning
services performed in Florida are subject to tax, unless such
sales are for resale and a valid resale certificate is provided
at the time of sale, or such sales are made directly to an
exempt entity which provides a valid consumer's certificate of
exemption at the time of sale. The Taxpayer is not primarily
engaged in the business of selling taxable services.
Furthermore, the Taxpayer is not registered for sales tax
purposes. Therefore, the Taxpayer could not extend a valid
resale certificate to the janitorial service provider and
purchase the taxable services for resale to the County. If the
Taxpayer directly provides the cleaning service for the County,
please note that the Taxpayer would be required to pay tax on
all materials and supplies used in performing the cleaning
services.

Secondly, you have requested advice on whether tangible
personal property repairs involving materials and supplies
provided by the Taxpayer as part of the contract with the County
are subject to sales or use tax. If the Taxpayer makes repairs
of tangible personal property in which the Taxpayer is required
to provide materials and supplies, the Taxpayer would not be
responsible for collecting sales tax on charges for such
repairs, as long as the Taxpayer accepted a valid consumer's
certificate of exemption from the County at the time of sale and
payment was made directly to the Taxpayer by the County.
Furthermore, the Taxpayer would not be required to accrue use
tax on the materials and supplies used in repairing the tangible
personal property of the County. Please note that the Taxpayer
would have to be registered to extend a valid resale certificate

at the time the materials and supplies are purchased or the
vendors would be required to charge and collect tax on such
sales. Furthermore, please note that only those materials and
supplies that are directly used in performing the repairs for
the County would be exempt from the tax. Any materials and
supplies that were consumed by the Taxpayer would be subject to
tax.

For real property transactions, please refer to Section
212.08(6), F.S., and Rule 12A-1.094, F.A.C., a copy of which I
have enclosed. Rule 12A-1.001(9), F.A.C., states that in order
for a sale to the County to be exempt, "payment must be directly
to the Taxpayer by the County." Rule 12A-1.094(2) and (3),
F.A.C., state that the purchase of the materials is taxable to
the Taxpayer as the ultimate consumer where the Taxpayer is
deemed to be the purchaser. If the purchaser of the materials
is the County, however, the transaction is exempt. For there to
be an exempt transaction, the County must directly purchase,
hold title to and assume the risk of loss of the tangible
personal property prior to its incorporation into realty, and
satisfy various factors contained in Rule 12A-1.094, F.A.C.

Section 212.08(6), F.S., 1998 Supplement, provides the
following regarding sales to governmental units:

There are also exempt from the tax imposed by this chapter
sales made to the United States Government, a state, or any
county, municipality, or political subdivision of a state
when payment is made directly to the dealer by the
governmental entity. This exemption shall not inure to any
transaction otherwise taxable under this chapter when
payment is made by a government employee by any means,
including, but not limited to, cash, check, or credit card
when that employee is subsequently reimbursed by the
governmental entity. This exemption does not include sales
of tangible personal property made to contractors employed
either directly or as agents of any such government or
political subdivision thereof when such tangible personal
property goes into or becomes a part of public works owned
by such government or political subdivision. A
determination whether a particular transaction is properly

characterized as an exempt sale to a government entity or a
taxable sale to a contractor shall be based on the
substance of the transaction rather than the form in which
the transaction is cast. The department shall adopt rules
that give special consideration to factors that govern the
status of the tangible personal property before its
affixation to real property. In developing these rules,
assumption of the risk of damage or loss is of paramount
consideration in the determination....

Rule 12A-1.094, F.A.C., lists several factors (bidding,
indemnification, inspection, acceptance, delivery, payment, and
storage) which govern the status of tangible personal property
prior to its affixation to real property when determining
whether the sale is to the County or to the Taxpayer. However,
the assumption of risk of damage or loss during the time that
the building materials are physically stored at the job site
prior to their installation or incorporation into the project is
the paramount consideration. The County must assume all risk of
loss or damage for the tangible personal property during that
period. To establish that it has assumed that risk, the County
should purchase, or be the insured party under, insurance on the
building materials.

To summarize, the conditions that must be met to satisfy
the requirements of Section 212.08(6), F.S., and Rule 12A-1.094,
F.A.C., and establish that the County rather than the Taxpayer
is the purchaser, include:

1. The County must execute the purchase orders (which
   must include the County's consumer's certificate of
   exemption number) for the tangible personal property
   involved in the contract, although the Taxpayer may
   present the County's purchase orders to the vendors of
   the tangible personal property.

2. The County must acquire title to, and assume liability
   for, the tangible personal property at the point in
   time when it is delivered to the job site up until the
   time it is incorporated as real property;

3. Vendors must directly invoice the County for supplies;

4. The County must directly pay the vendors for the
   tangible personal property; and

5. The County must assume all risk of loss or damage for
   the tangible personal property involved in the
   contract, as indicated by the County's acquisition of,
   or inclusion as the insured party under, insurance on
   the building materials.

Charges for management and administration services would
not be subject to tax if the Taxpayer's contract specifically
provided that the Taxpayer would be providing services only and
that the County would be responsible for purchasing any tangible
personal property associated with such services. The Taxpayer
would not be required to charge tax on separate and distinct
charges for trash disposal and grounds maintenance, as these are
not taxable services.

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, as specified in s. 213.22, F.S. Our response is
predicated upon 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 from that
which is expressed in this response.

You are further advised that this response and your request
are public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of s. 213.22, F.S.
Your name, address, and any other details that might lead to
identification of the taxpayer must be deleted by the Department
before disclosure. In an effort to protect the confidentiality
of such information, we request you notify the undersigned in
writing within 15 days of any deletions you wish made to the
request or this response.

Sincerely,

Leigh L. Ceci

Control# 36193
Enclosures