Could a Florida boat-repair shop buy shop supplies tax-free for resale when it itemized them to customers?

Plain-English summary

The boat-repair facility could buy specifically billed shop materials and overhead items tax-free for resale, then collect sales tax from the boat owner. The customer's supporting printout identified each item and its charge, allowing drill bits, rags, sandpaper, gloves, cleaners, and similar supplies to be treated as sold parts rather than the shop's own overhead.

The facility owed use tax on any exempt-purchased item it consumed without specifically charging a boat owner. Rags or linens supplied by a laundry service could not be treated as resold because they had to be returned. Itemizing taxable supplies also made the entire charge for an otherwise labor-only repair taxable.

What this means for you

The ruling tied resale treatment to a specific, identifiable customer charge. Buying all shop supplies with a resale certificate was not enough; unbilled consumption created use tax.

Common questions

Q: Did the supplies have to become part of the boat? Not under the specific invoicing practice approved here. Detailed billing let overhead items be treated as sold parts.

Q: What happened to supplies used without a customer charge? The shop owed use tax.

Q: Could laundry-service rags qualify? No. The ruling distinguished rented items that had to be returned.

Citations and references

• Fla. Stat. §§ 212.05, 212.02(14)(c) — taxable transactions and repair materials
• Fla. Admin. Code r. 12A-1.006(1)(a), (c) — repair parts and overhead supplies
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99A-053

Original ruling text

SUMMARY

QUESTION: Are shop materials and overhead items purchased
by a boat repair facility and used in the repair and

maintenance of boats and yachts taxable upon purchase when
the facility charges the boat owner in specific detail for

such items?

ANSWER - Based on Facts Below: If the repair facility

charges the boat owner for specific shop materials and
overhead items and itemizes such shop materials and
overhead items on its invoice to the boat owner in

sufficient detail that the charge for each particular

material and item can be identified, the repair facility

may treat such shop materials and overhead items as parts
that are sold to the boat owner. That is, tax is due on

the sale of the shop materials and overhead items to the
boat owner, and the repair facility may purchase such shop
materials and overhead items exempt from tax by presenting
a resale certificate to the vendor. The repair facility

will owe use tax on shop materials and overhead items that
are purchased exempt from tax but that are used or consumed

without being specifically charged to a boat owner.

Oct 04, 1999

Re: Technical Assistance Advisement 99A-053
Sales & Use Tax - Vessels and Related Items
Sections 212.05; 212.02(14)(c), F.S.

Rule 12A-1.006(1)(a), (c), F.A.C.
XXX ("Taxpayer")
F.E.1. # XX

Dear:

This is in response to your letter dated XX, for the

Department's issuance of a Technical Assistance Advisement

("TAA") concerning the above referenced party and matter. Your

letter 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 section

213.22, F.S.

Advisement Requested

You have requested our advisement concerning the taxability of
certain materials and supplies, such as shop rags, tools, and
sandpaper, used in the repair and maintenance of boats and

yachts.

Discussion of Facts

The Taxpayer is engaged in the business, among others, of boat
repair and maintenance. A boat repair generally requires
replacement of some parts and materials. A repair also
generally requires the use of various shop materials or overhead
items, such as tools, rags, sandpaper, and razor blades. Many
of these shop materials and overhead items are discarded after

use.

The Taxpayer charges a boat owner for all labor and material
used in a particular repair job. Included in the parts for

which a charge is made are all shop materials and overhead items
used in a particular job that are purchased in connection with

that job. For example, in the sample billings submitted to the
Department, boat owners were charged for such items as drill

bits, razor blades, brushes, paint rollers and trays, soaps and
cleaners, shop rags, polishing rags, paper towels, masking tape,

scotch brite pads, and rubber gloves.

The Taxpayer purchases all parts, and the types of shop
materials and overhead items listed above, without payment of
sales tax, giving resale certificates to vendors. The Taxpayer
then places the parts, shop materials, and overhead items in its
inventory for bookkeeping purposes. The Taxpayer charges boat
owners sales tax on the total amount of the repair; the invoice

is broken down according to the particular repair, such as

“engine repair" or “install holding tank system," and the

separate charges for labor and materials as to each repair are
set forth. The boat owner is also supplied with a computer
printout of all parts and materials used, including shop

materials and overhead items, together with the charge for each

item.

Law and Analysis

Section 212.05, F.S., provides:

... [E]very person is exercising a taxable privilege who
engages in the business of selling tangible personal
property at retail in this state... or who rents or

furnishes any of the things or services taxable under this
chapter, or who stores for use or consumption in this state
any item or article of tangible personal property as

defined herein and who leases or rents such property within

the state.

Section 212.02(14)(c), F.S., as amended by section 12, Chapter
99-208, L.O.F., provides that the terms "retail sales," "sale at

retail," "use," "storage," and "consumption."

... do not include the sale of materials to a registered
repair facility for use in repairing a motor vehicle,
airplane, or boat, when such materials are incorporated
into and sold as part of the repair. Such a sale shall be
deemed a purchase for resale by the repair facility, even
though every material is not separately stated or

separately priced on the repair invoice.

Rule 12A-1.006(1)(a), F.A.C., provides:
Where parts are furnished by the repairer, the entire
charge the repairer makes to a customer for adjusting,
applying, installing, maintaining, remodeling, or repairing
tangible personal property is taxable....

Rule 12A-1.006(1)(c), F.A.C., provides:

Materials which are actually incorporated into and become a

part of the tangible personal property repaired, remodeled,
or maintained, such as welding rods, solder, body solder,
or other surfacing materials, paint, thinner, bolts, nuts,

etc., are not taxable when purchased by the repairer.
Materials and supplies used by the repairer in making such
repairs, etc., but which do not become a part of the
property repaired are taxable to the repairer as overhead
items. For example: Tools, sandpaper, steel wool, flux,
detergents, and the like are not incorporated into the

repair or remodeling job and are taxable.

The language quoted above in section 212.02(14)(c), F.S., was
intended to clarify existing law, as exemplified by Rule 12A-
1.006(1)(c), F.A.C. The language was intended to emphasize that
the sale of any material that becomes a part of the vehicle,
airplane, or boat being repaired is not subject to sales or use

tax when the material is purchased by the repair facility. All

other materials, supplies, and tools that are used by the repair
facility to complete the repair are generally subject to sales

or use tax when purchased by the facility.

However, if the repair facility charges the boat owner for
specific shop materials and overhead items and itemizes such
shop materials and overhead items on its invoice to the boat
owner in sufficient detail that the charge for each particular
material and item can be identified, the repair facility may

treat such shop materials and overhead items as parts that are
sold to the boat owner. That is, tax is due on the sale of the
shop materials and overhead items to the boat owner, and the
repair facility may purchase such shop materials and overhead
items exempt from tax by presenting a resale certificate to the
vendor. The repair facility will owe use tax on shop materials
and overhead items that are purchased exempt from tax but that
are used or consumed without being specifically charged to a

boat owner.

A special note should be made that shop rags and other items
sometimes commonly referred to as "linens" can be considered to
be sold to the boat owner only if they have been purchased by
the repair facility. Rags and linens supplied to the repair

facility by a linen or laundry service cannot be considered

leased for resale, since such rags and linens must be returned

to the service.

The treatment by the repair facility of shop materials and
overhead items as parts in accordance with the practice
described above means that such materials and items will be
treated as parts for all purposes, including the situation where
the repair otherwise involves only labor. The entire charge for
a "labor only" repair becomes subject to tax when the repair
facility itemizes and charges for shop materials and overhead

items.

This response constitutes a Technical Assistance Advisement
under section 213.22, F.S., which is binding on the Department
only under the facts and circumstances described in the request
for this advise, as specified in section 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, your request and
related backup documents are public records under Chapter 119,
F.S., which are subject to disclosure to the public under the
conditions of section 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 15 days of the date of this

letter.

Sincerely,

Robert D. Heyde

Senior Attorney

Technical Assistance & Dispute Resolution

Control #38129