Did a relocatable modular asphalt plant qualify as a fixed-location new business when some asphalt was used in the owner's contracts?

Plain-English summary

Florida approved the modular asphalt plant for the new-business machinery exemption. Although relocatable, the plant was not portable and was intended to remain operating at the new site for more than six months, satisfying the rule's fixed-location definition.

The plant would make asphalt both for retail sale and for the owner's real-property improvement contracts. Florida found no requirement that all production be for sale; producing tangible personal property for sale as part of the operation was sufficient under the stated facts.

The ruling also described the temporary exemption permit and the documentation required to seek a refund if tax had already been paid on qualifying machinery.

What this means for you

Relocatable equipment can still operate at a fixed location. Document the planned operating period, production start, eligible purchases, and the part of the output manufactured for sale.

Common questions

Q: Did the plant fail because it could be moved? No.

Q: Did every ton of asphalt have to be sold? No.

Citations and references

• Fla. Stat. § 212.08(5)(b) — industrial machinery and equipment exemption
• Fla. Admin. Code r. 12A-1.096 — new and expanding business requirements and refund procedure
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99A-061

Original ruling text

SUMMARY

QUESTION: Whether the purchase and installation of a
modular asphalt plant at a new location is exempt from
sales and use tax pursuant to s. 212.08(5)(b), F.S.
Although the plant is relocatable, it is not portable.
Once set up, the plant will be in operation for a minimum
of six months. The plant will produce asphalt for both
retail sale and for use in real property improvement
contracts.

ANSWER - Based on Facts Below: A modular asphalt plant,
which is set up for a period of not less than six months,
conforms to the definition of a "fixed location" as
provided by Rule 12A-1.096(1)(a), F.A.C. The exemption
statute requires that tangible personal property must be
manufactured, processed, compounded, or produced for sale.
There is no statutory requirement that the tangible
personal property must be exclusively manufactured,
processed, compounded, or produced for sale. Accordingly,
the modular asphalt plant meets the qualifications for
exemption from sales and use tax.

Nov 16, 1999

Re: Technical Assistance Advisement 99A-061
Sales and Use Tax
New Business Exemption for XXX
Section 212.08(5)(b), F.S.

Dear :

This is in response to your letter of July 7, 1999, which
requests the issuance of a Technical Assistance Advisement
concerning the applicability of the exemption from sales and use
tax pursuant to s. 212.08(5)(b), F.S., to the activities of your
client, XXX (hereinafter "Taxpayer").

FACTS

Taxpayer has purchased and installed a modular asphalt
plant at its new facility at XXX (hereinafter "the Plant").
Although the modular machinery and equipment is relocatable, it
is not portable. The time and cost of setting up the modular
plant is only one-fourth to one-tenth the time and cost
necessary to set up a traditional stationary asphalt plant.
However, the cost to dismantle an operational modular plant,
move it to another location, and set up the plant again is still
a significant expenditure of time and money. Therefore, once
set up, it is Taxpayer's intention to leave the plant in
operation for a time period in excess of six months.

The Plant will produce asphalt for both retail sale and for
use in Taxpayer's own real property improvement contracts.
Productive operations at the Plant are reported to have begun on
August 11, 1999. Since productive operations have just begun,
the percentage of asphalt that will be sold versus the
percentage that will be consumed by Taxpayer in the real
property improvement contracts is unknown at this time. Taxpayer
has not closed down, nor will it close down, another asphalt
production facility owned by Taxpayer for the purposes of
establishing the Plant.

REQUESTED RULING

It is requested that the modular asphalt machinery and
equipment installed at the Plant be approved as qualifying for
exemption from sales and use tax pursuant to s. 212.08(5)(b),
F.S., as a new business.

RELEVANT AUTHORITY

The following passages from the Florida Statutes (F.S.) are
pertinent to the issues in this advisement.

Section 212.08(5)(b), F.S. (1998 Supplement), provides:

1. Industrial machinery and equipment purchased for use in
   new businesses which manufacture, process, compound, or

produce for sale, or for exclusive use in spaceport
activities as defined in s. 212.02, items of tangible
personal property at fixed locations are exempt from the
tax imposed by this chapter upon an affirmative showing by
the taxpayer to the satisfaction of the department that
such items are used in a new business in this state. Such
purchases must be made prior to the date the business first
begins its productive operations, and delivery of the
purchased item must be made within 12 months of that
date....

5. The exemptions provided in subparagraphs 1. and 2. do
   not apply to machinery or equipment purchased or used by
   electric utility communications companies, phosphate or
   other solid minerals severance, mining, or processing
   operations, oil or gas exploration or production
   operations, publishing firms that do not export at least 50
   percent of their finished product out of the state, any
   firm subject to regulation by the Division of Hotels and
   Restaurants of the Department of Business and Professional
   Regulation, or any firm which does not manufacture,
   process, compound, or produce for sale, or for exclusive
   use in spaceport activities as defined in s. 212.02, items
   of tangible personal property....

DETERMINATION

Section 212.08(5)(b), F.S., provides in part an exemption
from sales and use tax to new businesses that manufacture,
process, compound, or produce tangible personal property for
sale. Subparagraph 5. of the exemption statute prohibits certain
specific types of businesses from receiving the exemption. The
production of asphalt is not one of the businesses that are
prohibited from receiving the exemption.

Taxpayer will be manufacturing, processing, compounding, or
producing tangible personal property for sale at a fixed
location. Pursuant to paragraph (1)(a) of Rule 12A-1.096,
F.A.C., the term fixed location includes a plant site, which is
set up for a period of not less than six months in a stationary
manner. The exemption statute does not establish any criteria

or provisions as to the amount or percentage of production at a
facility that must be sold in order to qualify for the
exemption. Accordingly, it is the position of the Department
that Taxpayer qualifies for exemption as a new business pursuant
to the provisions of Section 212.08(5)(b), F.S., and Rule 12A1.096, F.A.C.

Enclosed is Taxpayer's temporary tax exemption permit. The
permit shows an effective date of July 7, 1999, the date that
Taxpayer's application for exemption was received by this
office. The permit carries an expiration date of August 11,
1999, the date that production is reported to have begun at the
Plant.

In the event that sales tax was paid to the modular asphalt
plant vendor, Taxpayer may request a refund of the previously
paid tax. Rule 12A-1.096(5), F.A.C., specifies the procedures
that must be followed in order to obtain a refund of previously
paid taxes on qualifying machinery and equipment. Pursuant to
this rule, before the owner of the qualifying new or expanding
business may request a refund, it is necessary to obtain
certified statements from the vendors, contractors, and
subcontractors who supplied or provided the qualifying machinery
and equipment and paid the sales tax to the State of Florida.
The following is a suggested format for such a certified
statement.

CERTIFIED STATEMENT

__ COMPANY, incorporated in the State of __
STATE, its undersigned officer who is duly authorized,
hereby certifies to __ New/Expanding Business
it has paid sales tax to the Department of Revenue, State
of Florida, totaling the sum of $. Said taxes were
collected by _ COMPANY upon the sales of tangible
personal property as evidenced by the attached invoice(s).

The company further certifies the sales tax for the
attached invoice(s) was paid to the State of Florida in the
month following the date of sale under sales tax number
_______.

Dated at __ COUNTY __, FLORIDA,
this _ day of , 19.

AUTHORIZED OFFICER OF COMPANY
BY: ___.
TITLE: ______.

The above certified statement will not be necessary for
those purchases where Taxpayer self-accrued and remitted the tax
directly to the State of Florida. However, evidence of payment
of the tax must still be provided.

A copy of Form DR-26 is enclosed. That form is necessary
in order to apply for a refund of any taxes that have already
been paid. Please have Taxpayer complete the application and
mail it to the Department of Revenue at the point in time that
it has received the necessary certified statement(s). Please
enclose a photocopy of this advisement with the refund
application. Upon receipt of the properly completed refund
application, the Department's Compliance Enforcement Office will
contact Taxpayer for purposes of verifying the amount of the
refund.

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 advice, 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 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. Your name, address, and any
other details which might lead to identification of the taxpayer
must be deleted before disclosure. In an effort to protect the

confidentiality of such information, we request you provide the
undersigned with an edited copy of your request for Technical
Assistance Advisement, backup material and response within
fifteen days of the date of this advisement.

Sincerely,

Jeffery L. Soff
Tax Law Specialist
Technical Assistance and
Dispute Resolution

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