When did repairs to a paving contractor's dirt-and-rock mining machinery qualify for Florida's industrial machinery exemption?

Plain-English summary

Repairs to machinery qualified when the equipment was committed to mining dirt or rock at a fixed Florida location owned or leased by the miner on a continuing basis. Dirt and rock became tangible personal property when removed through mining.

Site preparation performed for customers did not qualify as fixed-location mining, whether the removed material was sold to outsiders or used on the contractor's other paving jobs. The statute set no minimum waiting period before machinery newly committed to qualifying mining could receive exempt repairs.

If machinery later moved into nonexempt work, future repair eligibility ended. The change was not retroactive and did not disturb exemptions properly claimed during prior qualifying use.

What this means for you

The line was the business activity and site relationship, not merely the material removed. Keep records showing continuing ownership or lease of the mining site and when each machine entered or left qualifying use.

Common questions

Q: Was customer site preparation exempt mining? No.

Q: Did a miner have to wait before claiming the repair exemption? No specific period was stated.

Q: Did later nonexempt use recapture old exemptions? No.

Citations and references

• Fla. Stat. § 212.08(7)(eee)1.–2. — qualifying industrial-machinery repair exemption
• Chapter 99-364, Laws of Florida — exemption effective July 1, 1999
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99A-074

Original ruling text

SUMMARY

QUESTION: Is site preparation an exempt mining activity
when it involves the moving or removal or dirt or rock?
What if the dirt or rock removed in site preparation is to
an outside party? (In which case we would be required to
collect & remit sales tax.) What if the dirt or rock
removed in site preparation is used on another [Taxpayer]
job? What constitutes a fixed location? Is time a
consideration in the definition of a fixed location? Is
equipment/machinery previously used in non-exempt
activities but henceforth committed to exempt activity
subject to the Sales and Use Tax Exemption referred to
above? If so, how much time, if any, must pass before the
exemption applies? What happens if equipment/machinery
previously used exclusively in an exempt activity is moved
to a non-exempt activity? If the exemption is lost, as in
the opinion of your representative, is a tax owed for the
benefit received during its exempt usage?

ANSWER - Based on Facts Below: The mining of dirt and rock
at a "fixed location within this state" would qualify as an
exempt processing or production activity. Site preparation
for others, whether it involves removal of dirt and rock
for sale to outside parties, or whether the removal of
material is for the miner's road paving contracts, would
not constitute a "fixed location". Property that is owned
or leased by the miner, on a continuing basis, would
qualify for the "fixed location" requirement. Once
machinery is committed to exempt mining activities, the
machinery repairs would qualify for the tax exemption. No
specific waiting period or time requirement is established
in the statute. The machinery loses its exemption
eligibility once it is put to use in a non-exempt activity.
The loss of exemption eligibility would not be retroactive,
and the previous tax exemptions claimed would not be
affected.

Dec 16, 1999

Re: Technical Assistance Advisement (99A-074)
XXX ["Taxpayer"]
Sales and Use Tax
Exemption for Repairs to Industrial Machinery
Section 212.08(7), F.S.

Dear :

This is in response to your letter of October 26, 1999, in which
you seek the issuance of a Technical Assistance Advisement
concerning the recently enacted partial tax exemption for
repairs to qualifying industrial machinery, under Section
212.08(7)(eee)1. & 2., F.S. Your letter provides in part:

[Taxpayer] is a paving contractor in XX, engaged in the
mining & sale of dirt and rock as well as site preparation
and paving operations.
...
The following are the issues I would like to be addressed
by the Florida Department of Revenue under the rules and
statutes mention above:

1. Is dirt and rock a tangible personal property and
   subject to the Sales & Use Tax Exemption referred
   to above?

If so:

Is site preparation an exempt mining activity
when it involves the moving or removal of dirt or
rock? What if the dirt or rock removed in site
preparation is sold to an outside party? (In
which case we would be required to collect &
remit sales tax.) What if the dirt or rock
removed in site preparation is used on another
[Taxpayer] job?

2. What constitutes a fixed location? Is time a
   consideration in the definition of a fixed

location?

3. Is equipment/machinery previously used in nonexempt activities but henceforth committed to
   exempt activity subject to the Sales & Use Tax
   Exemption referred to above? If so, how much
   time, if any, must pass before the exemption
   applies.

4. What happens if equipment/machinery previously
   used exclusively in an exempt activity is moved
   to a non-exempt activity? If the exemption is
   lost, as in the opinion of your representative,
   is a tax owed for the benefit received during its
   exempt usage?

RESPONSE

Effective July 1, 1999, Section 212.08(7)(eee) 1. & 2., F.S.
(Created by Ch. 99-364, L.O.F.), provides an exemption on :

1. ... labor charges for the repair of, and parts and
   materials used in the repair of and incorporated into,
   industrial machinery and equipment which is used in
   manufacturing, processing, compounding, or production
   of tangible personal property at a fixed location
   within this state.

2. This exemption applies only to industries classified
   under SIC Industry Major Group Numbers... 14,....

Under subgroup 1499 of Major Group Number 14 (from the 1987
Standard Industrial Classification Manual) is found "Fill Dirt
Pits."

Dirt and rock, once removed from its natural state through the
mining process, would become tangible personal property. The
mining of dirt and rock at a "fixed location within this state"
would qualify as an exempt processing or production activity.
It is the Department's position that site preparation for
others, whether it involves removal of dirt and rock for sale to

outside parties, or whether the removal of material is for the
miner's road paving contracts, would not constitute a "fixed
location."

Property that is owned or leased by the miner, on a continuing
basis, would qualify for the "fixed location" requirement. The
statute does not specify how much time property would have to be
used as a mining site to be considered a "fixed location." A
site preparation job/contract, in which dirt and/or rock are
removed from the customer's site, would not qualify as mining at
a "fixed location."

Once machinery is committed to exempt mining activities, the
machinery repairs would qualify for the tax exemption. No
specific waiting period or time requirement is established in
the statute. The machinery loses its exemption eligibility once
it is put to use in a non-exempt activity. The loss of
exemption eligibility would not be retroactive, and the previous
tax exemptions claimed would not be affected.

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

Jonathan E. Swift
Tax Law Specialist
Technical Assistance and Dispute Resolution
(850) 922-4840

Control No. 39305