Fla. Admin. Code R. 12A-1.096
(1) Definitions – The following terms and phrases when used in this rule have the meaning ascribed to them except where the context clearly indicates a different meaning:
(e) “Physically comparable” means the similarity or equivalency of the characteristics of the items of tangible personal property being manufactured, processed, compounded or produced. Physical comparability applies to the units used to measure the increase in productive output of an expanding business.
1. Example: All models of microwave ovens made by a manufacturer, regardless of specific features, would be physically comparable. However, if the manufacturer also made coffee makers, the coffee makers would not be physically comparable to microwave ovens, even though both items are generally considered small kitchen appliances.
2. Example: A beverage manufacturer produces a variety of soft drinks in various sized cans and bottles. The production of the various sized cans and bottles of soft drinks is not physically comparable. However, production is physically comparable when converted to a common physical unit, such as gallons of product.
(f) “Production process” or “production line” means those industrial activities beginning when raw materials are delivered to the new or expanding business’ fixed location and generally ending when the items of tangible personal property have been packaged for sale, or are in saleable form if packaging is not done. However, the production process may include quality control activities after the items have been packaged (or are in salable form if packaging is normally not done), such as good manufacturing practices as mandated by the Federal Food and Drug Administration to detect adulterated food or food that has been prepared, packaged, or held under unsanitary conditions.
1. The production process may encompass more than one fixed location if the business transfers work-in-process from one fixed location to a second fixed location for further manufacturing, processing, compounding, or production. For example, a company purchases machinery and equipment to produce raw orange juice at one fixed location, and this raw orange juice is transferred as work-in-process to a second fixed location where the company will use the raw orange juice to make five different products.
2. A production process does not include natural processes occurring before raw material is delivered to the receiving operation or after the packaging operation. For example, the natural transformation of grass or feed into raw milk by dairy cows is not part of the production process. In this case, the production process begins with the milking parlor. The planting, growing, or harvesting of crops, and the raising of livestock or poultry are not part of the production process. The natural aging or fermentation of alcoholic beverages or other food products, after they have been packaged, is also not part of the production process. The production process ends when the alcoholic beverage or other food product has been packaged for sale.
3. The production process does not include product design activities. For example, the computer aided design of a product where the final design program or computer file for that product will be sent to or downloaded to industrial machinery and equipment for the physical creation of the product is not a part of the production process. Similarly, the production process for printed materials does not include the initial conception or creation of the written matter. For example, the writing of a story by a reporter for subsequent printing in a newspaper is not a part of the production process. (See subsection (8) of this rule regarding machinery and equipment and the production process.)
(2) New Business.
(d) 1. The start of production is the date that a product is manufactured, processed, compounded, or produced where such product will be inventoried for sale or will be immediately sold. However, if this date does not reflect the actual start of production, the date of the start of production will be determined by the Executive Director or the Executive Director’s designee on a-case-by case basis. In such cases, the business is required to maintain sufficient records to enable the Executive Director or the Executive Director’s designee to make a proper determination as to the initial production activities of the new facility. (See subsection (6) of this rule for record keeping requirements.)
a. Initial test or trial runs necessary to calibrate or evaluate the operation of machinery and equipment, where the products made are scrapped or sold for salvage value, are not considered to be the start of production. The operation of machinery and equipment at less than full capacity, where the products made are inventoried or immediately sold, is considered to be the start of production.
b. Production is considered to have started even though the production line may not be complete, if any part(s) of the production process is subcontracted to others and a finished product can be inventoried or immediately sold.
2. The beginning of spaceport activities is the date that industrial machinery and equipment is first exclusively used for that purpose. However, if this does not reflect the actual beginning of spaceport activities, the date will be determined by the Executive Director or the Executive Director’s designee on a case-by-case basis. In such cases, the business is required to maintain sufficient records to enable the Executive Director or the Executive Director’s designee to make a proper determination as to the beginning of spaceport activities of the new facility. (See subsection (6) of this rule for record keeping requirements.)
(e) The Executive Director or the Executive Director’s designee will determine if a business qualifies for exemption as a new business, based on the facts in each particular case.
1. A new business means a newly-formed company that opens a facility or plant, at a fixed location in this state, to manufacture, process, compound, or produce items of tangible personal property for sale, or to exclusively use industrial machinery and equipment in spaceport activities.
2. A new business means an addition to, or the enlargement of, an existing facility or plant, or the installation of additional machinery and equipment, for the purpose of manufacturing, processing, compounding, or producing items of tangible personal property for sale that represent a distinct and separate economic activity from other items that have been or are being produced at that same fixed location, or to exclusively use industrial machinery and equipment in distinct and separate spaceport activities. For example, a company that currently manufactures washing machines would be considered a new business for the purpose of installing a dedicated assembly line for the manufacturing of refrigerators. A new business does not mean an addition to, or the enlargement of, an existing facility or plant, or the installation of additional machinery and equipment at an existing facility or plant, for the purpose of manufacturing, processing, compounding, or producing component parts that were previously purchased from, or fabricated by, outside sources for inclusion in that business’ finished items of tangible personal property for sale. (See subsection (4) of this rule regarding manufacturing business classification factors.)
3. A new business means opening a new facility or plant, at a fixed location in this state, to manufacture, process, compound, or produce an item of tangible personal property for sale, or to exclusively use industrial machinery and equipment in spaceport activities, provided no other facility or plant in this state that manufactured, processed, compounded, or produced the same or a similar item of tangible personal property, or performed the same or a similar spaceport activity, at a fixed location in this state, was closed to open the new facility or plant, or will be closed within 12 months. However, this limitation concerning the closure of a facility or plant is not applicable to a mining activity when a mine is closed due to the exhaustion or depletion of the mined resource such that mining is no longer economically feasible at that location.
4. A new business does not mean the change of ownership of an existing facility or plant, at a fixed location in this state, that manufactures, processes, compounds, or produces items of tangible personal property for sale, or exclusively uses industrial machinery and equipment in spaceport activities, by a purchase arrangement, merger, or some other similar means, unless such facility or plant ceased doing productive operations for a period of not less than 12 months.
(3) Expanding Business.
(b) The Executive Director or the Executive Director’s designee will determine whether a business qualifies for exemption as an expanding business, based upon the facts of each case using the following guidelines:
1.a. An expanding business means an addition to, or the modernization or enlargement of, an existing facility or the installation of additional machinery and equipment to manufacture, process, compound, or produce an item of tangible personal property that is already being produced at that fixed location in this state or is similar to an item of tangible personal property that is already being produced at that fixed location.
b. An expanding business means an addition to, or the modernization or enlargement of, an existing facility or the installation of additional machinery and equipment to begin manufacturing, processing, compounding, or producing a component item of tangible personal property that will be incorporated into a finished item of tangible personal property for sale that is already being produced at that fixed location. When the component item of tangible personal property is manufactured, processed, compounded, or produced, the completion of the first component item meets the required productive output increase. When the business manufactures, processes, compounds, or produces that component for sale to others and incorporates that component in other items of tangible personal property for sale, the business would be classified as a new business.
c. For example, a washing machine manufacturer that previously purchased water pumps from an outside supplier as component parts for the washing machines would be considered an expanding business, rather than a new business, when it purchases machinery and equipment to begin manufacturing its own component water pumps and does not offer the water pumps for sale to others. When the first component water pump is produced, the manufacturer, as an expanding business, meets the required productive output increase.
d. An expanding business means an addition to, or the modernization or enlargement of, an existing facility or the installation of additional machinery and equipment to perform a spaceport activity that is already being performed, or is similar to an activity that is already being performed, at that fixed location.
2. An expanding business means closing an existing plant or an operation in a plant in this state and moving it to a new location in this state within 12 months of the closing.
3. An expanding business means the purchase of an existing facility to manufacture, process, compound, or produce an item of tangible personal property that is already being produced at that facility or is similar to an item of tangible personal property that is already being produced at that facility.
(c) 1. To qualify for exemption as an expanding business, the taxpayer is required to provide information to the satisfaction of the Executive Director or the Executive Director’s designee that the items purchased will be or have been used to increase the productive output of the existing facility or specific product line(s) by not less than 5 percent. An expanding business is allowed to specify whether the 5 percent increase in productive output is for the entire plant or for specific product line(s). However, where the increase in productive output applies to a product or component that becomes part of different product lines, the increase in productive output will be determined by measuring the increase in the combined output of the different product lines. Similarly, if the additional machinery and equipment affects the productive output of more than one product line, the increase in productive output must be measured by all of the product lines that have been affected.
a. Example: If a company purchases machinery and equipment that increases its production of raw orange juice by 25 percent, and this raw orange juice is used by the company to make five different products, the increase in productive output would be determined by measuring the volume increase in the combined output of all five different products.
b. Example: A beverage manufacturer that currently produces a variety of soft drinks in 12-ounce cans purchases machinery and equipment to begin making plastic bottles and also purchases additional mixing machinery and equipment to make more syrup for overall beverage production. Effectively, there are two separate expansion projects for this manufacturer. The plastic bottle expansion project will meet the required productive output increase requirement upon production of the first bottle. However, the productive output increase requirement for the additional mixing machinery and equipment must be measured by the amount of beverages produced at the plant.
c. Example: A manufacturer of coffeemakers, toasters, and microwave ovens purchases replacement machinery and equipment that is only used to make components for the coffeemakers. The productive output increase may be measured just on the production of coffeemakers.
2. The physical productive output measurement must be based on physical production data, which is directly relevant to the business and/or the product(s) being produced. A physical productive output measurement based on indirect or minor, variable components is not a relevant measurement. For example, a relevant measurement for a furniture manufacturer would be the number of pieces of furniture manufactured, not the amount of glue, paint, stain, or varnish used in the manufacturing of furniture.
3. Expanding spaceport activities are not subject to the increase in productive output requirement.
(4) Manufacturing Business Classification Factors.
(b) The Executive Director or the Executive Director’s designee will make a determination regarding the classification of a business’ application for exemption on a case-by-case basis. The Department will be guided by the following factors when making a determination:
1. The general nature of the applicant’s predominant existing business;
2. The Standard Industrial Classification (SIC) or North American Industry Classification System (NAICS) industry number of the existing product(s) versus the additional product;
3. The raw materials or components used to make the existing product(s) versus the additional product;
4. Whether the additional product is an alternative to, or represents a replacement for, the existing product(s);
5. The differences in machinery and equipment needed to make the existing product(s) versus the additional product; and
6. The units used to measure production of the existing product(s) versus the additional product.
(5) Temporary Tax Exemption Permit – Refund or Credit.
(b) 1. A temporary tax exemption permit may be issued only to the qualified business entity which will use the qualifying machinery and equipment at a fixed location in this state in manufacturing, processing, compounding, or producing tangible personal property for sale, or for exclusive use in spaceport activities. Such permit may be extended by the business entity to its vendor(s) or to its authorized contractor(s) operating under lump sum, cost plus, fixed fee, guaranteed price, or any other type of contract executed for the purpose of constructing a new or expanded business. The authorized contractor(s) may, likewise, extend the temporary tax exemption permit to its vendor(s) for use in purchasing qualifying machinery and equipment tax exempt. The business entity that extends the temporary tax exemption permit to a contractor or subcontractor for the purpose of authorizing that contractor or subcontractor to purchase qualifying machinery and equipment tax exempt will be responsible for paying the sales and use tax on any nonqualified items purchased tax exempt by the contractor or subcontractor.
2. Upon completion of purchases of qualifying machinery and equipment, the temporary tax exemption permit is required to be delivered to the Department or returned by certified or registered mail. If the permit is returned by mail, the permit should be mailed to the Florida Department of Revenue, Technical Assistance, P.O. Box 7443, Tallahassee, Florida 32314-7443.
(c) 1. If a qualifying business entity fails to apply for a temporary tax exemption permit before purchasing qualifying machinery and equipment for a new or expanded business, or if the initial determination by the Executive Director or the Executive Director’s designee is negative, the exemptions provided by subsections (2) and (3) above may be obtained only by a refund to the business entity of previously paid taxes. Refunds will not be allowed until information has been provided to the satisfaction of the Executive Director or the Executive Director’s designee that such machinery and equipment meets the requirements of this rule and is used as designated herein. Only the qualified business entity that will use the qualifying machinery and equipment at a fixed location in this state in manufacturing, processing, compounding, or producing tangible personal property for sale, or for exclusive use in spaceport activities is entitled to request a refund of sales or use taxes paid on qualifying industrial machinery and equipment, or installation thereof.
2. Before the owners of a qualifying new or expanded business under subsection (2) or (3) may request a refund of sales or use taxes paid by their contractors on qualifying industrial machinery and equipment, or installation thereof, the following certified statement(s) must be executed:
a. If a subcontractor was involved, the subcontractor must obtain a certified statement from its supplier(s) or other subcontractor(s) certifying that the supplier or other subcontractor has remitted the tax to the State, or certifying that the subcontractor has remitted use tax directly to the State. The subcontractor must then extend the statement(s) it has executed or obtained from suppliers or other subcontractors to the prime contractor; and
b. The prime contractor must obtain a certified statement from its supplier(s) and subcontractor(s) certifying that the supplier or subcontractor has remitted the tax to the State, or certifying that the prime contractor has remitted use tax directly to the State. The prime contractor must then extend the statement(s) it has executed or obtained from its supplier(s) or subcontractor(s) to the qualifying new or expanded business entity to support the refund claim.
(d) 1. The following is a suggested format for a certified statement that tax has been remitted to the State of Florida:
COMPANY, incorporated in the state of STATE, its undersigned officer who is duly authorized, hereby certifies to QUALIFYING NEW OR EXPANDING BUSINESS, OR CONTRACTOR, OR SUBCONTRACTOR 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 ___ 20___.
AUTHORIZED OFFICER OF COMPANY
BY: _______________________________
TITLE: ____________________________
2. The above certified statement will not be necessary where the business entity claiming the refund has self-accrued and remitted the tax directly to the State of Florida. However, documentation that the tax has been remitted to the State of Florida in a timely manner is required.
(e) The right to a refund of, or credit for, sales or use taxes.
l. An application for refund by a new business must be filed within 3 years after the date the tax was paid in accordance with the timing provisions of Section 215.26(2), F.S. However, an application for refund will not be considered complete pursuant to Sections 213.255(2) and (3), F.S., and Rule 12-26.003, F.A.C., and a refund will not be approved, before the date the new business first places a product in inventory or immediately sells a product, or before the date a new business engaged in spaceport activities begins those activities.
2. An application for refund by an expanding business must be filed within 3 years after the date the tax was paid in accordance with the timing provisions of Section 215.26(2), F.S. However, an application for refund will not be considered complete pursuant to Sections 213.255(2) and (3), F.S., and Rule 12-26.003, F.A.C., and a refund will not be approved, before the date an expanding business can substantiate that the business expansion has increased the productive output at the existing facility by not less than 5 percent, or for an expanding business engaged in spaceport activities, before the date of completion of the installation of the machinery and equipment.
(7) Exclusions.
(8) Types of industrial machinery and equipment that will or will not qualify for the exemption.
(a) For the purpose of this exemption, industrial machinery and equipment includes:
1. Special foundations required for the support of such qualifying machinery and equipment;
2. Electrical wiring from the nearest power panel or disconnect box to the qualifying machinery and equipment; and,
3. Plumbing connections necessary to connect the machinery and equipment to the nearest water supply or drain line.
(b) The exemption for industrial machinery and equipment ends at that stage of the production process where the product produced is placed in a package (or is in salable form if packaging is normally not done) to be sold to the wholesaler, retailer, or other purchaser. Machinery and equipment for the refrigerated, frozen, heated, or otherwise temperature-controlled storage or warehousing of packaged finished goods inventory, solely for preservation purposes, prior to shipment or delivery to customers, is not a part of the production process.
1. Example: A manufacturer’s cold storage facility that is used solely for the warehousing of processed and packaged foods is not a part of the production process regardless of the fact that custom palletized orders may be assembled within the cold storage facility for customers.
2. Example: A manufacturer produces a product that must be frozen to be in a salable condition. The facility that performs the freezing function also stores the product prior to shipment. The freezing facility will qualify as a part of the production process.
3. Example: Customer accessible refrigerated cases containing prepackaged meats in a butcher shop are not a part of the production process, regardless of the fact that a customer may request that a package of meat be recut, trimmed, or ground.
4. Example: Refrigerated cases containing meats or seafood that are only accessible by employees, where such meats or seafood may be further processed by packaging, cutting, grinding, or steaming or otherwise cooked, are a part of the production process.
5. Example: Bakery display cases where the baked goods are only accessible by bakery shop personnel for slicing or packaging are a part of the production process.
6. Example: Refrigerated or heated display cases or preparation units for deli items that are only accessible by deli personnel are a part of the production process.
7. Example: A citrus juice manufacturer is prohibited by federal regulations from selling its inventory of processed juice before required post-production microbial tests are performed. Accordingly, the refrigerated or frozen storage of processed juice is a part of the manufacturing process.
(i) Parts and accessories for industrial machinery and equipment purchased for replacement, maintenance, or repair purposes do not qualify for this exemption unless purchased by:
1. A new business before production or spaceport activities begin, and delivery is made within 12 months from the start of production or spaceport activities; or
2. An expanding business before the completion of the expansion project.
3. Parts and accessories purchased for replacement, maintenance, or repair that have already received an exemption pursuant to Section 212.08(7)(xx), F.S., are not entitled to an exemption as provided in this rule.
(k) Computers and computer equipment.
1. Computers and computer equipment, such as computer aided manufacturing (CAM) systems used to direct and control the functions of exempt industrial machinery and equipment will qualify for exemption.
2. Computers and computer equipment, such as computer aided design (CAD) systems used in the conception or design of a product and computers and computer equipment used to input original images or data into a publishing system are not a part of the production process and will not qualify for exemption.
3. Computers and computer equipment used in an ancillary function, such as data storage or backup, are not a part of the production process and will not qualify for exemption.
4. Portable computers, such as laptops and similar portable devices, including digital cameras, will not qualify for exemption unless such items are exclusively used at the fixed location.
5. The initial purchase of software for qualifying computers and computer equipment will qualify for exemption. However, software license renewals will not qualify for exemption.
(9) Leases of Machinery and Equipment.
Rulemaking Authority 212.08(5)(b)4., 212.18(2), 213.06(1) FS. Law Implemented 212.02, (10)(g), (14)(c), 212.05, 212.06, 212.08(5)(b), (7)(xx), 212.13(2), 213.255(2), (3), 215.26(2) FS. History–New 5-11-92, Amended 7-1-99, 6-28-00, 6-19-01, 3-6-02, 4-1-08, 1-12-11, 1-17-13.