Florida Sales Tax Rules
12A-1.043 Manufacturing
(1)(a) Any person who manufactures, produces, compounds, processes, or fabricates in any manner an article of tangible personal property for his own use shall pay a tax upon the cost of the property manufactured, produced, compounded, processed, or fabricated without any deduction therefrom on account of the cost of material used, labor or service costs, or transportation charges.
(b) Elements of cost will include the following materials, labor, service, or transportation costs that are attributable to manufacturing, producing, compounding, processing, or fabricating an article of tangible personal property for one's own use and which are properly chargeable to the cost of the product under generally accepted cost accounting standards.
1. Material costs include the following:
a. All direct materials and related freight costs that are physically observable as being identified to the finished tangible personal property, that are consumed in producing the property, or that become a component or ingredient of the finished property. See paragraphs (c) and (d), below, for calculating the tax on the cost of the finished product when sales tax has or has not been paid on direct materials.
b. Material handling and warehousing of direct materials and goods in process.
c. Manufacturer's excise taxes on materials.
2. Labor costs include the following:
a. The total direct labor costs for employees or contract labor that are allocable to the production of the finished property, including the entire amount of payroll burden, which includes but is not limited to overtime premium, vacation and holiday pay, sick leave pay, shift differential, payroll taxes, payments to a supplemental unemployment benefit plan, and employee fringe benefits.
b. Compensation of officers, to the extent it is allocated to production and not administrative functions.
c. Costs of service, engineering, design or other support employees allocated to production.
3. Service costs include the costs of non-employee services that are allocated to the production of the tangible personal property, such as engineering, design or similar consulting or professional services.
(c) Direct materials on which the tax has been paid shall not be included when computing the tax on the cost of items of tangible personal property manufactured, produced, compounded, processed, or fabricated.
(d) Persons who manufacture, produce, compound, process, or fabricate items of tangible personal property for resale or for their own use or consumption may purchase direct materials tax exempt but shall include the cost of the direct materials when computing tax on the cost of the items so manufactured, produced, compounded, processed, or fabricated for such persons' own use or consumption. If tax has been paid on the direct materials, the method described in paragraph (c) should be used when computing the tax on the cost of the items so manufactured, produced, compounded, processed, or fabricated.
(e)1. To purchase direct materials tax exempt, dealers registered with the Department to sell tangible personal property may extend a copy of their Annual Resale Certificate (Form DR-13) to the selling dealer in lieu of paying tax at the time of purchase. The cost of such materials is subject to tax on the cost of the items so manufactured, produced, compounded, processed, or fabricated, as provided in paragraph (d).
2. Persons who do not sell tangible personal property are not required to register with the Department as a dealer. However, to purchase direct materials tax exempt, such persons may extend an Exemption Certificate, as provided in Rule 12A-1.038, F.A.C., to the selling dealer in lieu of paying tax at the time of purchase. The cost of such materials is subject to tax on the cost of the items so manufactured, produced, compounded, processed, or fabricated, as provided in paragraph (d).
(f) The tax is due at the time the article of tangible personal property is manufactured, produced, compounded, processed, or fabricated for use or consumption, and such tax shall be remitted to the Department of Revenue in accordance with Rule 12A-1.056, F.A.C.
(2) Fabrication labor shall not be taxable where a person is using his own equipment and his own personnel, for his own account, as a producer, subproducer, or coproducer of a qualified motion picture. "Qualified motion picture" means all or any part of a series of related images, either on film, tape, or other embodiment, including but not limited to, all items comprising part of the original work and film-related products derived therefrom as well as duplicates and prints and all sound recordings created to accompany a motion picture, which is produced, adapted, or altered for exploitation in, on, or through any medium or device and at any location primarily for entertainment, commercial, industrial, or educational purposes.
(3)(a) Any person who manufactures factory-built buildings for his own use in the performance of contracts for the construction or improvement of real property shall pay a tax only upon the person's cost price of items used in the manufacture of such buildings.
(b) For the purpose of this exemption, "factory-built building" means a structure manufactured in a manufacturing facility for installation or erection as a finished building; "factory-built building" includes, but is not limited to, residential, commercial, institutional, storage, and industrial structures.
(4) Any person who manufactures asphalt for his own use shall calculate and remit the use tax on such asphalt, as provided in subsection 12A-1.051(12), F.A.C.
(5)(a)1. No tax shall be imposed upon any person who manufactures or produces electrical power or energy, steam energy, or other energy, when such power or energy is used directly and exclusively in the operation of machinery or equipment that is used to manufacture, process, compound, produce, fabricate, or prepare for shipment tangible personal property for sale or to operate pollution control equipment, maintenance equipment, or monitoring or control equipment, used in such operations.
2.a. Tax is not imposed upon electrical power or energy, steam energy, or other energy manufactured or produced for a person's own use at a single location, when such power or energy is used directly and exclusively at such location, or at other locations if the energy is transferred through facilities of the owner, in the operation of machinery or equipment that is used to manufacture, process, compound, produce, fabricate, or prepare for shipment tangible personal property for sale or to operate pollution control equipment, maintenance equipment, or monitoring or control equipment used in such operations.
b. Electrical power or energy manufactured or produced for a person's own use transmitted and distributed by a public utility to such person's facility at another location is taxable based upon the cost price of such power or energy without any deduction therefrom on account of the cost of material used, labor or service costs, or transportation charges.
3. Electrical power or energy manufactured or produced for a person's own use that is used for space heating, lighting, office equipment, air conditioning, or any other nonmanufacturing, nonprocessing, noncompounding, nonproducing, or nonfabricating activity is taxable based upon the cost price of such power or energy without any deduction therefrom on account of the cost of material used, labor or service costs, or transportation charges.
(b) Tax is not imposed upon the manufacture or production of electrical power or energy when such electrical power or energy is consumed or dissipated in the transmission or distribution of electrical power or energy for resale.
(6)(a) Tangible personal property manufactured, produced, compounded, processed, or fabricated for use directly and solely in research or development, and machinery and equipment used predominantly for research or development purposes are exempt when the research or development has one of the following as its ultimate goal:
1. Basic research or the advancement of knowledge or technology in a scientific or technical field of endeavor.
2. The development of a new product, the improvement of an existing product, or the development of new uses of an existing product, whether or not the product is offered for sale.
3. The design and development of prototypes, whether or not a resulting product is offered for sale.
(b) For the purpose of this subsection:
1. "Machinery and equipment" includes, but is not limited to, molds, dies, machine tooling, and other appurtenances or accessories for machinery and equipment, testing and measuring equipment, test beds, and computers and software. Such machinery and equipment may be purchased, leased, or self-fabricated. If self-fabricated, the machinery and equipment includes the materials and labor for the design, fabrication, and assembly of such items.
2. "Predominantly" means at least 50 percent of the time.
3. "Product" means any item, device, technique, prototype, invention, or process, which is, was, or may become, commercially exploitable.
(c) Research or development does not include ordinary testing or inspection of materials or products used for quality control, market research, efficiency surveys, consumer surveys, advertising and promotions, management studies, or research in connection with literature, history, social science, psychology, or other similar nontechnical activities.
(d)1. Materials and labor may be purchased tax-exempt when the purchaser extends an exemption certificate to the vendor or supplier certifying that the materials and labor will be used directly and solely for research or development purposes, as provided in Section 212.052, F.S.
2. The following is a suggested format for an exemption certificate for purchases of materials and labor:
EXEMPTION CERTIFICATE
ITEMS OF TANGIBLE PERSONAL PROPERTY AND LABOR
USED IN RESEARCH OR DEVELOPMENT
This is to certify that purchases of tangible personal property or labor on or after ________ (date) from ________ (Selling Dealer's Business Name) will be directly and solely used in research or development activities, as provided in Section 212.052, F.S. These research or development activities are located at:
______________________________________________________
(Street)
______________________________________________________
(City and State)
I understand that if I fraudulently issue this certificate to evade the payment of tax, I will be liable for payment of the tax plus a penalty of 200% of the tax and be liable for fine and punishment provided by law for conviction of a felony of the third degree, as provided in Section 775.082, 775.083, or 775.084, F.S.
Under penalties of perjury, I declare that I have read the foregoing document and that the facts stated in it are true.
_______________________________ ___________________________________________________________
Purchaser's Name (Print or Type) Purchaser's Address
_______________________________ ___________________________________________________________
Signature and Title Florida Sales and Use Tax Number (if applicable)
_______________________________ ___________________________________________________________
Date Federal Employer's Identification Number
(if applicable)
(e)1. Machinery and equipment, including materials and labor used in the self-fabrication of machinery and equipment, may be purchased or leased tax-exempt when the purchaser extends an affidavit to the vendor or supplier stating that the item(s) will be used predominantly for research or development purposes, as provided in Section 212.08(18), F.S.
2. The following is a suggested format of an affidavit to be provided to the selling dealer or lessor:
AFFIDAVIT
MACHINERY AND EQUIPMENT USED IN RESEARCH OR DEVELOPMENT
I, the undersigned individual, hereby swear and affirm that the purchase(s) or lease(s) of machinery and equipment, including materials and labor used in the self-fabrication of machinery and equipment, on or after ________ (date) from ________ (Selling Dealer's Business Name), will be used predominantly in research or development activities, as provided in Section 212.08(18), F.S.
These research or development activities are located at:
______________________________________________________
(Street)
______________________________________________________
(City and State)
I understand that if I fraudulently issue this affidavit to evade the payment of Florida sales tax, I will be liable for payment of the tax plus a penalty of 200% of the tax and be subject to conviction of a third degree felony.
Under the penalties of perjury, I swear or affirm that I have read the foregoing affidavit and that the facts stated herein are true to the best of my knowledge and belief.
______________________________________________________
Purchaser's Name (Print or Type)
______________________________________________________
Signature and Title
______________________________________________________
Date
Sworn to and subscribed before me this ___ day of ____________________________, 20___ BY_________________________________________________________________________
(name of person making statement).
Personally Known: __________________________________________________________________________________________
Or Produced Identification:____________________________________________________________________________________
Type of Identification Produced:________________________________________________________________________________
______________________________________________________________
Signature of Notary
(Print, Type, or Stamp Commissioned Name of Notary)
(f) Instead of furnishing an exemption certificate, as provided in paragraph (d), or an affidavit, as provided in paragraph (e), any purchaser who holds a valid Sales and Use Tax Direct Pay Permit, as provided in Rule 12A-1.0911, F.A.C., may extend a copy of the permit to the selling dealer to make purchases tax-exempt under this subsection.
(g) When a prototype or product of research or development is used by the developer for any purpose other than research or development, including being offered for sale, it is subject to tax.
Rulemaking Authority 212.052(5), 212.08(18)(c), 212.17(6), 212.18(2), 213.06(1) FS. Law Implemented 212.02(4), (7), 212.052, 212.06(1), 212.08(18), 212.085, 212.12(12), 366.051 FS. History– Revised 10-7-68, 1-7-70, 6-16-72, Amended 1-19-74, 12-26-83, Formerly 12A-1.43, Amended 1-2-89, 2-28-90, 3-20-96, 7-27-99, 10-2-01, 9-15-08.
12A-1.044 Vending Machines.
(1)(a) For purposes of this rule, the terms "vending machine" and "vending machine operator" shall have the meaning ascribed to them in Section 212.0515(1), F.S.:
(b) For the purpose of this rule, possession of a vending machine means either actual or constructive possession and control. To determine if a person has constructive possession and control the following indicia shall be considered: right of access to the machine; duty to repair; title to the machine; risk of loss from damages to the machine; and the party possessing the keys to the money box. If, based on the indicia set out above, the owner of the machine has constructive possession and control, but the location owner has physical possession of the machine, then the operator shall be determined by who has the key to the money box and is responsible for removing the receipts. If both the owner of the machine and the location owner have the keys to the money box and are responsible for removing the receipts, then they shall designate in writing who shall be considered the operator. Absent such written designation, the owner of the machine shall be deemed to be the operator.
(2) All sales made through vending machines of food, beverages, or other items are taxed in the manner provided in Section 212.0515(2), F.S., except as provided in paragraphs (a)-(c). See subsection (2) of Rule 12A-15.011, F.A.C., for the effective tax rates for sales made through vending machines in counties imposing a discretionary sales surtax.
(a) Receipts from vending machines owned and operated by churches or synagogues are exempt. Such entities are not required to post a notice as required in subsection (4). However, the name and address of the church or synagogue should be affixed to such machines.
(b) Food and drinks sold for human consumption for 25 cents or less through a coin-operated vending machine sponsored by a nonprofit corporation under s. 501(c)(3) or (4) of the Internal Revenue Code of 1986, as amended, are exempt. The name and address of the qualified sponsoring organization must be affixed to each machine used for this exempt purpose.
(c) Food and beverages sold or dispensed through vending machines or other dispensing devices located in the student lunchroom, student dining room, or other area designated for student dining in state-supported or parochial, church, and nonprofit private schools operated for and attended by pupils of grades K through 12 are exempt. See Rule 12A-1.0011, F.A.C.
(3) Registration. Owners or operators of vending machines must obtain a separate Sales and Use Tax Certificate of Registration (Form DR-11) for each county in which the machines are located. One Sales and Use Tax Certificate of Registration is sufficient for all the owner's or operator's machines within a single county. See Rule 12A-1.060, F.A.C.
(4) Notice to be displayed on each vending machine; penalty and interest for failing to display notice.
(a) Before an operator may operate a food or beverage vending machine in this state, the operator must post a notice on each vending machine. Token machines are not considered to be vending machines which require a notice.
(b) The notice must contain the exact wording of the following statements in type that is not smaller than 14 point bold face, and the words "cash reward" must not be smaller than 30 point:
NOTICE TO CUSTOMER:
FLORIDA LAW REQUIRES THIS NOTICE TO BE POSTED ON ALL FOOD AND BEVERAGE VENDING MACHINES. Report any machine without a notice to 1-800-352-9273. You may be eligible for a CASH REWARD.
DO NOT USE THIS NUMBER TO REPORT PROBLEMS WITH THE VENDING MACHINE SUCH AS LOST MONEY OR OUT-OF-DATE PRODUCTS.
(c) The notice must be displayed on the upper front of a vending machine, unless such placement impairs the use of the machine. If the notice cannot be placed on the upper front of the vending machine, then the notice must be displayed on another place on the machine where it is easily readable by the public. The notice must be affixed to the machine so it is not easily removed.
(d) Any vending machine operator who fails to properly obtain and display the required notice on any vending machine is subject to the penalties and interest as provided in Section 212.0515(4), F.S.
(5) Purchases or leases of vending machines.
(a) The purchase or repair of a vending machine is subject to tax.
(b) The purchase of machines, machine parts and repairs, and replacements thereof that are a component part of the machine, by the machine owner or lessor for exclusive rental is exempt. The machine owner or lessor must register with the Department and must issue a copy of the dealer's Annual Resale Certificate to the selling dealer to purchase these items tax exempt for the purposes of leasing or renting the machine.
(c) The lease or license to use a vending machine to an operator is taxable. The tax is to be collected by the machine owner or lessor from the operator. When there is an oral or written agreement for the lease or license to use a vending machine with a location owner (where the machines are located), the location owner (lessee) is required to be the operator of the machine. Sales tax shall be collected by the machine owner or lessor from the operator based on the amount the machine owner receives for the lease or license to use the machine.
(d) Agreements entered into prior to July 1, 1991, between the owner of vending machines and the location owner, for the lease or license to use the vending machines, will be recognized by the Department as a lease or license to use the machines purchased prior to July 1, 1991, until the expiration date of the original lease agreement. However, oral agreements entered into prior to July 1, 1991, shall be deemed to have expired prior to July 1, 1992, by virtue of the provisions of Sections 689.01 and 725.01, F.S. On the expiration date of the lease agreement entered into prior to July 1, 1991, for machines purchased prior to this date, the lease or license to use vending machines to an operator as described in paragraph (c) above is taxable.
(6) Lease or license to use real property; direct pay authority.
(a) If the machine owner is also the operator and the operator places the machine at another person's location, the arrangement between the machine operator and location owner is a lease or license to use real property. The location owner shall collect the tax from the machine operator on the amount the location owner receives for the lease or license to use the real property. The tax must be separately stated from the amount of the lease or license payment.
(b) The purchase of machines, machine parts and repairs, and replacements thereof that become a component part of the machine, by the machine operator (owner) is taxable. The machine operator should pay the sales tax to the seller of these items at the time of purchase.
(c) If the machine operator (owner or lessee) has obtained a direct pay permit from the Department, the permit may be presented to the location owner. The direct pay permit authorizes the machine operator to self-accrue and remit the tax due on the lease or license to use the real property and relieves the location owner of this obligation.
(d) Agreements entered into prior to July 1, 1991, between the owner of vending machines and the location owner, for the lease or license to use real property where the machines are to be located, will be recognized by the Department until the expiration date of the original lease agreement. However, oral agreements entered into prior to July 1, 1991, shall be deemed to have expired prior to July 1, 1992, by virtue of the provisions of Sections 689.01 and 725.01, F.S. On the expiration date of the lease agreement entered into prior to July 1, 1991, the lease or license to use the real property where the machines are located, is taxable when the machine owner is also the operator as described in paragraph (a) above.
(7) The following examples are intended to provide further clarification of the provisions of this section:
(a) Example: A vending machine owner enters into a license agreement with City Airport, which grants the machine owner the right to place vending machines in Concourse A. The vending machines consist of soft drink, snack food, and candy machines. City Airport has the right to designate the areas within the concourse where the machines will be located; the machine owner is the operator and the machine owner and owner's employees are to stock the machines and provide repairs as needed. The machine owner (operator) is required to remit the tax on the total proceeds from the machines. In addition, as consideration under the agreement, City Airport will receive 15 percent of all proceeds from the machines. By the terms of the agreement, this arrangement is a license to use real property, and City Airport, as the licensor, must collect tax from the machine owner.
(b) Example: When a bottler removes a drink vending machine from inventory to be placed at a location on a "fill service basis" and collects a "service charge" from the location operator for keeping the machine stocked with drinks it sells the location operator, the bottler shall declare and remit to the Department of Revenue a use tax on the value of such vending machine of 6 percent when title to the vending machine remains with the bottler and the service charge collected covers stocking the machine, making necessary repairs, repainting, and maintenance. The service charge is not taxable. All parts used in repairing the machines shall be taxed at 6 percent as use tax. The tax on all merchandise sold through the machine at 10 cents per bottle or more shall be reported to the Department by the location operator.
(c) Example: A bottler who removes from inventory a drink vending machine to be placed at a location on a "full service basis" and pays the location owner consideration for the right to place the machine at the location shall declare and remit to the Department of Revenue a use tax on the value of the vending machine when it is removed from inventory. All parts used in repairing the machine shall be taxed at 6 percent as use tax. The bottler is considered to be the operator of the machine. The tax due on all merchandise sold through the machine at 10 cents per bottle or more shall be reported by the bottler. The location owner shall collect tax from the bottler on the amount the location owner receives as a lease or license to use the real property.
(d) Example: When a bottler removes from inventory a drink vending machine to be placed at a location under an agreement where the location owner is the operator, the bottler, as a registered dealer, may extend a copy of the dealer' Annual Resale Certificate (Form DR-13) to purchase vending machines or component parts for exclusive rental. The rental of the vending machine may either be on a per case basis or a flat monthly rate. In such instances, the tax must be collected by the bottler and remitted at the rate of 6 percent of the amount received as rental. Also, tax is due on all merchandise sold through the machine by the location owner (operator).
(8) If any vending machine used on a full service basis or for exclusive rental is later sold as a "used" machine, the sale to the purchasing customer is subject to tax.
Rulemaking Authority 212.0515, 212.17(6), 212.18(2), 213.06(1) FS. Law Implemented 212.02(10)(g), (14), (15), (16), (19), (24), 212.031, 212.05(1)(h), 212.0515, 212.054(1), (2), (3)(l), 212.055, 212.07(1), (2), 212.08(1), (7), (8), 212.11(1), 212.12(2), (3), (4), (9), 212.18(2), (3) FS. History–Revised 10-7-68, 6-16-72, 1-10-78, Amended 7-20-82, Formerly 12A-1.44, Amended 12-13-88, 5-11-92, 3-17-93, 9-14-93, 12-13-94, 3-20-96, 7-1-99, 6-19-01, 11-1-05, 1-12-11.
