FLORIDA tax controversy: USE TAX ON INSTALLATION OF PARKING METERS FOR MUNICIPALITY – Taxpayer Argues Parking Meters Are NOT Real Property Improvements
On November 14, 2011, Cale Parking Systems USA, Inc. ("Cale") filed suit against the Florida Department of Revenue ("FL DOR") in the 13th Judicial Circuit Court (Hillsborough County) challenging an assessment of USE TAX on the installation of solar parking meters between 2007 and 2009. If you visited any major city in Florida over the past 5 years, then you have seen the new solar powered parking meters that allow you to pay at a nearby solar powered pay station. These innovative parking meters are provided and maintained by Cale Parking Systems USA, Inc. and are provided to cities and towns throughout the United States. The meters accept various means of payment including coins, cash, and credit cards and process these payments for the municipalities. The municipality owns the meters and, according to the complaint, each meter is a free-standing piece of equipment placed by the municipality. In September 2010, the FL DOR issued a Notice of Intent to Make Audit Changes claiming that the installation of the parking meters and pay station was an improvement to real property and, therefore, under Section 212.08(6), Florida Statute ("F.S."), Cale was the final user of the tangible personal property. As such, The FL DOR claims that Cale is subject to use tax on the cost of the meters and pay stations installed. The Taxpayer challenge the assessment in a Protest and via a Request for Reconsideration, neither of which were successful.
Cale argues in the complaint that the FL DOR's assessment is in error because:
The meters and pay stations are not permanently attached as they can be and are often exchanged/moved for repairs and to meet changing parking demand (i.e. not "fixtures" under Rule 12A-1.051(2)(c)(1)) Florida Administrative Code ("F.A.C."),
- Even if the meters and pay stations are considered to be permanently installed, they are used to "process" information in "commercial services" and therefore would still be considered "machinery and equipment," which is excluded from the definition of "Fixture" under Rules 12A-1.051(2)(c)(4) and 12A-1.051(2)(e) F.A.C.,
- Cale's contracts with the municipalities are not "Public Works Contracts" under Rule 12A-1.094(1)(c), F.A.C. because the meters and pay stations are cable of easy mobility (i.e. not permanently affixed),
- Cale is not a "Publics Works Contractor" subject to Use Tax because the meters and pay stations are not permanently installed/affixed to the realty of a municipality. Cale also contends it only installs the first few meters to teach the municipality employees how to install the tangible personal property while the vast majority of the meters are installed by parties other than Cale, and
- At best, Cale's contracts are mixed contracts predominantly for the sale of tangible personal property to a tax exempt municipality under Rule 12A-1.051(8), F.A.C., and therefore should be exempt from Florida Sales or Use Tax
The taxpayer has a very good chance of success with this controversy, at least based on the facts as presented in the Complaint (which can be downloaded as a PDF file below). The fact that Cale only installed the first few meters will likely be what a judge will hang his robe on, so to speak. However, the fact that Cale did not merely supervise the initial installation instead of doing the installation themselves shows that proper planning was not put in place or possibly not implemented as planned. It will be interesting to see what additional light will be shed when/if the FL DOR responds. This is also a great example of just how careful you have to be when providing tangible personal property or real property service contracts to tax exempt entities in Florida.
Download a copy of the complaint – CALE PARKING SYSTEMS USE, INC. V STATE OF FLORIDA DEPARTMENT OF REVENUE, Case No. 11-14532 (Fla. 13th Cir., Nov. 14, 2011)
For more information, please see our firm article FLORIDA CONSTRUCTION ON TAX EXEMPT PROJECTS – MINIMIZING/ELIMINATING SALES AND USE TAXES
AUTHORITY
Section 212.08(6), F.S.
Rule 12A-1.051, F.A.C.