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Sales and Use Tax TAA 18A-012 Sale of Tangible Personal Property

QUESTION: IS THE SALE OF TANGIBLE PROPERTY, IN CONJUNCTION WITH THE SALE OF REAL PROPERTY, TAXABLE IN THIS CASE?

ANSWER: NO.

July 24, 2018

XXX

Technical Assistance Advisement 18A-012
Sales & Use Tax – Sales of Tangible Personal Property
Section 212.05, Florida Statutes (F.S.)
Rules 12A-1.066 & 12A-1.037, Florida Administrative Code (F.A.C.)
XXX (the Taxpayer)
SSN: XXX

Dear Mr. XXX:

This is in response to your letter dated June 5, 2018, requesting this Department’s issuance of a Technical Assistance Advisement (“TAA”) pursuant to Section 213.22, F.S., and Rule Chapter 12-11, Florida Administrative Code (F.A.C.), regarding the taxability of certain tangible property sold in connection with a sale of real property. Your petition has been carefully examined, and the Department finds it to be in compliance with the requisite criteria set forth in Rule Chapter 12-11, F.A.C. This response to your request constitutes a TAA and is issued to you under the authority of section 213.22, F.S.

Issue

The issue is whether certain tangible property sold in connection with a sale of real property is subject to sales and use tax.

Facts Provided by Taxpayer

Your request provides in pertinent part:

We are seeking a legal opinion related to the imposition of sales tax on the purchase of personal property that is part of a real estate contract. The transaction related to the personal property was part of the sale of the real property for specific consideration, and handled by real estate brokers for both the buyer and seller. Specific questions we would like answered are:
I) In a transaction such as the one attached, [is] sales tax required to be collected and sent to the Department of Revenue?

2) If sales tax [is] required to be collected, who is required to collect them and send them to the Department of Revenue?

3) In a transaction such as the one attached, would it have been reasonable for [the Taxpayer] to be concerned about committing sales tax fraud if no sales tax was collected at closing?

4) What reason would there be for sales tax to not be required to be collected on the attached transaction?

5) If the reason for number 4 is that it is an isolated transaction for which no sales tax would be required to be collected and nobody would be committing fraud for not collecting sales tax and directing [it] to the Department of Revenue, how many transactions per year (or over any other period of time) would have to take place by the broker(s) before such transactions would no longer be considered “isolated” transactions and sales tax on personal property incidental to a real estate contract would be required to be collected?

6) While the Department of Revenue may not have necessarily targeted this particular transaction for collection of sales tax, would the Department of Revenue have a reasonable basis to require the collection of sales tax on the attached transaction as it related to the personal property transaction? If not, then what guidelines would a lay person be able to rely upon to ensure that the lay person would not later be held liable for the sales tax [that] arose from the attached transaction?

The controlling agreement, entitled, “’AS IS’ Residential Contract For Sale And Purchase” (the Agreement) was provided. The Agreement contains three addendums which provide, in part, as follows:

[Addendum one] Seller and Buyer make the following terms and conditions part of the Contract:
Buyer will pay $3,500.00 separate from the purchase price for all furnishings in the property minus personal possessions such as clothing, shoes, towels, etc.

* * *
[Addendum two] Seller and Buyer make the following terms and conditions part of the Contract:
Buyer and seller agree to an adjusted purchase price which reflects the appraised value of $120,000.00.

* * *

[Addendum three] Seller and Buyer make the following terms and conditions part of the Contract:

Buyer will pay $7,500.00 separate from the purchase price for all furnishings in the property minus personal possessions such as clothing, shoes, towels, etc.

Applicable Law & Discussion

Section 212.05, F.S., provides the authority to tax sales of tangible personal property (at retail) by a Florida dealer. This authority extends to sales made by or through a broker. See Rule 12A-1.037(5)(e), F.A.C.

Therefore, if tangible personal property is included in the sale of the real estate and a broker is utilized, sales tax is due on the sale of the tangible personal property if it is separately itemized and separately priced apart from the sale of the real property.
The status of a broker's duty to collect and remit sales tax on certain transactions in which such brokers participates is described in Rule 12A-1.066, F.A.C. In this rule, a broker is required to register as a dealer. A broker's participation in the sale of real estate, which sale includes tangible personal property, requires that brokers charge the applicable sales tax on the sale of such tangible personal property when the item or items of tangible personal property are separately described and the sales price of such property is separately itemized in the sales contract, bill of sale, or other similar sales document. If the tangible personal property (as in this case) is not separately described and priced apart from the real property, the transaction is considered to be a sale of real property not subject to sales tax.

In summary, when a real estate broker sells tangible personal property in conjunction with the sale of real property, and where such tangible items are separately described and priced apart from the price of the real property, in the sales contract, bill of sale, or other tangible evidence documenting the sale, then tax will apply to the tangible items.

Conclusion

There is not enough itemization of the furnishings (in the contract) to obligate the broker to collect tax on the sales of the “furnishings.” Accordingly, as the answer to question one is in the negative (for reasons described above), the other questions become moot.

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 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 section 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, the 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 10 days of the date of this letter.

Respectfully,
R. Clay Brower
Technical Assistance & Dispute Resolution
(850) 717-6306
Control No: 84383

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