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Sales and Use Tax TAA 14A-002 Public Works Contract



February 4, 2014

Re: Subject: Technical Assistance Advisement – TAA 14A-002 Sales and Use Tax – Public Works Contract
Section 212.08(6), Florida Statutes (F.S.)
Rule 12A-1.094, Florida Administrative Code (F.A.C.) XXX (“Taxpayer”)

Dear XXX:

This is in response to your letter dated XXX, requesting this Department’s issuance of a Technical Assistance Advisement (“TAA”) pursuant to section 213.22, F.S., and Rule Chapter 12-11, F.A.C., concerning a public works contract. An examination of your letter has established you have complied with the statutory and regulatory requirements for issuance of a TAA. Therefore, the Department is hereby granting your request for a TAA.


Taxpayer (hereinafter referred to as Owner) is requesting determination by the Department on whether a draft Agreement (between the Owner and a contractor to be selected) contains procedures for purchasing materials tax-exempt for a public works project. The work will take place at the XXX (hereinafter referred to as XXX), which is a department of XXX. XXX is referred to in the documents as Owner’s Representative. The project is for the construction of approximately 625 linear feet of seawall bulkhead between Bays xxx-xxx at the XXX to connect two areas of bulkhead, which already exist. Taxpayer provided a copy of a portion of the Invitation to Bid along with a document titled Addendum No.2, dated xxx. Section 1.26 of the Invitation to Bid provides the provisions for the Owner Direct Purchase Procedures.

The following provisions are included in Part 3 of the Owner Direct Purchase Procedures:

A) Contractor shall provide Owner’s Representative a list of all intended suppliers, vendors, and materialmen for consideration as Owner Direct Purchased materials. This list shall be submitted at the same time as the preliminary schedule of values and the Project schedule. The Contractor shall submit a description of the materials to be supplied, estimated quantities and prices.

D) After receipt of the Purchase Order Requisition Form, Owner shall prepare its Purchase Order for equipment, materials or supplies which the Owner chooses to purchase directly. Promptly upon receipt of each Purchase Order, Contractor shall verify the terms and conditions of the Purchase Order prior to its issuance to supplier and in a manner to assure proper and timely delivery of items. After such verification by the Contractor, the Owner shall issue the Purchase Order to the supplier or vendor. The Purchase Order shall require that the supplier provide the required shipping and handling insurance. The Purchase Order shall also require that the supplier invoice the Owner directly for the purchase price of the Owner Direct Purchased Materials. The Purchase Order shall also require the delivery of the Owner Direct Purchased Materials on the delivery dated [sic] provided by the Contractor in the Purchase Order Requisition Form and shall indicate F.O.B. jobsite. The Owner’s Purchase Orders shall contain or be accompanied by the Owner’s exemption certificate and must include the Owner’s name, address, and exemption number with issue and expiration date shown. The Owner shall issue each supplier or vendor a Certificate of Entitlement on the Certificate of Entitlement Form attached hereto with each Purchase Order.


F) Contractor shall be fully responsible for all matters relating to the receipt of materials in accordance with these Procedures, including, but not limited to, verifying correct quantities, verifying documentation of orders in a timely manner, coordinating purchases, providing and obtaining all warranties and guarantees in favor of and for the benefit of the Owner required by the Contract Documents, inspection and acceptance of the goods at the time of delivery. At the time of, and subsequent to, the delivery of such materials, the Owner shall be liable for all and loss or damage to equipment and materials purchased pursuant to the Purchase Order.... The Contractor agrees to indemnify and hold harmless the Owner from any and all claims of whatever nature resulting from non-payment of goods to suppliers arising from the actions or directions of Contractor. Notwithstanding the foregoing, the Owner shall be responsible for payment off the invoices issued by the supplier or vendor pursuant to the procedures in Paragraph G below.

G) ...The Contractor shall verify in writing to the Owner’s Representative that the Materials were received and agree to approve the invoice for payment. The invoice shall be thereupon furnished to the Owner’s Representative for processing and payment in the manner as all other Owner invoices are processed....


I) The Contractor shall be responsible for obtaining and managing all warranties and guarantees in favor of and for the benefit of the Owner for all materials and products as required by the Contract Documents. All repairs, maintenance or damage repair calls shall be forwarded to the Contractor for resolution with the appropriate supplier or vendor.

J) The transfer of possession of Owner Direct Purchased Materials from the Owner to the Contractor shall constitute a bailment for mutual benefit of the Owner and the Contractor. The Owner shall be considered the bailor and the Contractor the bailee of the Owner Direct Purchased materials. Owner Direct Purchased Materials shall be considered returned to the Owner for purposes of its bailment at such time as they are incorporated into the Project or consumed in the process of completing the Project. Bailee shall have the duty to safeguard, store and protect all Owner Direct Purchased Materials.

K) The Contractor shall maintain insurance in favor of and for the benefit of the Owner pursuant to the requirements set forth in the Owner and Contractor Agreement which shall be sufficient to protect against any loss of or damage to Owner Direct Purchased equipment, materials or supplies. Such insurance shall cover the value of any Owner Direct Purchased Materials not yet incorporated into the Project from the time the Owner first takes title which shall be at the time of delivery and acceptance of the materials by the Contractor as provided in Paragraph F above.


M) In order to arrange for the prompt payment to the supplier, the Contractor shall provide to the Owner, a list indicating the acceptance of the goods or materials in accordance with the established monthly Payment Request Schedule. The list shall include a copy of the applicable Purchase Order, invoices, delivery tickets, written acceptance of the delivered items, and such other documentation as may be reasonably required by the Owner. Upon receipt and verification of the appropriate documentation, the Owner shall prepare a payment to the supplier based upon the receipt of data provided. This payment will be released, delivered and remitted directly to the supplier by the Owner. The Contractor agrees to assists the Owner to immediately obtain partial or final release of lien waivers as appropriate.


O) From the time of delivery and acceptance, the Owner shall have and retain title to any and all Owner Direct Purchased materials.


Requested Advisement

Whether the provisions contained in the submitted contract are sufficient to enable the Owner to realize savings of their tax-exempt status on the purchase of materials for use in a public works contract.

Applicable Authority and Discussion

There are also exempt from the tax imposed by this chapter sales made to the United States Government, a state, or any county, municipality, or political subdivision of a state when payment is made directly to the dealer by the governmental entity. This exemption shall not inure to any transaction otherwise taxable under this chapter when payment is made by a government employee by any means, including, but not limited to, cash, check, or credit card when that employee is subsequently reimbursed by the governmental entity....

The exemption provided under this subsection does not include sales oftangible personal property made to contractors employed either directly to or as agents of any such government or political subdivision when such tangible personal property goes into or becomes a part of public works owned by such government or political subdivision. A determination whether a particular transaction is properly characterized as an exempt sale to a government entity or a taxable sale to a contractor shall be based on the substance of the transaction rather than the form in which the transaction is cast....

The department shall adopt rules for determining whether a particular transaction is properly characterized as an exempt sale to a governmental entity or a taxable sale to a contractor which give special consideration to factors that govern the status of the tangible personal property before being affixed to real property. In developing such rules, assumption of the risk of damage or loss is of paramount consideration in the determination. The department shall also adopt, by rule, a certificate of entitlement to exemption for use as provided in paragraph (b). The certificate shall require the governmental entity to affirm that it will comply with the requirements of this subsection and the rules adopted under paragraph (b) in order to qualify for the exemption and that it acknowledges its liability for any tax, penalty, or interest later determined by the department to be owed on such transactions.

Section 212.08(6), F.S., provides only direct purchases by governmental entities are exempt. In another words, if a contractor, who is employed by a governmental entity, purchases tangible personal property to be used in a public works contract, then the exemption authorized in s. 212.08(6), F.S., does not apply.

Rule 12A-1.094, F.A.C., provides the guidelines for purchasing materials tax-exempt for a public works contract. Rule 12A-1.094, F.A.C., states, in relevant part:

(4)(a) The exemption in Section 212.08(6), F.S., is a general exemption for sales made directly to the government. A determination whether a particular transaction is properly characterized as an exempt sale to a governmental entity or a taxable sale to or use by a contractor shall be based on the substance of the transaction, rather than the form in which the transaction is cast. The Executive Director or the Executive Director’s designee in the responsible program will determine whether the substance of a particular transaction is a taxable sale to or use by a contractor or an exempt direct sale to a governmental entity based on all of the facts and circumstances surrounding the transaction as a whole.

(b) The following criteria that govern the status of the tangible personal property prior to its affixation to real property will be considered in determining whether a governmental entity rather than a contractor is the purchaser of materials:

1. Direct Purchase Order. The governmental entity must issue its purchase order directly to the vendor supplying the materials the contractor will use and provide the vendor with a copy of the governmental entity’s Florida Consumer’s [Certificate] of Exemption.

2. Direct Invoice. The vendor’s invoice must be issued to the governmental entity, rather than to the contractor.

3. Direct Payment. The governmental entity must make payment directly to the vendor from public funds.

4. Passage of Title. The governmental entity must take title to the tangible personal property from the vendor at the time of purchase or delivery by the vendor.

5. Assumption of the Risk of Loss. Assumption of the risk of damage or loss by the governmental entity at the time of purchase is a paramount consideration. A governmental entity will be deemed to have assumed the risk of loss if the governmental entity bears the economic burden of obtaining insurance covering damage or loss or directly enjoys the economic benefit of the proceeds of such insurance.

(c)1. To be entitled to purchase materials tax exempt for a public works project, a governmental entity is required to issue a Certificate of Entitlement to each vendor and to the governmental entity’s contractor to affirm that the tangible personal property purchased from that vendor will go into or become a part of a public work. This requirement does not apply to any agency or branch of the United States government.

2. The governmental entity’s purchase order for tangible personal property to be incorporated into the public works project must be attached to the Certificate of Entitlement. The governmental entity must issue a separate Certificate of Entitlement for each purchase order. Copies of the Certificate may be issued.

3. The governmental entity will also affirm that if the Department determines that tangible personal property sold by a vendor tax-exempt pursuant to a Certificate of Entitlement does not qualify for the exemption under Section 212.08(6), F.S., and this rule, the governmental entity will be liable for any tax, penalty, and interest determined to be due.


Here, the Owner’s Direct Purchase Procedures do satisfy the foregoing conditions. The Owner will issue its own purchase orders directly to the suppliers, who will directly invoice the Owner. The Owner will issue a check for the materials directly to the supplier, accompanied by a Certificate of Entitlement. Moreover, the Owner is assuming liability for the materials upon delivery to the jobsite and will acquire title to the materials.

Concluding Statement

The Owner’s Direct Purchase Procedures meet the requirements of the above-mentioned Rule, and therefore, the Owner may purchase the materials tax-exempt for use in a public works contract.

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 that 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 15 days of the date of this letter.


Manshi Shah
Senior Attorney
Technical Assistance and Dispute Resolution 850-717-7312

Record ID: 154968


  • FL Dept. of Revenue
  • ABA
  • FL State Bar

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