Title: Exemptions from the Tax On Sales, Use, and Other Transactions

Summary: Revises limitations, conditions, criteria, & definitions relating to exempting certain business purchases of industrial machinery & equipment from sales tax; exempts from sales tax industrial machinery purchased for exclusive use in spaceport activities or use in businesses that manufacture, process, compound, or produce for sale items of tangible personal property at fixed locations; deletes limitations & restrictions relating to exemption for machinery & equipment used under federal procurement contract.

Full Text:
An act relating to exemptions from the tax on sales, use, and other transactions; amending s. 212.08, F.S.; revising limitations, conditions, criteria, and definitions relating to exempting certain business purchases of industrial machinery and equipment from the sales tax; exempting from the sales tax industrial machinery and equipment purchased for exclusive use in certain spaceport activities or use in bus inesses that manufacture, process, compound, or produce for sale items of tangible personal property at fixed locations; deleting limitations and restrictions relating to an exemption for machinery and equipment used under a federal procurement contract; conforming cross-references; providing an effective date. Be It Enacted by the Legislature of the State of Florida: Section 1. Paragraphs (b), (d), and (h) of subsection (5) of section 212.08, Florida Statutes, are amended to read: 212.08 Sales, rental, use, consumption, distribution, and storage tax; specified exemptions.-The sale at retail, the rental, the use, the consumption, the distribution, and the storage to be used or consumed in this state of the following are hereby specifically exempt from the tax imposed by this chapter. (5) EXEMPTIONS; ACCOUNT OF USE.-(b) Industrial machinery and equipment used exclusively in HB 1071 2012 spaceport activities or used by manufacturers to increase productive output.-1. Industrial machinery and equipment pur chased for exclusive use by a new business in spaceport activities directed or sponsored by Space Florida on spaceport territory pursuant to its powers and responsibilities under the Space Florida Act as defined by s. 212.02 or for use in new businesses th at manufacture, process, compound, or produce for sale items of tangible personal property at fixed locations are exempt from the tax imposed by this chapter upon an affirmative showing by the taxpayer to the satisfaction of the department that such items are used in a new business in this state.Such purchases must be made prior to the date the business first begins its productive operations, and delivery of the purchased item must be made within months after that date. 2. Industrial machinery and equ ipment purchased for exclusive use by an expanding facility which is engaged in spaceport activities as defined by s. 212.02 or for use in expanding manufacturing facilities or plant units which manufacture, process, compound, or produce for sale items of tangible personal property at fixed locations in this state are exempt from any amount of tax imposed by this chapter upon an affirmative showing by the taxpayer to the satisfaction of the department that such items are used to increase the productive output of such expanded facility or business by not less than 53 percent. 3.a. To receive an exemption provided by subparagraph 1. or subparagraph 2., a qualifying business entity shall apply to HB 1071 2012 the department for a temporary tax exemption permit. The application shall state that a new business exemption or expanded business exemption is being sought. Upon a tentative affirmative determination by the department pursuant to subparagraph 1. or subparagraph 2., the department shall issue such permit. b. The ap plicant shall maintain all necessary books and records to support the exemption. Upon completion of purchases of qualified machinery and equipment pursuant to subparagraph 1. or subparagraph 2., the temporary tax permit shall be delivered to the department or returned to the department by certified or registered mail. c. If, in a subsequent audit conducted by the department, it is determined that the machinery and equipment purchased as exempt under subparagraph 1. or subparagraph 2. did not meet the criteria mandated by this paragraph or if commencement of production did not occur, the amount of taxes exempted at the time of purchase shall immediately be due and payable to the department by the business entity, together with the appropriate interest and penalty, computed from the date of purchase, in the manner prescribed by this chapter. d. If a qualifying business entity fails to apply for a temporary exemption permit or if the tentative determination by the department required to obtain a temporary ex emption permit is negative, a qualifying business entity shall receive the exemption provided in subparagraph 1. or subparagraph 2. through a refund of previously paid taxes. No refund may be made for such taxes unless the criteria mandated by subparagraph 1. or HB 1071 2012 subparagraph 2. have been met and commencement of production has occurred. 4. The department shall adopt rules governing applications for, issuance of, and the form of temporary tax exemption permits; provisions for recapture of taxes; and the man ner and form of refund applications, and may establish guidelines as to the requisites for an affirmative showing of increased productive output, commencement of production, and qualification for exemption. 2.5. The exemptions provided in subparagraph subparagraphs 1. and 2. do not apply to machinery or equipment purchased or used by electric utility companies, communications companies, oil or gas exploration or production operations, publishing firms that do not export at least percent of their finish ed product out of the state, any firm subject to regulation by the Division of Hotels and Restaurants of the Department of Business and Professional Regulation, or any firm that does not manufacture, process, compound, or produce for sale items of tangible personal property or that does not use such machinery and equipment in spaceport activities as required by this paragraph. The exemptions provided in subparagraph subparagraphs 1. and 2. shall apply to machinery and equipment purchased for use in phosphat eor other solid minerals severance, mining, or processing operations. 3.6. For the purposes of the exemptions provided in subparagraph 1., the term subparagraphs 1. and 2., these terms have the following meanings: a. "industrial machinery and equipmen t" means tangible HB 1071 2012 personal property or other property that has a depreciable life of years or more and that is used as an integral part in the manufacturing, processing, compounding, or production of tangible personal property for sale or is exclusively used in spaceport activities as described in subparagraph.A building and its structural components are not industrial machinery and equipment unless the building or structural component is so closely related to the industrial machinery and equipment tha tit houses or supports that the building or structural component can be expected to be replaced when the machinery and equipment are replaced. Heating and air-conditioning systems are not industrial machinery and equipment unless the sole justification for their installation is to meet the requirements of the production process, even though the system may provide incidental comfort to employees or serve, to an insubstantial degree, nonproduction activities. The term includes parts and accessories only to the extent that the exemption thereof is consistent with the provisions of this paragraph. b. "Productive output" means the number of units actually produced by a single plant, operation, or product line in a single continuous-month period, irrespectiv eof sales. Increases in productive output shall be measured by the output for continuous months selected by the expanding business following the completion of installation of such machinery or equipment over the output for the continuous months immediately preceding such installation. However, in no case may such time period begin later than years following the completion of installation of the new machinery and equipment. HB 1071 2012 The units used to measure productive output shall be physically comparable between the two periods, irrespective of sales. (d) Machinery and equipment used under federal procurement contract.-1. Industrial machinery and equipment purchased by a an expanding business which manufactures tangible personal property pursuant to federal procurement regulations at fixed locations in this state are exempt from the tax imposed in this chapter upon an affirmative showing by the taxpayer to the satisfaction of the depa rtment that such items are used to increase the implicit productive output of the expanded business by not less than percent.The percentage of increase is measured as deflated implicit productive output for the calendar year during which the installati on of the machinery or equipment is completed or during which commencement of production utilizing such items is begun divided by the implicit productive output for the preceding calendar year. In no case may the commencement of production begin later than years following completion of installation of the machinery or equipment. 2. The amount of the exemption allowed shall equal the taxes otherwise imposed by this chapter on qualifying industrial machinery or equipment reduced by the percentage of gross receipts from cost-reimbursement type contracts attributable to the plant or operation to total gross receipts so attributable, accrued for the year of completion or commencement. 3. The exemption provided by this paragraph shall inure to the taxpayer only through refund of previously paid taxes. Such refund shall be made within days of formal approval by the HB 1071 2012 department of the taxpayer's application, which application may be made on an annual basis following installation of the machinery or equipment. 4. For the purposes of this paragraph, the term: a. "Cost-reimbursement type contracts" has the same meaning as in C.F.R. s.-405. b. "Deflated implicit productive output" means the product of implicit productive output times the quotient of the national defense implicit price deflator for the preceding calendar year divided by the deflator for the year of completion or commencement. c. "Eligible costs" means the total direct and indirect costs, as defined in C.F.R. ss.-202 and-203, excluding general and administrative costs, selling expenses, and profit, defined by the uniform cost-accounting standards adopted by the Cost-Accounting Standards Board created pursuant to U.S.C. s. 2168. d. "Implicit productive output" means the annua leligible costs attributable to all contracts or subcontracts subject to federal procurement regulations of the single plant or operation at which the machinery or equipment is used. e. As used in this paragraph, the term, "industrial machinery and equi pment" means tangible personal property or other property that has a depreciable life of years or more, that qualifies as an eligible cost under federal procurement regulations, and that is used as an integral part of the process of production of tangibl epersonal property. A building and its structural components are not industrial machinery and equipment HB 1071 2012 unless the building or structural component is so closely related to the industrial machinery and equipment that it houses or supports that the buildin gor structural component can be expected to be replaced when the machinery and equipment are replaced. Heating and air-conditioning systems are not industrial machinery and equipment unless the sole justification for their installation is to meet the requ irements of the production process, even though the system may provide incidental comfort to employees or serve, to an insubstantial degree, nonproduction activities. The term includes parts and accessories only to the extent that the exemption of such par ts and accessories is consistent with the provisions of this paragraph. f. "National defense implicit price deflator" means the national defense implicit price deflator for the gross national product as determined by the Bureau of Economic Analysis of th eUnited States Department of Commerce. 2.5. The exclusions provided in subparagraph (b)2. (b)5. apply to this exemption. This exemption applies only to machinery or equipment purchased pursuant to production contracts with the United States Department of Defense and Armed Forces, the National Aeronautics and Space Administration, and other federal agencies for which the contracts are classified for national security reasons. In no event shall the provisions of this paragraph apply to any expanding busine ss the increase in productive output of which could be measured under the provisions of sub-subparagraph (b)6.b. as physically comparable between the two periods. HB 1071 2012 (h) Business property used in an enterprise zone.-1. Business property purchased for use by businesses located in an enterprise zone which is subsequently used in an enterprise zone shall be exempt from the tax imposed by this chapter. This exemption inures to the business only through a refund of previously paid taxes. A refund shall be auth orized upon an affirmative showing by the taxpayer to the satisfaction of the department that the requirements of this paragraph have been met. 2. To receive a refund, the business must file under oath with the governing body or enterprise zone developme nt agency having jurisdiction over the enterprise zone where the business is located, as applicable, an application which includes: a. The name and address of the business claiming the refund. b. The identifying number assigned pursuant to s. 290.0065 to the enterprise zone in which the business is located. c. A specific description of the property for which a refund is sought, including its serial number or other permanent identification number. d. The location of the property. e. The sales invoi ce or other proof of purchase of the property, showing the amount of sales tax paid, the date of purchase, and the name and address of the sales tax dealer from whom the property was purchased. f. Whether the business is a small business as defined by s. 288.703. g. If applicable, the name and address of each permanent HB 1071 2012 employee of the business, including, for each employee who is a resident of an enterprise zone, the identifying number assigned pursuant to s. 290.0065 to the enterprise zone in which the employee resides. 3. Within working days after receipt of an application, the governing body or enterprise zone development agency shall review the application to determine if it contains all the information required pursuant to subparagraph 2. and meets the criteria set out in this paragraph. The governing body or agency shall certify all applications that contain the information required pursuant to subparagraph 2. and meet the criteria set out in this paragraph as eligible to receive a refund. If applicable, the governing body or agency shall also certify if percent of the employees of the business are residents of an enterprise zone, excluding temporary and part-time employees. The certification shall be in writing, and a copy of the certificati on shall be transmitted to the executive director of the Department of Revenue. The business shall be responsible for forwarding a certified application to the department within the time specified in subparagraph 4. 4. An application for a refund pursuan tto this paragraph must be submitted to the department within months after the tax is due on the business property that is purchased. 5. The amount refunded on purchases of business property under this paragraph shall be the lesser of percent of th esales tax paid on such business property or $5,000, or, if no less than percent of the employees of the business are residents of an enterprise zone, excluding temporary and part HB 1071 2012 time employees, the amount refunded on purchases of business property un der this paragraph shall be the lesser of percent of the sales tax paid on such business property or $10,000. A refund approved pursuant to this paragraph shall be made within days after formal approval by the department of the application for the re fund. A refund may not be granted under this paragraph unless the amount to be refunded exceeds $100 in sales tax paid on purchases made within a-day time period. 6. The department shall adopt rules governing the manner and form of refund applications and may establish guidelines as to the requisites for an affirmative showing of qualification for exemption under this paragraph. 7. If the department determines that the business property is used outside an enterprise zone within years from the date of purchase, the amount of taxes refunded to the business purchasing such business property shall immediately be due and payable to the department by the business, together with the appropriate interest and penalty, computed from the date of purchase, in the manner provided by this chapter. Notwithstanding this subparagraph, business property used exclusively in: a. Licensed commercial fishing vessels, b. Fishing guide boats, or c. Ecotourism guide boats that leave and return to a fixed location within an area designated under s. 379.2353, Florida Statutes 2010, are eligible for the exemption provided under this paragraph if all HB 1071 2012 requirements of this paragraph are met. Such vessels and boats must be owned by a business that is eligible to receive the exemption provided under this paragraph. This exemption does not apply to the purchase of a vessel or boat. 8. The department shall deduct an amount equal to 313 percent of each refund granted under this paragr aph from the amount transferred into the Local Government Half-cent Sales Tax Clearing Trust Fund pursuant to s. 212.20 for the county area in which the business property is located and shall transfer that amount to the General Revenue Fund. 9. For the purposes of this exemption, "business property" means new or used property defined as "recovery property" in s. 168(c) of the Internal Revenue Code of 1954, as amended, except: a. Property classified as-year property under s. 168(c)(2)(A) of the Interna lRevenue Code of 1954, as amended; b. Industrial machinery and equipment as defined in subparagraph (b)3. sub-subparagraph (b)6.a. and eligible for exemption under paragraph (b); c. Building materials as defined in sub-subparagraph (g)8.a.; and d. Business property having a sales price of under $5,000 per unit. 10. This paragraph expires on the date specified in s. 290.016 for the expiration of the Florida Enterprise Zone Act. Section 2. This act shall take effect upon becoming a law.