Florida Administrative Code › 12 - DEPARTMENT OF REVENUE › 12A - Sales and Use Tax › Chapter 12A-1 - SALES AND USE TAX › Section 12A-1.096 - Industrial Machinery and Equipment for Use in a New or Expanding Business

Current through Reg. 50, No. 138; July 16, 2024
(1) Definitions - The following terms and
				phrases when used in this rule have the meaning ascribed to them except where
				the context clearly indicates a different meaning:
(a) "Fixed location" means a location or
				plant site that is used, or intended to be used, for an extended or indefinite
				period of time for spaceport activities or for manufacturing, processing,
				compounding, or producing items of tangible personal property for sale. The
				term also includes a location where a portable plant is set up for a period of
				not less than six months in a stationary manner so as to perform the same
				industrial manufacturing, processing, compounding or production process that
				could be performed at a permanent location or plant site. The geographical
				limits of the fixed location for purposes of this rule are limited to the
				immediate permanent location or plant site. Facilities or plant units that are
				within the same building, or that are on the same parcel of land if not
				contained in a building, are considered to be one fixed location.
(b) "Industrial machinery and equipment"
				means tangible personal property or other property with a depreciable life of 3
				years or more 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. Buildings and their structural
				components are not industrial machinery and equipment unless the building or
				structural component is so closely related to the industrial machinery and
				equipment that it houses or supports that the building or structural component
				can be expected to be replaced when the machinery and equipment itself is
				replaced. Heating and air conditioning systems are not considered 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 serves, to an insubstantial
				degree, nonproduction activities. For example, a dehumidifier installed for the
				sole purpose of conditioning air in a factory, where the manufacturing of
				electronic components requires a controlled-humidity environment, will be
				considered industrial machinery and equipment. (See subsection (8) of this
				rule.)
(c) "Integral to" means that
				the machinery and equipment provides a significant function within the
				production process, such that the production process could not be complete
				without that machinery and equipment.
(d) "Manufacture, process, compound, or
				produce for sale" means the various industrial operations of a business where
				raw materials will be put through a series of steps to make an item of tangible
				personal property that will be sold. The industrial operations must bring about
				a change in the composition or physical nature of the raw materials. Where
				materials are merely repackaged or redistributed, those operations are not
				manufacturing, processing, compounding, or producing for sale. The item of
				tangible personal property may be sold to another manufacturer for further
				processing or for inclusion as a part in another item of tangible personal
				property that will be sold, or the item may be sold as a finished product to a
				wholesaler or an end consumer. The business performing the manufacturing,
				processing, compounding, or production process may or may not own the raw
				materials. However, the phrase "manufacture, process, compound, or produce for
				sale" does not include fabrication, alteration, modification, cleaning, or
				repair services performed on items of tangible personal property belonging to
				others where such items of tangible personal property are not for
				sale.
(e) "Physically comparable"
				means the similarity or equivalency of the characteristics of the items of
				tangible personal property being manufactured, processed, compounded or
				produced. Physical comparability applies to the units used to measure the
				increase in productive output of an expanding business.
1. Example: All models of microwave ovens
				made by a manufacturer, regardless of specific features, would be physically
				comparable. However, if the manufacturer also made coffee makers, the coffee
				makers would not be physically comparable to microwave ovens, even though both
				items are generally considered small kitchen appliances.
2. Example: A beverage manufacturer produces
				a variety of soft drinks in various sized cans and bottles. The production of
				the various sized cans and bottles of soft drinks is not physically comparable.
				However, production is physically comparable when converted to a common
				physical unit, such as gallons of product.
(f) "Production process" or "production line"
				means those industrial activities beginning when raw materials are delivered to
				the new or expanding business' fixed location and generally ending when the
				items of tangible personal property have been packaged for sale, or are in
				saleable form if packaging is not done. However, the production process may
				include quality control activities after the items have been packaged (or are
				in salable form if packaging is normally not done), such as good manufacturing
				practices as mandated by the Federal Food and Drug Administration to detect
				adulterated food or food that has been prepared, packaged, or held under
				unsanitary conditions.
1. The production
				process may encompass more than one fixed location if the business transfers
				work-in-process from one fixed location to a second fixed location for further
				manufacturing, processing, compounding, or production. For example, a company
				purchases machinery and equipment to produce raw orange juice at one fixed
				location, and this raw orange juice is transferred as work-in-process to a
				second fixed location where the company will use the raw orange juice to make
				five different products.
2. A
				production process does not include natural processes occurring before raw
				material is delivered to the receiving operation or after the packaging
				operation. For example, the natural transformation of grass or feed into raw
				milk by dairy cows is not part of the production process. In this case, the
				production process begins with the milking parlor. The planting, growing, or
				harvesting of crops, and the raising of livestock or poultry are not part of
				the production process. The natural aging or fermentation of alcoholic
				beverages or other food products, after they have been packaged, is also not
				part of the production process. The production process ends when the alcoholic
				beverage or other food product has been packaged for sale.
3. The production process does not include
				product design activities. For example, the computer aided design of a product
				where the final design program or computer file for that product will be sent
				to or downloaded to industrial machinery and equipment for the physical
				creation of the product is not a part of the production process. Similarly, the
				production process for printed materials does not include the initial
				conception or creation of the written matter. For example, the writing of a
				story by a reporter for subsequent printing in a newspaper is not a part of the
				production process. (See subsection (8) of this rule regarding machinery and
				equipment and the production process.)
(g) "Productive output" ordinarily means the
				number of units actually produced by a single plant or operation in a single
				continuous 12-month period. The increase in productive output shall be measured
				by the output for 12 continuous months, as selected by the expanding business,
				following the completion of the installation of machinery and equipment for the
				expansion project as compared to the productive output of 12 continuous months
				immediately preceding the beginning of the installation of machinery and
				equipment for the expansion project. However, the 12 continuous months post
				installation measurement period, as selected by the expanding business, must
				begin within 24 months following the completion of installation of qualifying
				machinery and equipment. Productive output may not be measured by sales dollars
				or by production labor hours for the purposes of this exemption.
(h) "Purchase, " "purchases, " or
				"purchasing" means the transfer of title or possession, or both, of industrial
				machinery and equipment for a consideration. The terms also include the
				acquisition of industrial machinery and equipment under a lease or rental
				agreement.
(i) "Purchase agreement"
				means a document, in the form of a purchase order issued by the purchaser, a
				contract for purchase with a seller or vendor, a memorandum of understanding,
				or a lease or rental agreement with a lessor.
(j) "Spaceport activities" means those
				activities as defined in Section
				212.02, F.S.