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In a recent Technical Assistance Advisement, the Florida Department of Revenue has determined that no tax need be collected when an unregistered, out-of-state dealer purchases merchandise from a registered out-of state supplier (drop-shipper), but directs the supplier to ship the merchandise directly to a customer in Florida via a common carrier. The Department states that on third-party drop shipments, the drop shipment of merchandise into Florida would not be a considered a Florida sale if: 1) both the dealer and the vendor are located outside Florida; 2) the property, at the time of sale, is outside Florida; and 3) the vendor ships the merchandise from a point outside Florida by common carrier, or sends the goods through the U.S. Postal Service, to the dealer’s customer. Since the situation at question meets all three criteria, no Florida sale has occurred. Therefore, the Florida end user is responsible for paying the tax. (Technical Assistance Advisement 07A-008, Florida Department of Revenue, March 29, 2007)


Replacement industrial machinery and equipment qualify for a Florida sales and use tax exemption as repairs, with the exception of the electrical substation (owned by a local utility company). The production of steel is an integrated process beginning with the melting of scrap steel and concluding with the coiling or bundling of the finished steel products. There are no breaks in the production process once the melting of the scrap steel has commenced. In addition, the exemption applies to replacement industrial machinery and equipment for the steel manufacturing process and constitutes repairs under the provisions of Section 212.08(7) (xx).(Technical Assistance Advisement, No 07A-030, Florida Department of Revenue).


The Florida Department of Revenue issued a Technical Assistance Advisement indicating that a taxpayer engaged in a lump sum real property improvement contract is considered the ultimate user of the tangible personal property used in completing the contract and is liable for Florida use tax on the cost of supplies and materials used for the contract. Furthermore, the freight, delivery and start-up charges included on an invoice for the sale of tangible personal property are taxable because the taxable sales price is the total amount paid including any services that are a part of the sale. (Technical Assistance Advisement, No. 07A-035, Florida Department of Revenue)


A Technical Assistance Advisement was issued by the Florida Department of Revenue clarifying that when a Florida taxpayer provides a crane to a customer on an operated and maintained basis, a lifting service is being provided and control of the crane is never transferred to the customer. The operation of a crane is a dangerous activity and an operator/employee cannot shift the control or operation to its customers. The customer has no right or authority to even enter the crane cab and the operators are solely responsible for the operation and safety of the crane. Therefore, the rental of a crane with an operator is a non-taxable service. An indemnity clause in the service contract stated that the equipment and operator were under the lessee’s exclusive supervision and control did not change the character of the contract from a service to a lease or transfer control of the crane to the lessee for sale and use tax purposes. Since the crane company was using the cranes to perform a nontaxable service, a use tax would be due from the crane company on its purchase or lease of the cranes. This ruling revises a Technical Assistance Advisement issued in 1995. (Technical Assistance Advisement, No. 95A-0220R, Florida Department of Revenue, October 25, 2007)


A contract for the sales/lease of customized software together with hardware to implement the software licensed by a software provider to a Florida client was subject to sales tax because the software was sold in conjunction with tangible personal property. If the customized software had been sold separately, it would not have been subject to sales tax. However, the contract between the taxpayer and its client was taxable because the contract stated that the hardware was provided to implement the software and, as such, the software would not be usable by the Client without the tangible personal property. In addition, the taxability of any associated warranty contract follows the taxability of the underlying product – taxable in this situation since the software was bundled with the hardware. (Technical Assistance Advisement, No. 07A-040, Florida Department of Revenue)



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