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A company’s sale of software created for the medical industry was determined to be a sale of custom software, a non-taxable service transaction when sold separately. The company also employs computer programmers for the support and maintenance of the software. Similarly, if the maintenance agreement is sold separately, it is also not taxable. However, if either is combined with the sale of tangible personal property, they would be subject to sales and use taxes. (Technical Assistance Advisement, No. 09A-001, Florida Department of Revenue, January 8, 2009)


The Florida Department of Revenue does not have the authority to assess sales and use taxes on the total amount the taxpayer billed his tenants/clients as base rent, as that amount encompassed more than just the total rent charged. The taxpayer develops and leases special purpose medical centers and provides administrative and other services to physician groups. Under agreement, the taxpayer provides the physician groups with a monthly financial summary and invoice, broken down as the base rent, the service fee, and the sales tax due. Included in the base rent are center expenses, such as salaries, benefits, and utilities. After conducting an audit, the Department issued a notice of proposed assessment which included additional sales tax due on items included in the base rent amount. It was clear that the taxpayer’s agreement with the physician groups provided for both payments taxable as total rent and payments not subject to the sales and use taxes, such as salaries and benefits. Therefore, the Department only has authority to assess taxes on the center expenses that are taxable as total rent, not on the total amount billed as base rent. (USCarido Vascular, Inc. v. Florida Department of Revenue, Florida Court of Appeal, First District, No. 1D07-3811, September 23, 2008)


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)


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)


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).



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