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In a Technical Assistance Advisement, the State of Florida qualified a taxpayer’s leaseback transaction as a financing arrangement rather than a true lease. The taxpayer was involved in a leaseback transaction of real property. The State of Florida provided the following indicators as guidance in determining whether or not the transaction was a financing agreement or lease:
1. the language of the documents should be clear, while understanding the importance of substance over form
2. recognizing that a debt must be secured in order for there to be a mortgage
3. the rent involved in the transaction should be fixed to debt service in contrast to the rental market value of the property
4. the buyer/lessee involved in the transaction needs to be a single purpose financing corporation created prior to the transaction in order to facilitate the loan process
5. the “so-called buyer” was passed the short-term and long-term risks; and
6. in order for “debt” to be properly recorded, title must be transferred shortly after the end of the “lease” term.
The Florida Department of Revenue further stated that the lease portion of the transaction was subject to the document stamp tax and that the agreement was also subject to nonrecurring intangible tax. (Technical Assistance Advisement, No. 04M-002, Florida Department of Revenue, November 16, 2004)

(01/21/2005)

In a technical assistance advisement, the Florida Department of Revenue determined that a Florida utility was required to collect sales and use tax from nonresidential customers and gross receipts tax from residential customers for optional facilities that were available for an extra charge. The facilities were not required for the utility service, but were available to customers who wanted more service. The Department of Revenue found that facility charges were taxable along with electricity provision. (Technical Assistance Advisement, No. 04A-059, Florida Department of Revenue, October 26, 2004)

(01/21/2005)

In order to qualify for tax exempt status in Florida, medical devices and tools must meet two qualifications. First, the supplies must be intended for one-time use. Second, they must be required by federal law to contain a prescription legend reading either “RX” or “Caution.” This label indicates that the device or tool must be sold either to a licensed physician or according to the order of a licensed physician. If the device or tool does not meet both criteria, it does not qualify for the exemption. (Florida Department of Revenue, TAA No. 04A-041, July 19, 2004)

(10/22/2004)

Ethylene gas, used in Florida to process fruit, was exempt from taxation as a “plant regulator.” Under Florida regulation “Plant Regulators” are a subcategory of pesticides, which are tax exempt. Originally the taxpayer argued that the ethylene gas should be exempt under the packaging exemption allowed in Florida because the gas is used to accelerate the ripening process of fruit and to change the color of peel. The peel is not consumed and therefore is the product’s packaging. In its determination the Department refused to address this argument. Instead, it ruled in favor of the taxpayer by deeming the ethylene gas a tax exempt pesticide. (TAA No. 04A-031R, Florida Department of Revenue, July 30, 2004)

(10/22/2004)

A free publication, distributed monthly in Florida is subject to use tax on the “cost price” of production because the publication is not comprised primarily of advertising. Florida law, Section 212.08(7)(w), F.S. provides an exemption for free, circulated publications whose content is mainly advertising. Because the publication in question contains both an address book and gift certificate section it does not fulfill the advertising qualification and therefore is not exempt from tax. (TAA No. 04A-046, Department of Revenue, August 6, 2004)

(10/22/2004)

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