A Florida Court of Appeals affirmed a trial court’s decision that tangible personal property incorporated into research and development prototypes are tax exempt as research and development costs. The court found that material incorporated into research and development prototypes is tax-exempt whereas equipment used for building the prototype is not exempt. The material incorporated into the prototype material used “directly and solely” in research and development then, it is not subject to tax. The court’s decision was contrary to the Department of Revenue’s position that only labor costs expended in research and development are exempt. (Florida Department of Revenue v. Lockheed Martin Corp., Florida Court of Appeals, July 5, 2005)