SUMMARY
QUESTION: Taxpayer manufactures roof tiles using a chemical called E-44. Is the chemical subject to Florida use tax?
ANSWER: No. Pursuant to Section 212.02(14) (c), F.S., and Rule 12A-1.039, F.A.C., the purchase of E-44 that is incorporated into roof tiles during manufacturing is not subject to Florida sales and use tax.
December 18, 2007
Re:Technical Assistance Advisement 07A-044
Sales and Use Tax – Taxability of a Chemical Agent
Section 212.02(14) (c), F. S.
Rule: 12A-1.039(1) (b)6., F.A.C.
XXX (“Taxpayer”)
FEI #: XXX
Dear :
This response is in reply to your letter datedSeptember 12, 2007, requesting the Department’s issuance of a Technical Assistance Advisement (“TAA”) pursuant to Section 213.22, F.S., and Rule Chapter 12-11, F.A.C., regarding the Department’s position on the issue of manufacturing. An examination of your letter has established that you have complied with the statutory and regulatory requirements for issuance of a TAA. Therefore, the Department is hereby granting your request for issuance of a TAA.
FACTS
You have provided the following in your letter referenced above:
[Taxpayer] is one of the largest manufacturers of premium-quality roofing tile in the United States.… E-44 is a fully biodegradable and methyl ester compound that is used in [Taxpayer’s] production of roofing tiles. Due to the way the chemical is applied, an insignificant amount of this compound is wasted in manufacturing process. [The Taxpayer’s] engineer states that more than 99% of the E-44 chemical purchased is incorporated into the manufactured tiles.
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You have provided the engineering lab reports and a letter written by the Taxpayer’s environmental manager and process engineer. The letter explains the lab reports and states that 99% of the chemical E-44 is absorbed into the concrete roof tile.
ISSUE PRESENTED
Whether E-44, a chemical used in the production of roof tiles, is subject to Florida use tax.
TAXPAYER POSITION
You have provided the following in your letter referenced above:
…[W]e respectfully request that the Department confirm to us in writing the [Taxpayer’s] use of chemical agent E-44 in manufacturing of roofing tile is exempt from sales tax in Florida….
APPLICABLE STATUTES AND RULES
The following provisions of the Florida Statutes (F.S.) and Florida Administrative Code (F.A.C.) are pertinent to the issues under consideration.
Section 212.02(14) (c), F.S., provides in part:
(c)…The terms ["retail sales," "sale at retail," "use," "storage," and "consumption"] do not include the sale, use, storage, or consumption of industrial materials, including chemicals and fuels except as provided herein, for future processing, manufacture, or conversion into articles of tangible personal property for resale when such industrial materials, including chemicals and fuels except as provided herein, become a component or ingredient of the finished product….
Rule 12A-1.039, F.A.C., provides in part:
(1)(b) A sale for resale is exempt from the tax imposed by Chapter 212, F.S., only when the sale for resale is in strict compliance with the provisions of this rule. For purposes of this rule, a "sale for resale" includes the following sales, leases, or rentals when made to a person who is an active registered dealer. This is not intended to be an exhaustive list.
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6. The sale of tangible personal property to a dealer when such property will be incorporated as a material, ingredient, or component part of tangible personal property that is being produced for sale by manufacturing, processing, or compounding.
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RESPONSE
Pursuant to Section 212.02(14)(c), F.S., and Rule 12A-1.039, F.A.C., chemicals that become a component of the finished product are not included in the definitions of “retail sales,” “sale at retail,” “use,” “storage,” and “consumption” and are not subject to Florida sales and use tax.
Under the facts provided, your purchase of E-44 that is incorporated into roof tiles during manufacturing is not subject to Florida sales and use tax.
This response constitutes a Technical Assistance Advisement under Section 213.22, F.S., which is binding on the Department only under the facts and circumstances described in the request for this advice as specified in Section 213.22, F.S. Our response is predicated on those facts and the specific situation summarized above. You are advised that subsequent statutory or administrative rule changes, or judicial interpretations of the statutes or rules, upon which this advise is based, may subject similar future transactions to a different treatment than expressed in this response.
You are further advised that this response, your request and related backup documents are public records under Chapter 119, F.S., and are subject to disclosure to the public under the conditions of s.213.22, F.S. Confidential information must be deleted before public disclosure. In an effort to protect confidentiality, we request you provide the undersigned with an edited copy of your request for Technical Assistance Advisement, the backup material and this response, deleting names, addresses and any other details which might
lead to identification of the taxpayer. Your response should be received by the Department within 15 days of the date of this letter.
Sincerely,
Valerie Koenitzer
Tax Law Specialist
Technical Assistance and Dispute Resolution
(850) 922-9412
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