Fla. Admin. Code R. 12A-1.043

Current through Reg. 50, No. 222; November 13, 2024

Section 12A-1.043 - Manufacturing

(1)

(a) Any person who manufactures, produces, compounds, processes, or fabricates in any manner an article of tangible personal property for his own use shall pay a tax upon the cost of the property manufactured, produced, compounded, processed, or fabricated without any deduction therefrom on account of the cost of material used, labor or service costs, or transportation charges.

(b) Elements of cost will include the following materials, labor, service, or transportation costs that are attributable to manufacturing, producing, compounding, processing, or fabricating an article of tangible personal property for one's own use and which are properly chargeable to the cost of the product under generally accepted cost accounting standards.

1. Material costs include the following:

a. All direct materials and related freight costs that are physically observable as being identified to the finished tangible personal property, that are consumed in producing the property, or that become a component or ingredient of the finished property. See paragraphs (c) and (d) below, for calculating the tax on the cost of the finished product when sales tax has or has not been paid on direct materials.

b. Material handling and warehousing of direct materials and goods in process.

c. Manufacturer's excise taxes on materials.

2. Labor costs include the following:

a. The total direct labor costs for employees or contract labor that are allocable to the production of the finished property, including the entire amount of payroll burden, which includes but is not limited to overtime premium, vacation and holiday pay, sick leave pay, shift differential, payroll taxes, payments to a supplemental unemployment benefit plan, and employee fringe benefits.

b. Compensation of officers, to the extent it is allocated to production and not administrative functions.

c. Costs of service, engineering, design or other support employees allocated to production.

3. Service costs include the costs of non-employee services that are allocated to the production of the tangible personal property, such as engineering, design or similar consulting or professional services.

(c) Direct materials on which the tax has been paid shall not be included when computing the tax on the cost of items of tangible personal property manufactured, produced, compounded, processed, or fabricated.

(d) Persons who manufacture, produce, compound, process, or fabricate items of tangible personal property for resale or for their own use or consumption may purchase direct materials tax exempt but shall include the cost of the direct materials when computing tax on the cost of the items so manufactured, produced, compounded, processed, or fabricated for such persons' own use or consumption. If tax has been paid on the direct materials, the method described in paragraph (c) should be used when computing the tax on the cost of the items so manufactured, produced, compounded, processed, or fabricated.

(e)

1. To purchase direct materials tax exempt, dealers registered with the Department to sell tangible personal property may extend a copy of their Annual Resale Certificate (Form DR-13) to the selling dealer in lieu of paying tax at the time of purchase. The cost of such materials is subject to tax on the cost of the items so manufactured, produced, compounded, processed, or fabricated, as provided in paragraph (d).

2. Persons who do not sell tangible personal property are not required to register with the Department as a dealer. However, to purchase direct materials tax exempt, such persons may extend an Exemption Certificate, as provided in Rule 12A-1.038, F.A.C., to the selling dealer in lieu of paying tax at the time of purchase. The cost of such materials is subject to tax on the cost of the items so manufactured, produced, compounded, processed, or fabricated, as provided in paragraph (d).

(f) The tax is due at the time the article of tangible personal property is manufactured, produced, compounded, processed, or fabricated for use or consumption, and such tax shall be remitted to the Department of Revenue in accordance with Rule 12A-1.056, F.A.C.

(2) Fabrication labor shall not be taxable where a person is using his own equipment and his own personnel, for his own account, as a producer, subproducer, or coproducer of a qualified motion picture. "Qualified motion picture" means all or any part of a series of related images, either on film, tape, or other embodiment, including but not limited to, all items comprising part of the original work and film-related products derived therefrom as well as duplicates and prints and all sound recordings created to accompany a motion picture, which is produced, adapted, or altered for exploitation in, on, or through any medium or device and at any location primarily for entertainment, commercial, industrial, or educational purposes.

(3)

(a) Any person who manufactures factory-built buildings for his own use in the performance of contracts for the construction or improvement of real property shall pay a tax only upon the person's cost price of items used in the manufacture of such buildings.

(b) For the purpose of this exemption, "factory-built building" means a structure manufactured in a manufacturing facility for installation or erection as a finished building; "factory-built building" includes, but is not limited to, residential, commercial, institutional, storage, and industrial structures.

(4) Any person who manufactures asphalt for his own use shall calculate and remit the use tax on such asphalt, as provided in subsection 12A-1.051(12), F.A.C.

(5)

(a)

1. No tax shall be imposed upon any person who manufactures or produces electrical power or energy, steam energy, or other energy, when such power or energy is used directly and exclusively in the operation of machinery or equipment that is used to manufacture, process, compound, produce, fabricate, or prepare for shipment tangible personal property for sale or to operate pollution control equipment, maintenance equipment, or monitoring or control equipment, used in such operations.

a. Tax is not imposed upon electrical power or energy, steam energy, or other energy manufactured or produced for a person's own use at a single location, when such power or energy is used directly and exclusively at such location, or at other locations if the energy is transferred through facilities of the owner, in the operation of machinery or equipment that is used to manufacture, process, compound, produce, fabricate, or prepare for shipment tangible personal property for sale or to operate pollution control equipment, maintenance equipment, or monitoring or control equipment used in such operations.

b. Electrical power or energy manufactured or produced for a person's own use transmitted and distributed by a public utility to such person's facility at another location is taxable based upon the cost price of such power or energy without any deduction therefrom on account of the cost of material used, labor or service costs, or transportation charges.

3. Electrical power or energy manufactured or produced for a person's own use that is used for space heating, lighting, office equipment, air conditioning, or any other nonmanufacturing, nonprocessing, noncompounding, nonproducing, or nonfabricating activity is taxable based upon the cost price of such power or energy without any deduction therefrom on account of the cost of material used, labor or service costs, or transportation charges.

(b) Tax is not imposed upon the manufacture or production of electrical power or energy when such electrical power or energy is consumed or dissipated in the transmission or distribution of electrical power or energy for resale.

(6)

(a) Tangible personal property manufactured, produced, compounded, processed, or fabricated for use directly and solely in research or development, and machinery and equipment used predominantly for research or development purposes are exempt when the research or development has one of the following as its ultimate goal:

1. Basic research or the advancement of knowledge or technology in a scientific or technical field of endeavor.

2. The development of a new product, the improvement of an existing product, or the development of new uses of an existing product, whether or not the product is offered for sale.

3. The design and development of prototypes, whether or not a resulting product is offered for sale.

(b) For the purpose of this subsection:

1. "Machinery and equipment" includes, but is not limited to, molds, dies, machine tooling, and other appurtenances or accessories for machinery and equipment, testing and measuring equipment, test beds, and computers and software. Such machinery and equipment may be purchased, leased, or self-fabricated. If self-fabricated, the machinery and equipment includes the materials and labor for the design, fabrication, and assembly of such items.

2. "Predominantly" means at least 50 percent of the time.

3. "Product" means any item, device, technique, prototype, invention, or process, which is, was, or may become, commercially exploitable.

(c) Research or development does not include ordinary testing or inspection of materials or products used for quality control, market research, efficiency surveys, consumer surveys, advertising and promotions, management studies, or research in connection with literature, history, social science, psychology, or other similar nontechnical activities.

(d)

1. Materials and labor may be purchased tax-exempt when the purchaser extends an exemption certificate to the vendor or supplier certifying that the materials and labor will be used directly and solely for research or development purposes, as provided in Section 212.052, F.S.

2. The following is a suggested format for an exemption certificate for purchases of materials and labor:

EXEMPTION CERTIFICATE

ITEMS OF TANGIBLE PERSONAL PROPERTY AND LABOR

USED IN RESEARCH OR DEVELOPMENT

This is to certify that purchases of tangible personal property or labor on or after ________ (date) from ________ (Selling Dealer's Business Name) will be directly and solely used in research or development activities, as provided in Section 212.052, F.S. These research or development activities are located at:

______________________________________________________

(Street)

______________________________________________________

(City and State)

I understand that if I fraudulently issue this certificate to evade the payment of tax, I will be liable for payment of the tax plus a penalty of 200% of the tax and be liable for fine and punishment provided by law for conviction of a felony of the third degree, as provided in Section 775.082, 775.083 or 775.084, F.S.

Under penalties of perjury, I declare that I have read the foregoing document and that the facts stated in it are true to the best of my knowledge and belief.

_______________________________ ___________________________________________________________

Purchaser's Name (Print or Type) Purchaser's Address

_______________________________ ___________________________________________________________

Signature and Title Florida Sales and Use Tax Number (if applicable)

_______________________________ ___________________________________________________________

Date Federal Employer's Identification Number

(if applicable)

(e)

1. Machinery and equipment, including materials and labor used in the self-fabrication of machinery and equipment, may be purchased or leased tax-exempt when the purchaser extends an affidavit to the vendor or supplier stating that the item(s) will be used predominantly for research or development purposes, as provided in Section 212.08(18), F.S.

2. The following is a suggested format of an affidavit to be provided to the selling dealer or lessor:

AFFIDAVIT

MACHINERY AND EQUIPMENT USED IN RESEARCH OR DEVELOPMENT

I, the undersigned individual, hereby declare that the purchase(s) or lease(s) of machinery and equipment, including materials and labor used in the self-fabrication of machinery and equipment, on or after ________ (date) from ________ (Selling Dealer's Business Name), will be used predominantly in research or development activities, as provided in Section 212.08(18), F.S.

These research or development activities are located at:

______________________________________________________

(Street)

______________________________________________________

(City and State)

I understand that if I fraudulently issue this affidavit to evade the payment of Florida sales tax, I will be liable for payment of the tax plus a penalty of 200% of the tax and be subject to conviction of a third degree felony.

Under penalties of perjury, I declare that I have read the foregoing affidavit and that the facts stated in it are true to the best of my knowledge and belief.

______________________________________________________

Purchaser's Name (Print or Type)

______________________________________________________

Signature and Title

______________________________________________________

Date

(f) Instead of furnishing an exemption certificate, as provided in paragraph (d), or an affidavit, as provided in paragraph (e), any purchaser who holds a valid Sales and Use Tax Direct Pay Permit, as provided in Rule 12A-1.0911, F.A.C., may extend a copy of the permit to the selling dealer to make purchases tax-exempt under this subsection.

(g) When a prototype or product of research or development is used by the developer for any purpose other than research or development, including being offered for sale, it is subject to tax.

Fla. Admin. Code Ann. R. 12A-1.043

Rulemaking Authority 212.052(5), 212.08(18)(c), 212.18(2), 213.06(1) FS. Law Implemented 212.02(4), (7), 212.052, 212.06(1), 212.08(18), 212.085, 212.12(12) FS.

New 10-7-68, Amended 1-7-70, 6-16-72, 1-19-74, 12-26-83, Formerly 12A-1.43, Amended 1-2-89, 2-28-90, 3-20-96, 7-27-99, 10-2-01, 9-15-08, Amended by Florida Register Volume 46, Number 242, December 15, 2020 effective 12/31/2020.

New 10-7-68, Amended 1-7-70, 6-16-72, 1-19-74, 12-26-83, Formerly 12A-1.43, Amended 1-2-89, 2-28-90, 3-20-96, 7-27-99, 10-2-01, 9-15-08, 12-31-20.