It is imperative to be successful in business today to know what your costs are. Florida Sales Tax is one of those costs. How can you compete with a competitor who is paying 7% less than you are? You won’t for very long. Florida has a long history of trying to woo manufacturers into our state. Here are several ways that manufacturers in Florida can reduce if not eliminate their Florida Sales Tax.
Purchases of New Equipment
Equipment purchased by a new manufacturer that is used in manufacturing is exempt from tax if they apply for exemption status with the Florida Department of Revenue.
If an existing manufacturer increases their productive output by more than 5% (used to be 10%) then the equipment purchased is exempt from sales tax. In addition, any money that is spent of repairs for manufacturing equipment is also exempt from sales tax. From April 30, 2014 until April 30, 2017, manufacturers can purchase equipment tax exempt without having to increase productive output by 5%.
No Sales Tax on Electricity to Operate the Machinery
There is no sales tax on your electricity if you are a manufacturer who fit within the following parameters as follows:
- Exemption is available only to businesses classified under certain SIC Industry Major Groups for mining, construction, and manufacturing (that use 50% or more of the electricity or steam to operate qualifying machinery and equipment).
- 100% exemption if 75% or more of the electricity or steam is used to operate qualifying machinery and equipment.
- 50% exemption if less than 75%, but 50% or more of the electricity or steam is used to operate qualifying machinery and equipment.
- No exemption if less than 50% of the electricity or steam is used to operate qualifying machinery and equipment.
Florida Statute: Section 212.08(7)(ff), F.S., TIP 00A01-14
No Sales Tax on Equipment used in Research & Development
If you are a Florida manufacturer and you purchase equipment for Research and Development, then you need to fill out the appropriate affidavit and inform the Florida Department of Revenue that you are sales tax exempt.
The new Florida statute, 212.08(7), exempting all equipment used in manufacturing is as follows:
Certain machinery and equipment.– (effective April 30, 2014)
1. Industrial machinery and equipment purchased by eligible manufacturing businesses which is used at a fixed location within this state for the manufacture, processing, compounding, or production of items of tangible personal property for sale shall be exempt from the tax imposed by this chapter. If at the time of purchase the purchaser furnishes the seller with a signed certificate certifying the purchaser’s entitlement to exemption pursuant to this paragraph, the seller is relieved of the responsibility for collecting the tax on the sale of such items, and the department shall look solely to the purchaser for recovery of the tax if it determines that the purchaser was not entitled to the exemption.
2. For purposes of this paragraph, the term:
a. “Eligible manufacturing business” means any business whose primary business activity at the location where the industrial machinery and equipment is located is within the industries classified under NAICS codes 31, 32, and 33. As used in this subparagraph, “NAICS” means those classifications contained in the North American Industry Classification System, as published in 2007 by the Office of Management and Budget, Executive Office of the President.
b. “Primary business activity” means an activity representing more than 50 percent of the activities conducted at the location where the industrial machinery and equipment is located.
c. “Industrial machinery and equipment” means tangible personal property or other property that has a depreciable life of 3 years or more and that is used as an integral part in the manufacturing, processing, compounding, or production of tangible personal property for sale. A building and its structural components are not industrial machinery and equipment unless the building or structural component is so closely related to the industrial machinery and equipment that it houses or supports that the building or structural component can be expected to be replaced when the machinery and equipment are replaced. Heating and air conditioning systems are not industrial machinery and equipment unless the sole justification for their installation is to meet the requirements of the production process, even though the system may provide incidental comfort to employees or serve, to an insubstantial degree, nonproduction activities. The term includes parts and accessories for industrial machinery and equipment only to the extent that the parts and accessories are purchased prior to the date the machinery and equipment are placed in service.
(This paragraph is repealed effective April 30, 2017.)
This area of the law is too specialized to give you a complete road map to follow. Hopefully, we have given you insight into evaluating your sales tax procedures you are following.
Contact us for more information.
