Sales Tax Articles
Sales Tax State Activity Update - March 2006
Florida Clears the Muddy Taxability of Water Restoration Services
The Taxpayer provides a variety of water restoration services from damage caused by natural disasters, such as hurricanes and floods. They deal primarily with nonresidential properties.
The Taxpayer's various services are primarily for real property, although some services involve personal property.
The Taxpayer's contracts and invoices usually do not allocate the charges among the various elements of the work performed, including the real property services and any personal property services.
Question
Are the water restoration services subject to sales tax?
Ruling
The predominant nature of Taxpayer's services is to be determined on a contract by contract basis.
On all contracts that do not clearly allocate the price among the various elements and in which the predominant nature is that of an improvement to real property, the Taxpayer should follow the guidelines of Rule 12A-1.051(4), F.A.C., which states that Taxpayer owes tax on all materials and supplies it uses in the performance of a contract and that no tax is charged to the customer.
To the extent that the predominant nature of a contract is that of a sale of tangible personal property, tax is charged on the total contract price to the customer, and Taxpayer does not owe tax on the materials that are incorporated into the repair. Likewise, to the extent Taxpayer enters into a contract that clearly allocates the price among the elements, the various elements are taxed according to their classification.
The details of this advisement can be found on the Florida Department of Revenue website.
(Florida Department of Revenue, Technical Assistance Advisement, No. 05A-054, 01/03/06)
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