Sales Tax State Activity Update - April 2004

Taxability Assessment of Floor Covering Materials in Florida

The Taxpayer is engaged in the business of selling and installing floor covering materials. Sales of floor covering materials consist of “cash and carry” and “installation sales”.

Cash and carry sales are made at the taxpayer’s store location and no installation is associated with these sales. The taxpayer performs installation sales at customer locations and pursuant to lump sum contracts. Cash and carry sales of flooring material, including those that become improvements to real property upon installation by the purchaser, are subject to sales tax. Purchases of inventory for these sales are made exempt for resale. Installation sales are not subject to sales tax. Rather, the taxpayer is the user or consumer of the flooring materials transferred pursuant to such contracts and must pay sales tax to suppliers or remit use tax on the purchase price of floor covering materials.

In this case, the taxpayer collected sales tax on cash and carry sales and paid sales tax to suppliers on purchases of materials for “installation sales”. However, they did not collect the full amount of tax for all taxable cash and carry sales or pay the full amount of tax on all purchases of materials for installation sales.

The Florida Department of Revenue sustained a sales and use tax assessment for the taxpayer’s cash and carry sales of floor covering materials, as well as the purchase of materials for installation sales.

Carpet King Carpets, Inc. v. State of Florida Department of Revenue DOAH Case Nos. 03-3337, 03-3338, 03-3339 and DOR Case No. 04-4-FOF 03/04

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