Sales Tax State Activity Update - January 2009

Florida Supermarket Chain Receives Chilling News on Refrigeration Installation

Do plans for strategic business expansion continue in these troubled economic times? A supermarket retailer of natural and organic foods proposed a set of questions to the Florida Department of Revenue (DOR) in order to obtain a ruling regarding the taxability of installing freezers and refrigeration equipment. Their plans are to expand their business locations within the state.

In order to take advantage of lower costs on bulk purchases, the retailer purchases refrigeration equipment from various vendors and separately arranges for installation services. Specifically, they seek out contractors that specialize in the installation of refrigeration equipment.

Three questions presented to the DOR with summarized responses were as follows:

Q: Is the contract for the installation of refrigeration equipment that is owned by the Taxpayer deemed a real property improvement contract?

A: Equipment is considered fixtures permanently attached to reality. Therefore, the contractor is the ultimate consumer of supplies and materials used in the fulfillment of the installation contract.

Q: Would the refrigeration services nevertheless be taxable under Rule 12A-1.016(3)(a), F.A.C., because the installation services are purchased from separate contractors than those providing the refrigeration equipment?

A: Rule 12A-1.051 (Sales to or by Contractors…) applies rather than Rule 12A-1.016 (Sales; Installation Charges) related to tangible personal property

Q: Would the separately purchased refrigeration equipment installation services contracts be subject to the provisions for a mixed contract?

A: The mixed contract provisions of Rule 12A-1.051(8) would not apply.

Readers conducting similar activities within the State of Florida may want to refresh their understanding of the rules regarding the installation of real and personal property and the conclusions reached by the representative of the DOR.

Visit the Florida Department of Revenue for additional details.

(State of Florida Department of Revenue: Technical Assistance Advisement -08A-029 Sales and Use Tax – Refrigeration Equipment issued Nov 4, 2008)

---

Subscribe to CyberTax News and receive the latest indirect tax news, including rate changes, rule updates, compliance issues, and more, delivered directly to your email.

Email Address