Governor Rick Scott recently enacted Florida HB 7007 to create a sales tax exemption for industrial machinery and equipment purchased by manufacturers. Effective April 30, 2014, purchases of industrial machinery and equipment used by an eligible manufacturing business at a fixed location in Florida to manufacture, process, compound, or produce for sale items of tangible personal property will be exempt from sales tax.
An "eligible manufacturing business" is a business that primarily engages in business activities within the industries classified under manufacturing NAICS (North American Industry Classification System) codes 31, 32, and 33 at the location where the industrial machinery and equipment are located. Eligible types of manufacturing establishments include, but are not limited to food, apparel, wood, paper, printing, chemical, pharmaceutical, plastic, rubber, metal, transportation, and furniture.
Industrial machinery and equipment are items with a depreciable life of three years or longer that are used to make "tangible personal property for sale." Parts and accessories for industrial machinery and equipment may qualify for the exemption provided that they are purchased prior to the date the machinery is placed into service. Building components and heating and air-conditioning systems are generally excluded from the exemption, but may qualify under certain conditions.
Sellers are relieved of their responsibility to collect tax on the sale of such items if at the time of purchase the purchaser furnishes the seller with a signed certificate certifying the purchaser's entitlement to this exemption. If the Florida Department of Revenue determines that the purchaser was not entitled to the exemption, then it will look solely to the purchaser to recover any tax due. Taxpayers can reference Taxpayer Information Bulletin No. 13A01-06 for a suggested exemption certificate as well as more guidance concerning the exemption.
The exemption is schedule to expire effective April 30, 2017.
Things to Consider
- Taxpayer’s eligible for the exemption may wish to delay purchases of industrial machinery and equipment until April 30, 2014.
- The provisions of this new exemption are similar to, and not intended to replace, the exemption provided for qualifying purchases under the New and Expanding Business Credit ("NEBC"). Under the NEBC, a manufacturer’s sales tax exemption was only available if the manufacturer increased output. The NEBC is still available to taxpayers, and in some cases it may be applicable retroactively. Taxpayers who think they may have qualified for the NEBC may be able to request sales tax refunds.
Questions
If you have any questions regarding Florida’s manufacturer’s exemption or the New and Expanding Business Credit, please contact your CBIZ tax advisor.
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