Florida Sales and Use Tax Exemption for Industrial Machinery and Equipment Repairs
Yay, another exemption handed down by the Florida Legislature - let's break it down for a good understanding and see if it's helpful for your business.
What is the Exemption:
The original exemption, enacted July 1, 1999 was revised July 1, 2000 as below:
*Effective July 1, 1999; a sales and use tax exemption is given for ‘labor charges for the repair of, and parts and materials used in the repair of and incorporated into, industrial machinery and equipment used by certain industries for manufacturing, processing, compounding, or production of items of tangible personal property at a fixed location in Florida’ - that’s a mouthful isn’t it? And here comes the revision;
*Effective July 1, 2000; the exemption above was expanded to include ‘repairs of machinery and equipment used to prepare tangible personal property for shipping by such industries’.
What’s the Criteria to Qualify:
In addition to the item considered for exemption to be in a fixed Florida location and perform one of the duties listed above, the industry itself needs to have a SIC Code that fall into certain Industry Major Group Numbers as classified in the Standard Industrial Classification Manual, 1987. Listed are the Industry Major Group Numbers (based on the 1987 SIC Manual) that qualify:
10, 12, 13, 14, 2022, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39 and Industry Group Number 212. You can click here to do a search in the 1987 version of the SIC manual.
How to Apply the Exemption:
Depending on the date of the bill (not the date of the repair) determines the amount of the exemption. Considering that it’s 2016, a majority if not all repairs probably fall in the 100% exemption timeframe but let’s go over it anyway:
Beginning July 1, 2000, 50% of the qualified repair parts and labor are exempt
Beginning July 1, 2001, 75% of the qualified repair parts and labor are exempt
Beginning July 1, 2002, 100% of the qualified repair parts and labor are exempt
How to Report the Exemption on Your Return:
Easy – put the total cost of your repair under Gross Sales, calculate the exempted amount and put figure under Exempt Sales, subtract the Exempt Sales from the Gross Sales and put figure under Taxable Amount and carry on with your return as you usually do.
Documentation to Be Kept:
As always, you’ll need some type of signed documentation between you and your customer verifying that the industry, equipment, and work being done meets the exemption. There are two suggested exemption certificates provided by the FDOR for use, or you can create your own – just make sure they include all the major items from the suggested FDOR certificate. The first exemption certificate can be used to exempt qualifying work done between July 1, 1999 and June 30, 2000 which can be found here. The second certificate can be used to exempt qualifying work done on or after July 1, 2000 which can be found here.
Here are the key points for this exemption:
The work needs to be done to industrial machinery or equipment at a fixed Florida location.
The industrial machinery or equipment has to be used for manufacturing, processing, compounding, or producing tangible personal property items; or preparation of shipping tangible personal property items.
Only industries with SIC Codes under the following Major Industry Numbers: 10, 12, 13, 14, 20, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, and 39, or Industry Group Number 212 qualify.
July 1, 2000 charges are 50% exempt, July 1, 2001 charges are 75% exempt, and on and after July 1, 2002 charges are 100% exempt.
The exemption starts with the date of the bill.
Documentation for the exemption needs to be kept; the Florida Department of Revenue provides suggested certificates for exemptions before July 1, 2000 here and exemptions on or after July 1, 2000 here.
Find out more about this exemption at the Florida Department of Revenue’s site here.
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