House Bill 0743

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    Florida House of Representatives - 2000                 HB 743

        By the Committee on Tourism and Representatives Starks,
    Farkas, Bush, Sobel, Bloom, Argenziano, Hafner, Lynn and
    Melvin




  1                      A bill to be entitled

  2         An act relating to entertainment industry

  3         incentives; creating s. 288.1258, F.S.;

  4         authorizing entertainment industry production

  5         companies to apply for approval by the Office

  6         of the Film Commissioner as a qualified

  7         production company for the purpose of receiving

  8         sales tax exemptions; directing the office to

  9         develop application procedures; providing for

10         denial and revocation of a certificate of

11         exemption; providing a penalty for

12         falsification of an application or unauthorized

13         use of a certificate of exemption; providing

14         categories of qualification for a certificate

15         of exemption; providing duties of the

16         Department of Revenue with respect to issuance

17         of a certificate of exemption for qualified

18         production companies; requiring the Office of

19         the Film Commissioner to keep specified

20         records; requiring an annual report to the

21         Legislature; amending s. 212.031, F.S.,

22         relating to the tax on the lease or rental of

23         or license in real property; providing that the

24         exemption for property used as an integral part

25         of the performance of qualified production

26         services inures to the taxpayer upon

27         presentation of a certificate of exemption

28         issued under s. 288.1258, F.S.; amending s.

29         212.06, F.S.; providing that the exemption for

30         fabrication labor used in the production of a

31         qualified motion picture inures to the taxpayer

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  1         upon presentation of a certificate of exemption

  2         issued under s. 288.1258, F.S.; amending s.

  3         212.08, F.S.; providing that the exemption for

  4         certain motion picture or video equipment and

  5         sound recording equipment shall be a point of

  6         sale exemption rather than by refund; providing

  7         that the exemption inures to the taxpayer upon

  8         presentation of a certificate of exemption

  9         issued under s. 288.1258, F.S.; providing that

10         the partial exemption for master tapes,

11         records, films, or video tapes inures to the

12         taxpayer upon presentation of a certificate of

13         exemption issued under s. 288.1258, F.S.;

14         amending s. 213.053, F.S.; authorizing the

15         Department of Revenue to share certain

16         information with the Office of the Film

17         Commissioner; providing effective dates.

18

19  Be It Enacted by the Legislature of the State of Florida:

20

21         Section 1.  Effective July 1, 2000, section 288.1258,

22  Florida Statutes, is created to read:

23         288.1258  Entertainment industry qualified production

24  companies; application procedure; categories; duties of the

25  Department of Revenue; records and reports.--

26         (1)  PRODUCTION COMPANIES AUTHORIZED TO APPLY.--

27         (a)  Any production company engaged in this state in

28  the production of motion pictures, made-for-TV motion

29  pictures, television series, commercial advertising, music

30  videos, or sound recordings may submit an application to the

31  Office of the Film Commissioner to be approved as a qualified

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  1  production company for the purpose of receiving a sales and

  2  use tax certificate of exemption from the Department of

  3  Revenue.

  4         (b)  For the purposes of this section, "qualified

  5  production company" means any production company that has

  6  submitted a properly completed application to the Office of

  7  the Film Commissioner and that is subsequently qualified by

  8  that office.

  9         (2)  APPLICATION PROCEDURE.--

10         (a)1.  The Office of the Film Commissioner shall

11  establish a process by which an entertainment industry

12  production company may be approved by the office as a

13  qualified production company and may receive a certificate of

14  exemption from the Department of Revenue for the sales and use

15  tax exemptions under ss. 212.031, 212.06, and 212.08.

16         2.  Upon determination by the Office of the Film

17  Commissioner that a production company meets the established

18  approval criteria and qualifies for exemption, the Office of

19  the Film Commissioner shall forward the approved application

20  or application renewal or extension to the Department of

21  Revenue, which shall issue a certificate of exemption.

22         3.  The Office of the Film Commissioner shall deny an

23  application or application for renewal or extension from a

24  production company if it determines that the production

25  company does not meet the established approval criteria.

26         (b)  The Office of the Film Commissioner shall develop,

27  with the cooperation of the Department of Revenue and local

28  government entertainment industry promotion agencies, a

29  standardized application form for use in approving qualified

30  production companies.

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  1         1.  The application form shall include, but not be

  2  limited to, production-related information on employment,

  3  proposed budgets, planned purchases of items exempted from

  4  sales and use taxes under ss. 212.031, 212.06, and 212.08, a

  5  signed affirmation from the applicant that any items purchased

  6  for which the applicant is seeking a tax exemption are

  7  intended for use exclusively as an integral part of

  8  entertainment industry preproduction, production, or

  9  postproduction activities engaged in primarily in this state,

10  and a signed affirmation from the Office of the Film

11  Commissioner that the information on the application form has

12  been verified and is correct. In lieu of information on

13  projected employment, proposed budgets, or planned purchases

14  of exempted items, a production company seeking a 1-year

15  certificate of exemption may submit summary historical data on

16  employment, production budgets, and purchases of exempted

17  items related to production activities in this state. Any

18  information gathered from production companies for the

19  purposes of this section shall be considered confidential

20  taxpayer information and shall be disclosed only as provided

21  in s. 213.053.

22         2.  The application form may be distributed to

23  applicants by the Office of the Film Commissioner or local

24  film commissions.

25         (c)  All applications, renewals, and extensions for

26  designation as a qualified production company shall be

27  processed by the Office of the Film Commissioner.

28         (d)  In the event that the Department of Revenue

29  determines that a production company no longer qualifies for a

30  certificate of exemption, or has used a certificate of

31  exemption for purposes other than those authorized by this

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  1  section and chapter 212, the Department of Revenue shall

  2  revoke the certificate of exemption of that production

  3  company, and any sales or use taxes exempted on items

  4  purchased or leased by the production company during the time

  5  such company did not qualify for a certificate of exemption or

  6  improperly used a certificate of exemption shall become

  7  immediately due to the Department of Revenue, along with

  8  interest and penalty as provided by s. 212.12.  In addition to

  9  the other penalties imposed by law, any person who knowingly

10  and willfully falsifies an application, or uses a certificate

11  of exemption for purposes other than those authorized by this

12  section and chapter 212, commits a felony of the third degree,

13  punishable as provided in s. 775.082, s. 775.083, and s.

14  775.084.

15         (3)  CATEGORIES.--

16         (a)1.  A production company may be qualified for

17  designation as a qualified production company for a period of

18  1 year if the company has operated a business in Florida at a

19  permanent address for a period of 12 consecutive months.  Such

20  a qualified production company shall receive a single 1-year

21  certificate of exemption from the Department of Revenue for

22  the sales and use tax exemptions under ss. 212.031, 212.06,

23  and 212.08, which certificate shall expire 1 year after

24  issuance or upon the cessation of business operations in the

25  state, at which time the certificate shall be surrendered to

26  the Department of Revenue.

27         2.  The Office of the Film Commissioner shall develop a

28  method by which a qualified production company may annually

29  renew a 1-year certificate of exemption for a period of up to

30  5 years without requiring the production company to resubmit a

31  new application during that 5-year period.

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  1         3.  Any qualified production company may submit a new

  2  application for a 1-year certificate of exemption upon the

  3  expiration of that company's certificate of exemption.

  4         (b)1.  A production company may be qualified for

  5  designation as a qualified production company for a period of

  6  90 days. Such production company shall receive a single 90-day

  7  certificate of exemption from the Department of Revenue for

  8  the sales and use tax exemptions under ss. 212.031, 212.06,

  9  and 212.08, which certificate shall expire 90 days after

10  issuance, with extensions contingent upon approval of the

11  Office of the Film Commissioner.  The certificate shall be

12  surrendered to the Department of Revenue upon its expiration.

13         2.  Any production company may submit a new application

14  for a 90-day certificate of exemption upon the expiration of

15  that company's certificate of exemption.

16         (4)  DUTIES OF THE DEPARTMENT OF REVENUE.--

17         (a)  The Department of Revenue shall issue a numbered

18  certificate of exemption to a qualified production company

19  within 5 working days of the receipt of a properly completed

20  and approved application, application renewal, or application

21  extension from the Office of the Film Commissioner.

22         (b)  The Department of Revenue may promulgate such

23  rules and shall prescribe and publish such forms as may be

24  necessary to effectuate the purposes of this section or any of

25  the sales tax exemptions which are reasonably related to the

26  provisions of this section.

27         (c)  The Department of Revenue is authorized to

28  establish audit procedures in accordance with the provisions

29  of ss. 212.12, 212.13, and 213.34 which relate to the sales

30  tax exemption provisions of this section.

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  1         (5)  RELATIONSHIP OF TAX EXEMPTIONS TO INDUSTRY GROWTH;

  2  REPORT TO THE LEGISLATURE.--The Office of the Film

  3  Commissioner shall keep annual records from the information

  4  provided on taxpayer applications for tax exemption

  5  certificates beginning January 1, 2001. These records shall

  6  reflect a percentage comparison of the annual amount of funds

  7  exempted to the estimated amount of funds expended in relation

  8  to entertainment industry products. In addition, the office

  9  shall maintain data showing annual growth in Florida-based

10  entertainment industry companies and entertainment industry

11  employment and wages. The Office of the Film Commissioner

12  shall report this information to the Legislature by no later

13  than December 1 of each year.

14         Section 2.  Paragraph (a) of subsection (1) of section

15  212.031, Florida Statutes, is amended to read:

16         212.031  Lease or rental of or license in real

17  property.--

18         (1)(a)  It is declared to be the legislative intent

19  that every person is exercising a taxable privilege who

20  engages in the business of renting, leasing, letting, or

21  granting a license for the use of any real property unless

22  such property is:

23         1.  Assessed as agricultural property under s. 193.461.

24         2.  Used exclusively as dwelling units.

25         3.  Property subject to tax on parking, docking, or

26  storage spaces under s. 212.03(6).

27         4.  Recreational property or the common elements of a

28  condominium when subject to a lease between the developer or

29  owner thereof and the condominium association in its own right

30  or as agent for the owners of individual condominium units or

31  the owners of individual condominium units. However, only the

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  1  lease payments on such property shall be exempt from the tax

  2  imposed by this chapter, and any other use made by the owner

  3  or the condominium association shall be fully taxable under

  4  this chapter.

  5         5.  A public or private street or right-of-way and

  6  poles, conduits, fixtures, and similar improvements located on

  7  such streets or rights-of-way, occupied or used by a utility

  8  or franchised cable television company for utility or

  9  communications or television purposes. For purposes of this

10  subparagraph, the term "utility" means any person providing

11  utility services as defined in s. 203.012. This exception also

12  applies to property, excluding buildings, wherever located, on

13  which antennas, cables, adjacent accessory structures, or

14  adjacent accessory equipment used in the provision of

15  cellular, enhanced specialized mobile radio, or personal

16  communications services are placed.

17         6.  A public street or road which is used for

18  transportation purposes.

19         7.  Property used at an airport exclusively for the

20  purpose of aircraft landing or aircraft taxiing or property

21  used by an airline for the purpose of loading or unloading

22  passengers or property onto or from aircraft or for fueling

23  aircraft.

24         8.a.  Property used at a port authority, as defined in

25  s. 315.02(2), exclusively for the purpose of oceangoing

26  vessels or tugs docking, or such vessels mooring on property

27  used by a port authority for the purpose of loading or

28  unloading passengers or cargo onto or from such a vessel, or

29  property used at a port authority for fueling such vessels, or

30  to the extent that the amount paid for the use of any property

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  1  at the port is based on the charge for the amount of tonnage

  2  actually imported or exported through the port by a tenant.

  3         b.  The amount charged for the use of any property at

  4  the port in excess of the amount charged for tonnage actually

  5  imported or exported shall remain subject to tax except as

  6  provided in sub-subparagraph a.

  7         9.  Property used as an integral part of the

  8  performance of qualified production services.  As used in this

  9  subparagraph, the term "qualified production services" means

10  any activity or service performed directly in connection with

11  the production of a qualified motion picture, as defined in s.

12  212.06(1)(b), and includes:

13         a.  Photography, sound and recording, casting, location

14  managing and scouting, shooting, creation of special and

15  optical effects, animation, adaptation (language, media,

16  electronic, or otherwise), technological modifications,

17  computer graphics, set and stage support (such as

18  electricians, lighting designers and operators, greensmen,

19  prop managers and assistants, and grips), wardrobe (design,

20  preparation, and management), hair and makeup (design,

21  production, and application), performing (such as acting,

22  dancing, and playing), designing and executing stunts,

23  coaching, consulting, writing, scoring, composing,

24  choreographing, script supervising, directing, producing,

25  transmitting dailies, dubbing, mixing, editing, cutting,

26  looping, printing, processing, duplicating, storing, and

27  distributing;

28         b.  The design, planning, engineering, construction,

29  alteration, repair, and maintenance of real or personal

30  property including stages, sets, props, models, paintings, and

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  1  facilities principally required for the performance of those

  2  services listed in sub-subparagraph a.; and

  3         c.  Property management services directly related to

  4  property used in connection with the services described in

  5  sub-subparagraphs a. and b.

  6

  7  This exemption will inure to the taxpayer upon presentation of

  8  the certificate of exemption issued to the taxpayer under the

  9  provisions of s. 288.1258.

10         10.  Leased, subleased, licensed, or rented to a person

11  providing food and drink concessionaire services within the

12  premises of a convention hall, exhibition hall, auditorium,

13  stadium, theater, arena, civic center, performing arts center,

14  recreational facility, or any business operated under a permit

15  issued pursuant to chapter 550.  A person providing retail

16  concessionaire services involving the sale of food and drink

17  or other tangible personal property within the premises of an

18  airport shall be subject to tax on the rental of real property

19  used for that purpose, but shall not be subject to the tax on

20  any license to use the property.  For purposes of this

21  subparagraph, the term "sale" shall not include the leasing of

22  tangible personal property.

23         11.  Property occupied pursuant to an instrument

24  calling for payments which the department has declared, in a

25  Technical Assistance Advisement issued on or before March 15,

26  1993, to be nontaxable pursuant to rule 12A-1.070(19)(c),

27  Florida Administrative Code; provided that this subparagraph

28  shall only apply to property occupied by the same person

29  before and after the execution of the subject instrument and

30  only to those payments made pursuant to such instrument,

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  1  exclusive of renewals and extensions thereof occurring after

  2  March 15, 1993.

  3         Section 3.  Paragraph (b) of subsection (1) of section

  4  212.06, Florida Statutes, is amended to read:

  5         212.06  Sales, storage, use tax; collectible from

  6  dealers; "dealer" defined; dealers to collect from purchasers;

  7  legislative intent as to scope of tax.--

  8         (1)

  9         (b)  Except as otherwise provided, any person who

10  manufactures, produces, compounds, processes, or fabricates in

11  any manner tangible personal property for his or her own use

12  shall pay a tax upon the cost of the product manufactured,

13  produced, compounded, processed, or fabricated without any

14  deduction therefrom on account of the cost of material used,

15  labor or service costs, or transportation charges,

16  notwithstanding the provisions of s. 212.02 defining "cost

17  price."  However, the tax levied under this paragraph shall

18  not be imposed upon any person who manufactures or produces

19  electrical power or energy, steam energy, or other energy at a

20  single location, when such power or energy is used directly

21  and exclusively at such location, or at other locations if the

22  energy is transferred through facilities of the owner in the

23  operation of machinery or equipment that is used to

24  manufacture, process, compound, produce, fabricate, or prepare

25  for shipment tangible personal property for sale or to operate

26  pollution control equipment, maintenance equipment, or

27  monitoring or control equipment used in such operations.  The

28  manufacture or production of electrical power or energy that

29  is used for space heating, lighting, office equipment, or

30  air-conditioning or any other nonmanufacturing, nonprocessing,

31  noncompounding, nonproducing, nonfabricating, or nonshipping

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  1  activity is taxable. Electrical power or energy consumed or

  2  dissipated in the transmission or distribution of electrical

  3  power or energy for resale is also not taxable.  Fabrication

  4  labor shall not be taxable when a person is using his or her

  5  own equipment and personnel, for his or her own account, as a

  6  producer, subproducer, or coproducer of a qualified motion

  7  picture.  For purposes of this chapter, the term "qualified

  8  motion picture" means all or any part of a series of related

  9  images, either on film, tape, or other embodiment, including,

10  but not limited to, all items comprising part of the original

11  work and film-related products derived therefrom as well as

12  duplicates and prints thereof and all sound recordings created

13  to accompany a motion picture, which is produced, adapted, or

14  altered for exploitation in, on, or through any medium or

15  device and at any location, primarily for entertainment,

16  commercial, industrial, or educational purposes. This

17  exemption for fabrication labor associated with production of

18  a qualified motion picture will inure to the taxpayer upon

19  presentation of the certificate of exemption issued to the

20  taxpayer under the provisions of s. 288.1258. A person who

21  manufactures factory-built buildings for his or her own use in

22  the performance of contracts for the construction or

23  improvement of real property shall pay a tax only upon the

24  person's cost price of items used in the manufacture of such

25  buildings.

26         Section 4.  Paragraph (f) of subsection (5) and

27  subsection (12) of section 212.08, Florida Statutes, are

28  amended to read:

29         212.08  Sales, rental, use, consumption, distribution,

30  and storage tax; specified exemptions.--The sale at retail,

31  the rental, the use, the consumption, the distribution, and

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  1  the storage to be used or consumed in this state of the

  2  following are hereby specifically exempt from the tax imposed

  3  by this chapter.

  4         (5)  EXEMPTIONS; ACCOUNT OF USE.--

  5         (f)  Motion picture or video equipment used in motion

  6  picture or television production activities and sound

  7  recording equipment used in the production of master tapes and

  8  master records.--

  9         1.  Motion picture or video equipment and sound

10  recording equipment purchased or leased for use in this state

11  in production activities is exempt from the tax imposed by

12  this chapter upon an affirmative showing by the purchaser or

13  lessee to the satisfaction of the department that the

14  equipment will be used for production activities. The

15  exemption provided by this paragraph shall inure to the

16  taxpayer upon presentation of the certificate of exemption

17  issued to the taxpayer under the provisions of s. 288.1258.

18  only through a refund of previously paid taxes.

19  Notwithstanding the provisions of s. 212.095, such refund

20  shall be made within 30 days of formal application, which

21  application may be made after the completion of production

22  activities or on a quarterly basis. Notwithstanding the

23  provisions of chapter 213, the department shall provide the

24  Department of Commerce with a copy of each refund application

25  and the amount of such refund, if any.

26         2.  For the purpose of the exemption provided in

27  subparagraph 1.:

28         a.  "Motion picture or video equipment" and "sound

29  recording equipment" includes only equipment meeting the

30  definition of "section 38 property" as defined in s.

31  48(a)(1)(A) and (B)(i) of the Internal Revenue Code that is

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  1  used by the lessee or purchaser exclusively as an integral

  2  part of production activities; however, motion picture or

  3  video equipment and sound recording equipment does not include

  4  supplies, tape, records, film, or video tape used in

  5  productions or other similar items; vehicles or vessels; or

  6  general office equipment not specifically suited to production

  7  activities.  In addition, the term does not include equipment

  8  purchased or leased by television or radio broadcasting or

  9  cable companies licensed by the Federal Communications

10  Commission.

11         b.  "Production activities" means activities directed

12  toward the preparation of a:

13         (I)  Master tape or master record embodying sound; or

14         (II)  Motion picture or television production which is

15  produced for theatrical, commercial, advertising, or

16  educational purposes and utilizes live or animated actions or

17  a combination of live and animated actions. The motion picture

18  or television production shall be commercially produced for

19  sale or for showing on screens or broadcasting on television

20  and may be on film or video tape.

21         (12)  PARTIAL EXEMPTION; MASTER TAPES, RECORDS, FILMS,

22  OR VIDEO TAPES.--

23         (a)  There are exempt from the taxes imposed by this

24  chapter the gross receipts from the sale or lease of, and the

25  storage, use, or other consumption in this state of, master

26  tapes or master records embodying sound, or master films or

27  master video tapes; except that amounts paid to recording

28  studios or motion picture or television studios for the

29  tangible elements of such master tapes, records, films, or

30  video tapes are taxable as otherwise provided in this chapter.

31  This exemption will inure to the taxpayer upon presentation of

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  1  the certificate of exemption issued to the taxpayer under the

  2  provisions of s. 288.1258.

  3         (b)  For the purposes of this subsection, the term:

  4         1.  "Amounts paid for the tangible elements" does not

  5  include any amounts paid for the copyrightable, artistic, or

  6  other intangible elements of such master tapes, records,

  7  films, or video tapes, whether designated as royalties or

  8  otherwise, including, but not limited to, services rendered in

  9  producing, fabricating, processing, or imprinting tangible

10  personal property or any other services or production expenses

11  in connection therewith which may otherwise be construed as

12  constituting a "sale" under s. 212.02.

13         2.  "Master films or master video tapes" means films or

14  video tapes utilized by the motion picture and television

15  production industries in making visual images for

16  reproduction.

17         3.  "Master tapes or master records embodying sound"

18  means tapes, records, and other devices utilized by the

19  recording industry in making recordings embodying sound.

20         4.  "Motion picture or television studio" means a

21  facility in which film or video tape productions or parts of

22  productions are made and which contains the necessary

23  equipment and personnel for this purpose and includes a mobile

24  unit or vehicle that is equipped in much the same manner as a

25  stationary studio and used in the making of film or video tape

26  productions.

27         5.  "Recording studio" means a place where, by means of

28  mechanical or electronic devices, voices, music, or other

29  sounds are transmitted to tapes, records, or other devices

30  capable of reproducing sound.

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  1         6.  "Recording industry" means any person engaged in an

  2  occupation or business of making recordings embodying sound

  3  for a livelihood or for a profit.

  4         7.  "Motion picture or television production industry"

  5  means any person engaged in an occupation or business for a

  6  livelihood or for profit of making visual motion picture or

  7  television visual images for showing on screen or television

  8  for theatrical, commercial, advertising, or educational

  9  purposes.

10         Section 5.  Effective July 1, 2000, paragraph (r) is

11  added to subsection (7) of section 213.053, Florida Statutes,

12  to read:

13         213.053  Confidentiality and information sharing.--

14         (7)  Notwithstanding any other provision of this

15  section, the department may provide:

16         (r)  Information relative to the tax exemptions under

17  ss. 212.031, 212.06, and 212.08 for those persons qualified

18  under s. 288.1258 to the Office of the Film Commissioner. The

19  Department of Revenue shall provide the Office of the Film

20  Commissioner with information in the aggregate.

21

22  Disclosure of information under this subsection shall be

23  pursuant to a written agreement between the executive director

24  and the agency.  Such agencies, governmental or

25  nongovernmental, shall be bound by the same requirements of

26  confidentiality as the Department of Revenue.  Breach of

27  confidentiality is a misdemeanor of the first degree,

28  punishable as provided by s. 775.082 or s. 775.083.

29         Section 6.  Except as otherwise provided herein, this

30  act shall take effect January 1, 2001.

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  1            *****************************************

  2                          HOUSE SUMMARY

  3
      Authorizes entertainment industry production companies to
  4    apply to the Office of the Film Commissioner for approval
      to receive a sales tax exemption certificate for purposes
  5    of the exemptions for property used as an integral part
      of the performance of qualified production services,
  6    fabrication labor used in the production of a qualified
      motion picture, certain motion picture or video equipment
  7    and sound recording equipment, and master tapes, records,
      films, and video tapes. Directs the office to establish a
  8    standard application form and approval procedures.
      Directs the Department of Revenue to issue an exemption
  9    certificate upon receipt of an application approved by
      the office.  Specifies periods for which such exemption
10    certificates are valid and provides for renewal. Provides
      a penalty for falsifying an application or misuse of a
11    certificate.

12
      Specifies that such exemptions will inure to the taxpayer
13    upon presentation of the exemption certificate, and
      removes provisions which specify that the exemption for
14    certain motion picture or video equipment and sound
      recording equipment inures only through a refund.
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