Senate Bill sb2312

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    Florida Senate - 2005                                  SB 2312

    By Senator Smith





    14-1170A-05

  1                      A bill to be entitled

  2         An act relating to the tax on sales, use, and

  3         other transactions; amending s. 212.08, F.S.;

  4         amending provisions relating to the exemption

  5         for machinery and equipment used to increase

  6         productive output; eliminating a limitation on

  7         the exemption for spaceport activities and

  8         manufacturing facilities and an exemption for

  9         machinery and equipment used in printing

10         facilities; providing an exemption from the

11         entire amount of the tax for machinery and

12         equipment used under federal procurement

13         contracts; repealing s. 212.0805, F.S.,

14         relating to qualifying for the exemption and

15         credit for machinery and equipment purchased

16         for use in phosphate or other solid-minerals

17         severance, mining, or processing operations;

18         providing an effective date.

19  

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

21  

22         Section 1.  Paragraphs (b) and (d) of subsection (5) of

23  section 212.08, Florida Statutes, are amended to read:

24         212.08  Sales, rental, use, consumption, distribution,

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

26  the rental, the use, the consumption, the distribution, and

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

28  following are hereby specifically exempt from the tax imposed

29  by this chapter.

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

31  

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    Florida Senate - 2005                                  SB 2312
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 1         (b)  Machinery and equipment used to increase

 2  productive output.--

 3         1.  Industrial machinery and equipment purchased for

 4  exclusive use by a new business in spaceport activities as

 5  defined by s. 212.02 or for use in new businesses which

 6  manufacture, process, compound, or produce for sale items of

 7  tangible personal property at fixed locations are exempt from

 8  the tax imposed by this chapter upon an affirmative showing by

 9  the taxpayer to the satisfaction of the department that such

10  items are used in a new business in this state. Such purchases

11  must be made prior to the date the business first begins its

12  productive operations, and delivery of the purchased item must

13  be made within 12 months of that date.

14         2.a.  Industrial machinery and equipment purchased for

15  exclusive use by an expanding facility which is engaged in

16  spaceport activities as defined by s. 212.02 or for use in

17  expanding manufacturing facilities or plant units which

18  manufacture, process, compound, or produce for sale items of

19  tangible personal property at fixed locations in this state

20  are exempt from any amount of tax imposed by this chapter in

21  excess of $50,000 per calendar year upon an affirmative

22  showing by the taxpayer to the satisfaction of the department

23  that such items are used to increase the productive output of

24  such expanded facility or business by not less than 10

25  percent.

26         b.  Notwithstanding any other provision of this

27  section, industrial machinery and equipment purchased for use

28  in expanding printing manufacturing facilities or plant units

29  that manufacture, process, compound, or produce for sale items

30  of tangible personal property at fixed locations in this state

31  are exempt from any amount of tax imposed by this chapter upon

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    Florida Senate - 2005                                  SB 2312
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 1  an affirmative showing by the taxpayer to the satisfaction of

 2  the department that such items are used to increase the

 3  productive output of such an expanded business by not less

 4  than 10 percent.

 5         3.a.  To receive an exemption provided by subparagraph

 6  1. or subparagraph 2., a qualifying business entity shall

 7  apply to the department for a temporary tax exemption permit.

 8  The application shall state that a new business exemption or

 9  expanded business exemption is being sought. Upon a tentative

10  affirmative determination by the department pursuant to

11  subparagraph 1. or subparagraph 2., the department shall issue

12  such permit.

13         b.  The applicant shall be required to maintain all

14  necessary books and records to support the exemption. Upon

15  completion of purchases of qualified machinery and equipment

16  pursuant to subparagraph 1. or subparagraph 2., the temporary

17  tax permit shall be delivered to the department or returned to

18  the department by certified or registered mail.

19         c.  If, in a subsequent audit conducted by the

20  department, it is determined that the machinery and equipment

21  purchased as exempt under subparagraph 1. or subparagraph 2.

22  did not meet the criteria mandated by this paragraph or if

23  commencement of production did not occur, the amount of taxes

24  exempted at the time of purchase shall immediately be due and

25  payable to the department by the business entity, together

26  with the appropriate interest and penalty, computed from the

27  date of purchase, in the manner prescribed by this chapter.

28         d.  If In the event a qualifying business entity fails

29  to apply for a temporary exemption permit or if the tentative

30  determination by the department required to obtain a temporary

31  exemption permit is negative, a qualifying business entity

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    Florida Senate - 2005                                  SB 2312
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 1  shall receive the exemption provided in subparagraph 1. or

 2  subparagraph 2. through a refund of previously paid taxes. A

 3  No refund may not be made for such taxes unless the criteria

 4  mandated by subparagraph 1. or subparagraph 2. have been met

 5  and commencement of production has occurred.

 6         4.  The department shall adopt rules governing

 7  applications for, issuance of, and the form of temporary tax

 8  exemption permits; provisions for recapture of taxes; and the

 9  manner and form of refund applications and may establish

10  guidelines as to the requisites for an affirmative showing of

11  increased productive output, commencement of production, and

12  qualification for exemption.

13         5.  The exemptions provided in subparagraphs 1. and 2.

14  do not apply to machinery or equipment purchased or used by

15  electric utility companies, communications companies, oil or

16  gas exploration or production operations, publishing firms

17  that do not export at least 50 percent of their finished

18  product out of the state, any firm subject to regulation by

19  the Division of Hotels and Restaurants of the Department of

20  Business and Professional Regulation, or any firm which does

21  not manufacture, process, compound, or produce for sale items

22  of tangible personal property or which does not use such

23  machinery and equipment in spaceport activities as required by

24  this paragraph. The exemptions provided in subparagraphs 1.

25  and 2. shall apply to machinery and equipment purchased for

26  use in phosphate or other solid minerals severance, mining, or

27  processing operations only by way of a prospective credit

28  against taxes due under chapter 211 for taxes paid under this

29  chapter on such machinery and equipment.

30  

31  

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    Florida Senate - 2005                                  SB 2312
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 1         6.  For the purposes of the exemptions provided in

 2  subparagraphs 1. and 2., the term these terms have the

 3  following meanings:

 4         a.  "Industrial machinery and equipment" means tangible

 5  personal property or other property that has a depreciable

 6  life of 3 years or more and that is used as an integral part

 7  in the manufacturing, processing, compounding, or production

 8  of tangible personal property for sale or is exclusively used

 9  in spaceport activities. A building and its structural

10  components are not industrial machinery and equipment unless

11  the building or structural component is so closely related to

12  the industrial machinery and equipment that it houses or

13  supports that the building or structural component can be

14  expected to be replaced when the machinery and equipment are

15  replaced. Heating and air-conditioning systems are not

16  industrial machinery and equipment unless the sole

17  justification for their installation is to meet the

18  requirements of the production process, even though the system

19  may provide incidental comfort to employees or serve, to an

20  insubstantial degree, nonproduction activities. The term

21  includes parts and accessories only to the extent that the

22  exemption thereof is consistent with the provisions of this

23  paragraph.

24         b.  "Productive output" means the number of units

25  actually produced by a single plant or operation in a single

26  continuous 12-month period, irrespective of sales. Increases

27  in productive output shall be measured by the output for 12

28  continuous months immediately following the completion of

29  installation of such machinery or equipment over the output

30  for the 12 continuous months immediately preceding such

31  installation. However, if a different 12-month continuous

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    Florida Senate - 2005                                  SB 2312
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 1  period of time would more accurately reflect the increase in

 2  productive output of machinery and equipment purchased to

 3  facilitate an expansion, the increase in productive output may

 4  be measured during that 12-month continuous period of time if

 5  such time period is mutually agreed upon by the Department of

 6  Revenue and the expanding business prior to the commencement

 7  of production; provided, however, in no case may such time

 8  period begin later than 2 years following the completion of

 9  installation of the new machinery and equipment. The units

10  used to measure productive output shall be physically

11  comparable between the two periods, irrespective of sales.

12         (d)  Machinery and equipment used under federal

13  procurement contract.--

14         1.  Industrial machinery and equipment purchased by an

15  expanding business which manufactures tangible personal

16  property pursuant to federal procurement regulations at fixed

17  locations in this state are partially exempt from the tax

18  imposed in this chapter on that portion of the tax which is in

19  excess of $100,000 per calendar year upon an affirmative

20  showing by the taxpayer to the satisfaction of the department

21  that such items are used to increase the implicit productive

22  output of the expanded business by not less than 10 percent.

23  The percentage of increase is measured as deflated implicit

24  productive output for the calendar year during which the

25  installation of the machinery or equipment is completed or

26  during which commencement of production utilizing such items

27  is begun divided by the implicit productive output for the

28  preceding calendar year.  In no case may the commencement of

29  production begin later than 2 years following completion of

30  installation of the machinery or equipment.

31  

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    Florida Senate - 2005                                  SB 2312
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 1         2.  The amount of the exemption allowed shall equal the

 2  taxes otherwise imposed by this chapter in excess of $100,000

 3  per calendar year on qualifying industrial machinery or

 4  equipment reduced by the percentage of gross receipts from

 5  cost-reimbursement type contracts attributable to the plant or

 6  operation to total gross receipts so attributable, accrued for

 7  the year of completion or commencement.

 8         3.  The exemption provided by this paragraph shall

 9  inure to the taxpayer only through refund of previously paid

10  taxes.  Such refund shall be made within 30 days of formal

11  approval by the department of the taxpayer's application,

12  which application may be made on an annual basis following

13  installation of the machinery or equipment.

14         4.  For the purposes of this paragraph, the term:

15         a.  "Cost-reimbursement type contracts" has the same

16  meaning as in 32 C.F.R. s. 3-405.

17         b.  "Deflated implicit productive output" means the

18  product of implicit productive output times the quotient of

19  the national defense implicit price deflator for the preceding

20  calendar year divided by the deflator for the year of

21  completion or commencement.

22         c.  "Eligible costs" means the total direct and

23  indirect costs, as defined in 32 C.F.R. ss. 15-202 and 15-203,

24  excluding general and administrative costs, selling expenses,

25  and profit, defined by the uniform cost-accounting standards

26  adopted by the Cost-Accounting Standards Board created

27  pursuant to 50 U.S.C. s. 2168.

28         d.  "Implicit productive output" means the annual

29  eligible costs attributable to all contracts or subcontracts

30  subject to federal procurement regulations of the single plant

31  or operation at which the machinery or equipment is used.

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    Florida Senate - 2005                                  SB 2312
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 1         e.  "Industrial machinery and equipment" means tangible

 2  personal property or other property that has a depreciable

 3  life of 3 years or more, that qualifies as an eligible cost

 4  under federal procurement regulations, and that is used as an

 5  integral part of the process of production of tangible

 6  personal property. A building and its structural components

 7  are not industrial machinery and equipment unless the building

 8  or structural component is so closely related to the

 9  industrial machinery and equipment that it houses or supports

10  that the building or structural component can be expected to

11  be replaced when the machinery and equipment are replaced.

12  Heating and air-conditioning systems are not industrial

13  machinery and equipment unless the sole justification for

14  their installation is to meet the requirements of the

15  production process, even though the system may provide

16  incidental comfort to employees or serve, to an insubstantial

17  degree, nonproduction activities. The term includes parts and

18  accessories only to the extent that the exemption of such

19  parts and accessories is consistent with the provisions of

20  this paragraph.

21         f.  "National defense implicit price deflator" means

22  the national defense implicit price deflator for the gross

23  national product as determined by the Bureau of Economic

24  Analysis of the United States Department of Commerce.

25         5.  The exclusions provided in subparagraph (b)5. apply

26  to this exemption.  This exemption applies only to machinery

27  or equipment purchased pursuant to production contracts with

28  the United States Department of Defense and Armed Forces, the

29  National Aeronautics and Space Administration, and other

30  federal agencies for which the contracts are classified for

31  national security reasons.  In no event shall the provisions

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    Florida Senate - 2005                                  SB 2312
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 1  of this paragraph apply to any expanding business the increase

 2  in productive output of which could be measured under the

 3  provisions of sub-subparagraph (b)6.b. as physically

 4  comparable between the two periods.

 5         Section 2.  Section 212.0805, Florida Statutes, is

 6  repealed.

 7         Section 3.  This act shall take effect July 1, 2005.

 8  

 9            *****************************************

10                          SENATE SUMMARY

11    Amends provisions relating to the exemption from the tax
      on sales, use, and other transactions for machinery and
12    equipment used to increase productive output. Deletes a
      limitation on the exemption for spaceport activities and
13    manufacturing facilities. Deletes an exemption for
      machinery and equipment used in printing facilities.
14    Provides an exemption from the entire amount of the tax
      for machinery and equipment used under federal
15    procurement contracts. Repeals s. 212.0805, F.S., which
      relates to qualifying for the exemption and credit for
16    machinery and equipment purchased for use in phosphate or
      other solid minerals severance, mining, or processing
17    operations.

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