HB 0027

CS

CHAMBER ACTION

1	The Finance & Tax Committee recommends the following:
2
3	Council/Committee Substitute
4	Remove the entire bill and insert:
5	A bill to be entitled
6	An act relating to exemptions from the tax on sales, use,
7	and other transactions; amending s. 212.08, F.S.; deleting
8	an annual limitation on an exemption from the sales tax
9	for certain machinery and equipment used to increase
10	productive output; deleting an exemption for machinery and
11	equipment used to expand certain printing manufacturing
12	facilities or plant units; deleting a limitation on
13	application of the exemption for machinery and equipment
14	purchased for use in phosphate or other solid minerals
15	severance, mining, or processing operations by way of a
16	prospective credit; deleting an annual limitation on an
17	exemption from the sales tax for certain machinery and
18	equipment purchased under a federal procurement contract;
19	repealing s. 212.0805, F.S., relating to qualifications
20	for the exemption and credit for machinery and equipment
21	purchased by an expanding business for use in phosphate or
22	other solid minerals severance, mining, or processing
23	operations; providing an effective date.
24
25	Be It Enacted by the Legislature of the State of Florida:
26
27	Section 1.  Paragraphs (b) and (d) of subsection (5) of
28	section 212.08, Florida Statutes, are amended to read:
29	212.08  Sales, rental, use, consumption, distribution, and
30	storage tax; specified exemptions.--The sale at retail, the
31	rental, the use, the consumption, the distribution, and the
32	storage to be used or consumed in this state of the following
33	are hereby specifically exempt from the tax imposed by this
34	chapter.
35	(5)  EXEMPTIONS; ACCOUNT OF USE.--
36	(b)  Machinery and equipment used to increase productive
37	output.--
38	1.  Industrial machinery and equipment purchased for
39	exclusive use by a new business in spaceport activities as
40	defined by s. 212.02 or for use in new businesses which
41	manufacture, process, compound, or produce for sale items of
42	tangible personal property at fixed locations are exempt from
43	the tax imposed by this chapter upon an affirmative showing by
44	the taxpayer to the satisfaction of the department that such
45	items are used in a new business in this state. Such purchases
46	must be made prior to the date the business first begins its
47	productive operations, and delivery of the purchased item must
48	be made within 12 months of that date.
49	2.a.  Industrial machinery and equipment purchased for
50	exclusive use by an expanding facility which is engaged in
51	spaceport activities as defined by s. 212.02 or for use in
52	expanding manufacturing facilities or plant units which
53	manufacture, process, compound, or produce for sale items of
54	tangible personal property at fixed locations in this state are
55	exempt from any amount of tax imposed by this chapter in excess
56	of $50,000 per calendar year upon an affirmative showing by the
57	taxpayer to the satisfaction of the department that such items
58	are used to increase the productive output of such expanded
59	facility or business by not less than 10 percent.
60	b.  Notwithstanding any other provision of this section,
61	industrial machinery and equipment purchased for use in
62	expanding printing manufacturing facilities or plant units that
63	manufacture, process, compound, or produce for sale items of
64	tangible personal property at fixed locations in this state are
65	exempt from any amount of tax imposed by this chapter upon an
66	affirmative showing by the taxpayer to the satisfaction of the
67	department that such items are used to increase the productive
68	output of such an expanded business by not less than 10 percent.
69	3.a.  To receive an exemption provided by subparagraph 1.
70	or subparagraph 2., a qualifying business entity shall apply to
71	the department for a temporary tax exemption permit. The
72	application shall state that a new business exemption or
73	expanded business exemption is being sought. Upon a tentative
74	affirmative determination by the department pursuant to
75	subparagraph 1. or subparagraph 2., the department shall issue
76	such permit.
77	b.  The applicant shall be required to maintain all
78	necessary books and records to support the exemption. Upon
79	completion of purchases of qualified machinery and equipment
80	pursuant to subparagraph 1. or subparagraph 2., the temporary
81	tax permit shall be delivered to the department or returned to
82	the department by certified or registered mail.
83	c.  If, in a subsequent audit conducted by the department,
84	it is determined that the machinery and equipment purchased as
85	exempt under subparagraph 1. or subparagraph 2. did not meet the
86	criteria mandated by this paragraph or if commencement of
87	production did not occur, the amount of taxes exempted at the
88	time of purchase shall immediately be due and payable to the
89	department by the business entity, together with the appropriate
90	interest and penalty, computed from the date of purchase, in the
91	manner prescribed by this chapter.
92	d.  In the event a qualifying business entity fails to
93	apply for a temporary exemption permit or if the tentative
94	determination by the department required to obtain a temporary
95	exemption permit is negative, a qualifying business entity shall
96	receive the exemption provided in subparagraph 1. or
97	subparagraph 2. through a refund of previously paid taxes. No
98	refund may be made for such taxes unless the criteria mandated
99	by subparagraph 1. or subparagraph 2. have been met and
100	commencement of production has occurred.
101	4.  The department shall adopt rules governing applications
102	for, issuance of, and the form of temporary tax exemption
103	permits; provisions for recapture of taxes; and the manner and
104	form of refund applications and may establish guidelines as to
105	the requisites for an affirmative showing of increased
106	productive output, commencement of production, and qualification
107	for exemption.
108	5.  The exemptions provided in subparagraphs 1. and 2. do
109	not apply to machinery or equipment purchased or used by
110	electric utility companies, communications companies, oil or gas
111	exploration or production operations, publishing firms that do
112	not export at least 50 percent of their finished product out of
113	the state, any firm subject to regulation by the Division of
114	Hotels and Restaurants of the Department of Business and
115	Professional Regulation, or any firm which does not manufacture,
116	process, compound, or produce for sale items of tangible
117	personal property or which does not use such machinery and
118	equipment in spaceport activities as required by this paragraph.
119	The exemptions provided in subparagraphs 1. and 2. shall apply
120	to machinery and equipment purchased for use in phosphate or
121	other solid minerals severance, mining, or processing operations
122	only by way of a prospective credit against taxes due under
123	chapter 211 for taxes paid under this chapter on such machinery
124	and equipment.
125	6.  For the purposes of the exemptions provided in
126	subparagraphs 1. and 2., these terms have the following
127	meanings:
128	a.  "Industrial machinery and equipment" means tangible
129	personal property or other property that has a depreciable life
130	of 3 years or more and that is used as an integral part in the
131	manufacturing, processing, compounding, or production of
132	tangible personal property for sale or is exclusively used in
133	spaceport activities. A building and its structural components
134	are not industrial machinery and equipment unless the building
135	or structural component is so closely related to the industrial
136	machinery and equipment that it houses or supports that the
137	building or structural component can be expected to be replaced
138	when the machinery and equipment are replaced. Heating and air-
139	conditioning systems are not industrial machinery and equipment
140	unless the sole justification for their installation is to meet
141	the requirements of the production process, even though the
142	system may provide incidental comfort to employees or serve, to
143	an insubstantial degree, nonproduction activities. The term
144	includes parts and accessories only to the extent that the
145	exemption thereof is consistent with the provisions of this
146	paragraph.
147	b.  "Productive output" means the number of units actually
148	produced by a single plant or operation in a single continuous
149	12-month period, irrespective of sales. Increases in productive
150	output shall be measured by the output for 12 continuous months
151	immediately following the completion of installation of such
152	machinery or equipment over the output for the 12 continuous
153	months immediately preceding such installation. However, if a
154	different 12-month continuous period of time would more
155	accurately reflect the increase in productive output of
156	machinery and equipment purchased to facilitate an expansion,
157	the increase in productive output may be measured during that
158	12-month continuous period of time if such time period is
159	mutually agreed upon by the Department of Revenue and the
160	expanding business prior to the commencement of production;
161	provided, however, in no case may such time period begin later
162	than 2 years following the completion of installation of the new
163	machinery and equipment. The units used to measure productive
164	output shall be physically comparable between the two periods,
165	irrespective of sales.
166	(d)  Machinery and equipment used under federal procurement
167	contract.--
168	1.  Industrial machinery and equipment purchased by an
169	expanding business which manufactures tangible personal property
170	pursuant to federal procurement regulations at fixed locations
171	in this state are partially exempt from the tax imposed in this
172	chapter on that portion of the tax which is in excess of
173	$100,000 per calendar year upon an affirmative showing by the
174	taxpayer to the satisfaction of the department that such items
175	are used to increase the implicit productive output of the
176	expanded business by not less than 10 percent. The percentage of
177	increase is measured as deflated implicit productive output for
178	the calendar year during which the installation of the machinery
179	or equipment is completed or during which commencement of
180	production utilizing such items is begun divided by the implicit
181	productive output for the preceding calendar year. In no case
182	may the commencement of production begin later than 2 years
183	following completion of installation of the machinery or
184	equipment.
185	2.  The amount of the exemption allowed shall equal the
186	taxes otherwise imposed by this chapter in excess of $100,000
187	per calendar year on qualifying industrial machinery or
188	equipment reduced by the percentage of gross receipts from cost-
189	reimbursement type contracts attributable to the plant or
190	operation to total gross receipts so attributable, accrued for
191	the year of completion or commencement.
192	3.  The exemption provided by this paragraph shall inure to
193	the taxpayer only through refund of previously paid taxes. Such
194	refund shall be made within 30 days of formal approval by the
195	department of the taxpayer's application, which application may
196	be made on an annual basis following installation of the
197	machinery or equipment.
198	4.  For the purposes of this paragraph, the term:
199	a.  "Cost-reimbursement type contracts" has the same
200	meaning as in 32 C.F.R. s. 3-405.
201	b.  "Deflated implicit productive output" means the product
202	of implicit productive output times the quotient of the national
203	defense implicit price deflator for the preceding calendar year
204	divided by the deflator for the year of completion or
205	commencement.
206	c.  "Eligible costs" means the total direct and indirect
207	costs, as defined in 32 C.F.R. ss. 15-202 and 15-203, excluding
208	general and administrative costs, selling expenses, and profit,
209	defined by the uniform cost-accounting standards adopted by the
210	Cost-Accounting Standards Board created pursuant to 50 U.S.C. s.
211	2168.
212	d.  "Implicit productive output" means the annual eligible
213	costs attributable to all contracts or subcontracts subject to
214	federal procurement regulations of the single plant or operation
215	at which the machinery or equipment is used.
216	e.  "Industrial machinery and equipment" means tangible
217	personal property or other property that has a depreciable life
218	of 3 years or more, that qualifies as an eligible cost under
219	federal procurement regulations, and that is used as an integral
220	part of the process of production of tangible personal property.
221	A building and its structural components are not industrial
222	machinery and equipment unless the building or structural
223	component is so closely related to the industrial machinery and
224	equipment that it houses or supports that the building or
225	structural component can be expected to be replaced when the
226	machinery and equipment are replaced. Heating and air-
227	conditioning systems are not industrial machinery and equipment
228	unless the sole justification for their installation is to meet
229	the requirements of the production process, even though the
230	system may provide incidental comfort to employees or serve, to
231	an insubstantial degree, nonproduction activities. The term
232	includes parts and accessories only to the extent that the
233	exemption of such parts and accessories is consistent with the
234	provisions of this paragraph.
235	f.  "National defense implicit price deflator" means the
236	national defense implicit price deflator for the gross national
237	product as determined by the Bureau of Economic Analysis of the
238	United States Department of Commerce.
239	5.  The exclusions provided in subparagraph (b)5. apply to
240	this exemption. This exemption applies only to machinery or
241	equipment purchased pursuant to production contracts with the
242	United States Department of Defense and Armed Forces, the
243	National Aeronautics and Space Administration, and other federal
244	agencies for which the contracts are classified for national
245	security reasons. In no event shall the provisions of this
246	paragraph apply to any expanding business the increase in
247	productive output of which could be measured under the
248	provisions of sub-subparagraph (b)6.b. as physically comparable
249	between the two periods.
250	Section 2.  Section 212.0805, Florida Statutes, is
251	repealed.
252	Section 3.  This act shall take effect July 1, 2005.

CODING: Words stricken are deletions; words underlined are additions.