HB 0027

1	A bill to be entitled
2	An act relating to exemptions from the tax on sales, use,
3	and other transactions; amending s. 212.08, F.S.; deleting
4	an annual limitation on an exemption from the sales tax
5	for certain machinery and equipment used to increase
6	productive output; deleting an exemption for machinery and
7	equipment used to expand certain printing manufacturing
8	facilities or plant units; deleting a limitation on
9	application of the exemption for machinery and equipment
10	purchased for use in phosphate or other solid minerals
11	severance, mining, or processing operations by way of a
12	prospective credit; deleting an annual limitation on an
13	exemption from the sales tax for certain machinery and
14	equipment purchased under a federal procurement contract;
15	repealing s. 212.0805, F.S., relating to qualifications
16	for the exemption and credit for machinery and equipment
17	purchased by an expanding business for use in phosphate or
18	other solid minerals severance, mining, or processing
19	operations; providing an appropriation; providing an
20	effective date.
21
22	Be It Enacted by the Legislature of the State of Florida:
23
24	Section 1.  Paragraphs (b) and (d) of subsection (5) of
25	section 212.08, Florida Statutes, are amended to read:
26	212.08  Sales, rental, use, consumption, distribution, and
27	storage tax; specified exemptions.--The sale at retail, the
28	rental, the use, the consumption, the distribution, and the
29	storage to be used or consumed in this state of the following
30	are hereby specifically exempt from the tax imposed by this
31	chapter.
32	(5)  EXEMPTIONS; ACCOUNT OF USE.--
33	(b)  Machinery and equipment used to increase productive
34	output.--
35	1.  Industrial machinery and equipment purchased for
36	exclusive use by a new business in spaceport activities as
37	defined by s. 212.02 or for use in new businesses which
38	manufacture, process, compound, or produce for sale items of
39	tangible personal property at fixed locations are exempt from
40	the tax imposed by this chapter upon an affirmative showing by
41	the taxpayer to the satisfaction of the department that such
42	items are used in a new business in this state. Such purchases
43	must be made prior to the date the business first begins its
44	productive operations, and delivery of the purchased item must
45	be made within 12 months of that date.
46	2.a.  Industrial machinery and equipment purchased for
47	exclusive use by an expanding facility which is engaged in
48	spaceport activities as defined by s. 212.02 or for use in
49	expanding manufacturing facilities or plant units which
50	manufacture, process, compound, or produce for sale items of
51	tangible personal property at fixed locations in this state are
52	exempt from any amount of tax imposed by this chapter in excess
53	of $50,000 per calendar year upon an affirmative showing by the
54	taxpayer to the satisfaction of the department that such items
55	are used to increase the productive output of such expanded
56	facility or business by not less than 10 percent.
57	b.  Notwithstanding any other provision of this section,
58	industrial machinery and equipment purchased for use in
59	expanding printing manufacturing facilities or plant units that
60	manufacture, process, compound, or produce for sale items of
61	tangible personal property at fixed locations in this state are
62	exempt from any amount of tax imposed by this chapter upon an
63	affirmative showing by the taxpayer to the satisfaction of the
64	department that such items are used to increase the productive
65	output of such an expanded business by not less than 10 percent.
66	3.a.  To receive an exemption provided by subparagraph 1.
67	or subparagraph 2., a qualifying business entity shall apply to
68	the department for a temporary tax exemption permit. The
69	application shall state that a new business exemption or
70	expanded business exemption is being sought. Upon a tentative
71	affirmative determination by the department pursuant to
72	subparagraph 1. or subparagraph 2., the department shall issue
73	such permit.
74	b.  The applicant shall be required to maintain all
75	necessary books and records to support the exemption. Upon
76	completion of purchases of qualified machinery and equipment
77	pursuant to subparagraph 1. or subparagraph 2., the temporary
78	tax permit shall be delivered to the department or returned to
79	the department by certified or registered mail.
80	c.  If, in a subsequent audit conducted by the department,
81	it is determined that the machinery and equipment purchased as
82	exempt under subparagraph 1. or subparagraph 2. did not meet the
83	criteria mandated by this paragraph or if commencement of
84	production did not occur, the amount of taxes exempted at the
85	time of purchase shall immediately be due and payable to the
86	department by the business entity, together with the appropriate
87	interest and penalty, computed from the date of purchase, in the
88	manner prescribed by this chapter.
89	d.  In the event a qualifying business entity fails to
90	apply for a temporary exemption permit or if the tentative
91	determination by the department required to obtain a temporary
92	exemption permit is negative, a qualifying business entity shall
93	receive the exemption provided in subparagraph 1. or
94	subparagraph 2. through a refund of previously paid taxes. No
95	refund may be made for such taxes unless the criteria mandated
96	by subparagraph 1. or subparagraph 2. have been met and
97	commencement of production has occurred.
98	4.  The department shall adopt rules governing applications
99	for, issuance of, and the form of temporary tax exemption
100	permits; provisions for recapture of taxes; and the manner and
101	form of refund applications and may establish guidelines as to
102	the requisites for an affirmative showing of increased
103	productive output, commencement of production, and qualification
104	for exemption.
105	5.  The exemptions provided in subparagraphs 1. and 2. do
106	not apply to machinery or equipment purchased or used by
107	electric utility companies, communications companies, oil or gas
108	exploration or production operations, publishing firms that do
109	not export at least 50 percent of their finished product out of
110	the state, any firm subject to regulation by the Division of
111	Hotels and Restaurants of the Department of Business and
112	Professional Regulation, or any firm which does not manufacture,
113	process, compound, or produce for sale items of tangible
114	personal property or which does not use such machinery and
115	equipment in spaceport activities as required by this paragraph.
116	The exemptions provided in subparagraphs 1. and 2. shall apply
117	to machinery and equipment purchased for use in phosphate or
118	other solid minerals severance, mining, or processing operations
119	only by way of a prospective credit against taxes due under
120	chapter 211 for taxes paid under this chapter on such machinery
121	and equipment.
122	6.  For the purposes of the exemptions provided in
123	subparagraphs 1. and 2., these terms have the following
124	meanings:
125	a.  "Industrial machinery and equipment" means tangible
126	personal property or other property that has a depreciable life
127	of 3 years or more and that is used as an integral part in the
128	manufacturing, processing, compounding, or production of
129	tangible personal property for sale or is exclusively used in
130	spaceport activities. A building and its structural components
131	are not industrial machinery and equipment unless the building
132	or structural component is so closely related to the industrial
133	machinery and equipment that it houses or supports that the
134	building or structural component can be expected to be replaced
135	when the machinery and equipment are replaced. Heating and air-
136	conditioning systems are not industrial machinery and equipment
137	unless the sole justification for their installation is to meet
138	the requirements of the production process, even though the
139	system may provide incidental comfort to employees or serve, to
140	an insubstantial degree, nonproduction activities. The term
141	includes parts and accessories only to the extent that the
142	exemption thereof is consistent with the provisions of this
143	paragraph.
144	b.  "Productive output" means the number of units actually
145	produced by a single plant or operation in a single continuous
146	12-month period, irrespective of sales. Increases in productive
147	output shall be measured by the output for 12 continuous months
148	immediately following the completion of installation of such
149	machinery or equipment over the output for the 12 continuous
150	months immediately preceding such installation. However, if a
151	different 12-month continuous period of time would more
152	accurately reflect the increase in productive output of
153	machinery and equipment purchased to facilitate an expansion,
154	the increase in productive output may be measured during that
155	12-month continuous period of time if such time period is
156	mutually agreed upon by the Department of Revenue and the
157	expanding business prior to the commencement of production;
158	provided, however, in no case may such time period begin later
159	than 2 years following the completion of installation of the new
160	machinery and equipment. The units used to measure productive
161	output shall be physically comparable between the two periods,
162	irrespective of sales.
163	(d)  Machinery and equipment used under federal procurement
164	contract.--
165	1.  Industrial machinery and equipment purchased by an
166	expanding business which manufactures tangible personal property
167	pursuant to federal procurement regulations at fixed locations
168	in this state are partially exempt from the tax imposed in this
169	chapter on that portion of the tax which is in excess of
170	$100,000 per calendar year upon an affirmative showing by the
171	taxpayer to the satisfaction of the department that such items
172	are used to increase the implicit productive output of the
173	expanded business by not less than 10 percent. The percentage of
174	increase is measured as deflated implicit productive output for
175	the calendar year during which the installation of the machinery
176	or equipment is completed or during which commencement of
177	production utilizing such items is begun divided by the implicit
178	productive output for the preceding calendar year. In no case
179	may the commencement of production begin later than 2 years
180	following completion of installation of the machinery or
181	equipment.
182	2.  The amount of the exemption allowed shall equal the
183	taxes otherwise imposed by this chapter in excess of $100,000
184	per calendar year on qualifying industrial machinery or
185	equipment reduced by the percentage of gross receipts from cost-
186	reimbursement type contracts attributable to the plant or
187	operation to total gross receipts so attributable, accrued for
188	the year of completion or commencement.
189	3.  The exemption provided by this paragraph shall inure to
190	the taxpayer only through refund of previously paid taxes. Such
191	refund shall be made within 30 days of formal approval by the
192	department of the taxpayer's application, which application may
193	be made on an annual basis following installation of the
194	machinery or equipment.
195	4.  For the purposes of this paragraph, the term:
196	a.  "Cost-reimbursement type contracts" has the same
197	meaning as in 32 C.F.R. s. 3-405.
198	b.  "Deflated implicit productive output" means the product
199	of implicit productive output times the quotient of the national
200	defense implicit price deflator for the preceding calendar year
201	divided by the deflator for the year of completion or
202	commencement.
203	c.  "Eligible costs" means the total direct and indirect
204	costs, as defined in 32 C.F.R. ss. 15-202 and 15-203, excluding
205	general and administrative costs, selling expenses, and profit,
206	defined by the uniform cost-accounting standards adopted by the
207	Cost-Accounting Standards Board created pursuant to 50 U.S.C. s.
208	2168.
209	d.  "Implicit productive output" means the annual eligible
210	costs attributable to all contracts or subcontracts subject to
211	federal procurement regulations of the single plant or operation
212	at which the machinery or equipment is used.
213	e.  "Industrial machinery and equipment" means tangible
214	personal property or other property that has a depreciable life
215	of 3 years or more, that qualifies as an eligible cost under
216	federal procurement regulations, and that is used as an integral
217	part of the process of production of tangible personal property.
218	A building and its structural components are not industrial
219	machinery and equipment unless the building or structural
220	component is so closely related to the industrial machinery and
221	equipment that it houses or supports that the building or
222	structural component can be expected to be replaced when the
223	machinery and equipment are replaced. Heating and air-
224	conditioning systems are not industrial machinery and equipment
225	unless the sole justification for their installation is to meet
226	the requirements of the production process, even though the
227	system may provide incidental comfort to employees or serve, to
228	an insubstantial degree, nonproduction activities. The term
229	includes parts and accessories only to the extent that the
230	exemption of such parts and accessories is consistent with the
231	provisions of this paragraph.
232	f.  "National defense implicit price deflator" means the
233	national defense implicit price deflator for the gross national
234	product as determined by the Bureau of Economic Analysis of the
235	United States Department of Commerce.
236	5.  The exclusions provided in subparagraph (b)5. apply to
237	this exemption. This exemption applies only to machinery or
238	equipment purchased pursuant to production contracts with the
239	United States Department of Defense and Armed Forces, the
240	National Aeronautics and Space Administration, and other federal
241	agencies for which the contracts are classified for national
242	security reasons. In no event shall the provisions of this
243	paragraph apply to any expanding business the increase in
244	productive output of which could be measured under the
245	provisions of sub-subparagraph (b)6.b. as physically comparable
246	between the two periods.
247	Section 2.  Section 212.0805, Florida Statutes, is
248	repealed.
249	Section 3.  For the 2005-2006 fiscal year, the sum of
250	$210,069 is appropriated from the General Revenue Fund and four
251	positions are authorized to the Department of Revenue for the
252	purpose of implementing the provisions of this act. Of the funds
253	provided, $191,825 are recurring and $18,244 are nonrecurring
254	funds.
255	Section 4.  This act shall take effect July 1, 2005.

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