HB 69

1
A bill to be entitled
2An act relating to exemptions from the tax on sales, use,
3and other transactions; amending s. 212.08, F.S.; deleting
4an annual limitation on an exemption from the sales tax
5for certain machinery and equipment used to increase
6productive output; deleting an exemption for machinery and
7equipment used to expand certain printing manufacturing
8facilities or plant units; deleting a limitation on
9application of the exemption for machinery and equipment
10purchased for use in phosphate or other solid minerals
11severance, mining, or processing operations by way of a
12prospective credit; deleting an annual limitation on an
13exemption from the sales tax for certain machinery and
14equipment purchased under a federal procurement contract;
15repealing s. 212.0805, F.S., relating to qualifications
16for the exemption and credit for machinery and equipment
17purchased by an expanding business for use in phosphate or
18other solid minerals severance, mining, or processing
19operations; providing an appropriation; providing an
20effective date.
21
22Be It Enacted by the Legislature of the State of Florida:
23
24     Section 1.  Paragraphs (b) and (d) of subsection (5) of
25section 212.08, Florida Statutes, are amended to read:
26     212.08  Sales, rental, use, consumption, distribution, and
27storage tax; specified exemptions.--The sale at retail, the
28rental, the use, the consumption, the distribution, and the
29storage to be used or consumed in this state of the following
30are hereby specifically exempt from the tax imposed by this
31chapter.
32     (5)  EXEMPTIONS; ACCOUNT OF USE.--
33     (b)  Machinery and equipment used to increase productive
34output.--
35     1.  Industrial machinery and equipment purchased for
36exclusive use by a new business in spaceport activities as
37defined by s. 212.02 or for use in new businesses which
38manufacture, process, compound, or produce for sale items of
39tangible personal property at fixed locations are exempt from
40the tax imposed by this chapter upon an affirmative showing by
41the taxpayer to the satisfaction of the department that such
42items are used in a new business in this state. Such purchases
43must be made prior to the date the business first begins its
44productive operations, and delivery of the purchased item must
45be made within 12 months of that date.
46     2.a.  Industrial machinery and equipment purchased for
47exclusive use by an expanding facility which is engaged in
48spaceport activities as defined by s. 212.02 or for use in
49expanding manufacturing facilities or plant units which
50manufacture, process, compound, or produce for sale items of
51tangible personal property at fixed locations in this state are
52exempt from any amount of tax imposed by this chapter in excess
53of $50,000 per calendar year upon an affirmative showing by the
54taxpayer to the satisfaction of the department that such items
55are used to increase the productive output of such expanded
56facility or business by not less than 10 percent.
57     b.  Notwithstanding any other provision of this section,
58industrial machinery and equipment purchased for use in
59expanding printing manufacturing facilities or plant units that
60manufacture, process, compound, or produce for sale items of
61tangible personal property at fixed locations in this state are
62exempt from any amount of tax imposed by this chapter upon an
63affirmative showing by the taxpayer to the satisfaction of the
64department that such items are used to increase the productive
65output of such an expanded business by not less than 10 percent.
66     3.a.  To receive an exemption provided by subparagraph 1.
67or subparagraph 2., a qualifying business entity shall apply to
68the department for a temporary tax exemption permit. The
69application shall state that a new business exemption or
70expanded business exemption is being sought. Upon a tentative
71affirmative determination by the department pursuant to
72subparagraph 1. or subparagraph 2., the department shall issue
73such permit.
74     b.  The applicant shall be required to maintain all
75necessary books and records to support the exemption. Upon
76completion of purchases of qualified machinery and equipment
77pursuant to subparagraph 1. or subparagraph 2., the temporary
78tax permit shall be delivered to the department or returned to
79the department by certified or registered mail.
80     c.  If, in a subsequent audit conducted by the department,
81it is determined that the machinery and equipment purchased as
82exempt under subparagraph 1. or subparagraph 2. did not meet the
83criteria mandated by this paragraph or if commencement of
84production did not occur, the amount of taxes exempted at the
85time of purchase shall immediately be due and payable to the
86department by the business entity, together with the appropriate
87interest and penalty, computed from the date of purchase, in the
88manner prescribed by this chapter.
89     d.  In the event a qualifying business entity fails to
90apply for a temporary exemption permit or if the tentative
91determination by the department required to obtain a temporary
92exemption permit is negative, a qualifying business entity shall
93receive the exemption provided in subparagraph 1. or
94subparagraph 2. through a refund of previously paid taxes. No
95refund may be made for such taxes unless the criteria mandated
96by subparagraph 1. or subparagraph 2. have been met and
97commencement of production has occurred.
98     4.  The department shall adopt rules governing applications
99for, issuance of, and the form of temporary tax exemption
100permits; provisions for recapture of taxes; and the manner and
101form of refund applications and may establish guidelines as to
102the requisites for an affirmative showing of increased
103productive output, commencement of production, and qualification
104for exemption.
105     5.  The exemptions provided in subparagraphs 1. and 2. do
106not apply to machinery or equipment purchased or used by
107electric utility companies, communications companies, oil or gas
108exploration or production operations, publishing firms that do
109not export at least 50 percent of their finished product out of
110the state, any firm subject to regulation by the Division of
111Hotels and Restaurants of the Department of Business and
112Professional Regulation, or any firm which does not manufacture,
113process, compound, or produce for sale items of tangible
114personal property or which does not use such machinery and
115equipment in spaceport activities as required by this paragraph.
116The exemptions provided in subparagraphs 1. and 2. shall apply
117to machinery and equipment purchased for use in phosphate or
118other solid minerals severance, mining, or processing operations
119only by way of a prospective credit against taxes due under
120chapter 211 for taxes paid under this chapter on such machinery
121and equipment.
122     6.  For the purposes of the exemptions provided in
123subparagraphs 1. and 2., these terms have the following
124meanings:
125     a.  "Industrial machinery and equipment" means tangible
126personal property or other property that has a depreciable life
127of 3 years or more and that is used as an integral part in the
128manufacturing, processing, compounding, or production of
129tangible personal property for sale or is exclusively used in
130spaceport activities. A building and its structural components
131are not industrial machinery and equipment unless the building
132or structural component is so closely related to the industrial
133machinery and equipment that it houses or supports that the
134building or structural component can be expected to be replaced
135when the machinery and equipment are replaced. Heating and air-
136conditioning systems are not industrial machinery and equipment
137unless the sole justification for their installation is to meet
138the requirements of the production process, even though the
139system may provide incidental comfort to employees or serve, to
140an insubstantial degree, nonproduction activities. The term
141includes parts and accessories only to the extent that the
142exemption thereof is consistent with the provisions of this
143paragraph.
144     b.  "Productive output" means the number of units actually
145produced by a single plant or operation in a single continuous
14612-month period, irrespective of sales. Increases in productive
147output shall be measured by the output for 12 continuous months
148immediately following the completion of installation of such
149machinery or equipment over the output for the 12 continuous
150months immediately preceding such installation. However, if a
151different 12-month continuous period of time would more
152accurately reflect the increase in productive output of
153machinery and equipment purchased to facilitate an expansion,
154the increase in productive output may be measured during that
15512-month continuous period of time if such time period is
156mutually agreed upon by the Department of Revenue and the
157expanding business prior to the commencement of production;
158provided, however, in no case may such time period begin later
159than 2 years following the completion of installation of the new
160machinery and equipment. The units used to measure productive
161output shall be physically comparable between the two periods,
162irrespective of sales.
163     (d)  Machinery and equipment used under federal procurement
164contract.--
165     1.  Industrial machinery and equipment purchased by an
166expanding business which manufactures tangible personal property
167pursuant to federal procurement regulations at fixed locations
168in this state are partially exempt from the tax imposed in this
169chapter on that portion of the tax which is in excess of
170$100,000 per calendar year upon an affirmative showing by the
171taxpayer to the satisfaction of the department that such items
172are used to increase the implicit productive output of the
173expanded business by not less than 10 percent. The percentage of
174increase is measured as deflated implicit productive output for
175the calendar year during which the installation of the machinery
176or equipment is completed or during which commencement of
177production utilizing such items is begun divided by the implicit
178productive output for the preceding calendar year. In no case
179may the commencement of production begin later than 2 years
180following completion of installation of the machinery or
181equipment.
182     2.  The amount of the exemption allowed shall equal the
183taxes otherwise imposed by this chapter in excess of $100,000
184per calendar year on qualifying industrial machinery or
185equipment reduced by the percentage of gross receipts from cost-
186reimbursement type contracts attributable to the plant or
187operation to total gross receipts so attributable, accrued for
188the year of completion or commencement.
189     3.  The exemption provided by this paragraph shall inure to
190the taxpayer only through refund of previously paid taxes. Such
191refund shall be made within 30 days of formal approval by the
192department of the taxpayer's application, which application may
193be made on an annual basis following installation of the
194machinery or equipment.
195     4.  For the purposes of this paragraph, the term:
196     a.  "Cost-reimbursement type contracts" has the same
197meaning as in 32 C.F.R. s. 3-405.
198     b.  "Deflated implicit productive output" means the product
199of implicit productive output times the quotient of the national
200defense implicit price deflator for the preceding calendar year
201divided by the deflator for the year of completion or
202commencement.
203     c.  "Eligible costs" means the total direct and indirect
204costs, as defined in 32 C.F.R. ss. 15-202 and 15-203, excluding
205general and administrative costs, selling expenses, and profit,
206defined by the uniform cost-accounting standards adopted by the
207Cost-Accounting Standards Board created pursuant to 50 U.S.C. s.
2082168.
209     d.  "Implicit productive output" means the annual eligible
210costs attributable to all contracts or subcontracts subject to
211federal procurement regulations of the single plant or operation
212at which the machinery or equipment is used.
213     e.  "Industrial machinery and equipment" means tangible
214personal property or other property that has a depreciable life
215of 3 years or more, that qualifies as an eligible cost under
216federal procurement regulations, and that is used as an integral
217part of the process of production of tangible personal property.
218A building and its structural components are not industrial
219machinery and equipment unless the building or structural
220component is so closely related to the industrial machinery and
221equipment that it houses or supports that the building or
222structural component can be expected to be replaced when the
223machinery and equipment are replaced. Heating and air-
224conditioning systems are not industrial machinery and equipment
225unless the sole justification for their installation is to meet
226the requirements of the production process, even though the
227system may provide incidental comfort to employees or serve, to
228an insubstantial degree, nonproduction activities. The term
229includes parts and accessories only to the extent that the
230exemption of such parts and accessories is consistent with the
231provisions of this paragraph.
232     f.  "National defense implicit price deflator" means the
233national defense implicit price deflator for the gross national
234product as determined by the Bureau of Economic Analysis of the
235United States Department of Commerce.
236     5.  The exclusions provided in subparagraph (b)5. apply to
237this exemption. This exemption applies only to machinery or
238equipment purchased pursuant to production contracts with the
239United States Department of Defense and Armed Forces, the
240National Aeronautics and Space Administration, and other federal
241agencies for which the contracts are classified for national
242security reasons. In no event shall the provisions of this
243paragraph apply to any expanding business the increase in
244productive output of which could be measured under the
245provisions of sub-subparagraph (b)6.b. as physically comparable
246between the two periods.
247     Section 2.  Section 212.0805, Florida Statutes, is
248repealed.
249     Section 3.  For the 2006-2007 fiscal year, the sum of
250$210,069 is appropriated from the General Revenue Fund and four
251positions are authorized to the Department of Revenue for the
252purpose of implementing the provisions of this act. Of the funds
253provided, $191,825 are recurring and $18,244 are nonrecurring
254funds.
255     Section 4.  This act shall take effect July 1, 2006.


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