On May 17, 2013 Governor Rick Scott signed into law one of the main agenda goals of his term in office. Specifically, Sec. 212.08(7)(kkk), Florida Statutes (F.S.), was enacted with an effective date of April 30, 2014 to allow a 100% exemption for machinery and equipment purchased for the use in Florida based manufacturing and processing companies. A simple exemption certificate can be supplied to the vender selling the equipment and no sales or use taxes are theoretically due. If your company or your clients are in the manufacturing industry, then this is a huge win. However, there are a few nuances of the law to which you should pay attention. For example, by the terms of the law, the exemption will expire on April 30, 2017 if not extended.
(NAICS) codes 31, 32, and 33
There are a few specifics to note when reading through the new statute. First, the purchaser must fall under one of the NAICS Codes specified by the statute, specifically 31, 32, or 33. These are the general codes for most types of manufacturing and processing industries, and you can find a free listing of each of the sub-codes at the NAICS Code web site. Second, the purchaser must not only be in a manufacturing industry specified under NAICS codes 31, 32, or 33, but the qualifying business activities must also be at least 50% of the company’s activities. So companies that do some processing or manufacturing but the business is primarily in some other industry will not qualify. NOTE: separating the manufacturing division of the business into a separate legal entity may achieve a more favorable tax result. Even a separate legal entity that is disregarded for Federal income tax purposes should achieve the desired results. Third, the statute seems to create some uncertainty about machinery and equipment that might be considered part of the building.
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