SALT Report 2366 – The Florida Department of Revenue issued a technical advisory regarding the taxability of non-residential cleaning and security services performed under a public works contract. The Taxpayer has several long-term contracts with various state agencies that require it to maintain highways, roads, bridges, traffic control equipment, weigh stations, rest areas, toll booths, and also provide security at interstate rest stops. The Taxpayer generally subcontracts with a third party to provide these services on its behalf.
The Taxpayer does not currently meet the four resale conditions provided in Rule 12A-1.0161(4), F.A.C., which would allow it to purchase the taxable security services and nonresidential cleaning services exempt from tax as a sale for resale. Because of this, the Taxpayer requested a ruling to determine whether the taxable services purchased under the terms of a multi-year lump sum contract would qualify as a sale for resale if the Taxpayer makes the following changes to its contracts:
- Taxpayer will amend its contracts to specifically state that the work to be performed under the subcontract is being done solely for the benefit of its client.
- The monthly invoices will separately state to the client the value of all services provided by the subcontractors.
- Each service provider will separately state on its invoices to the Taxpayer the value of all services provided, and will specifically designate the Taxpayer’s client as the customer who is purchasing the service from Taxpayer.
- The Taxpayer will comply with all of the requirements of Rule 12A-1.039, F.A.C., with regard to documenting its purchases for resale.
The Department stated that if the Taxpayer purchases the taxable security and nonresidential cleaning services to fulfill a multi-year, lump-sum public works contract, it can purchase those services, as sales for resale provided that the contracts the Taxpayer has with the subcontractors are modified to:
- Provide that the transactions are itemized on invoices to meet the four resale conditions, and
- Include specific language stating that the Taxpayer is purchasing these services to fulfill its contract with a client
Additionally, if these conditions are met then any future purchases of security and nonresidential cleaning services would not be subject to tax as they would be considered purchases for resale.
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