SALT Report 2528 – The Florida Governor recently signed legislation that provides a temporary exemption for qualified manufacturing businesses. HB 7007 creates a sales and use tax exemption for industrial machinery and equipment purchased and used to manufacture, process, compound, or produce items of tangible personal property for sale. The exemption applies only to industrial machinery and equipment used at fixed locations in Florida.
To be eligible for the exemption, manufacturing businesses must be primarily engaged in a business activity listed in NAICS codes 31, 32, or 33 at the location where the industrial machinery and equipment will be installed. A minimum of 50% of the businesses activities must represent one of the activities defined in the approved NAICS codes.
Industrial machinery and equipment
Qualified industrial machinery and equipment is limited to property with a depreciable life of three years or more and must be an integral part of the manufacturing, processing, compounding, or production of tangible personal property for sale. Buildings and their structural components are not considered industrial machinery and equipment unless the building or structural component is so closely related to the industrial machinery and equipment that it houses or supports that it will also be replaced when the machinery and equipment are replaced.
Additionally, qualified manufacturers may apply the exemption to equipment upgrades at an existing facility. Industrial machinery and equipment includes parts and accessories so long as the parts and accessories are purchased prior to the date the machinery and equipment are first used.
Finally, the bill specifically excludes heating and air conditioning systems as they are not considered industrial machinery and equipment unless the sole reason for their installation and use is to meet the requirements of the production process. This exception applies even if the system provides incidental comfort to employees or is used insubstantially in non-production activities.
The exemption is effective April 30, 2014, and expires on April 30, 2017.
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