Agenda 03/13/2012 Item #16E33/13/2012 Item 16.E.3.
EXECUTIVE SUMMARY
Recommendation to approve delegation of authority for County Division Administrators to
sign Certificate of Entitlement related to Direct Material Purchases (DMP).
OBJECTIVE: To comply with recent changes to Florida law and the Florida Administrative
Code related to Direct Material Purchases (DMP) that enables the County to save payment of
sales tax.
CONSIDERATIONS: For many years, the County has been purchasing goods and /or materials
directly from the supplier for sales tax exemption in accordance with Section 212.08(6), F.S.
This has resulted in savings of $118,366.19 in FYI 1, $196,020.00 in FYI and $76,538 so far in
FYI 2. The Florida Administrative Code related to the Department of Revenue Sales and Use
Tax Rule 12A -1.094 (attached) changed effective January 12, 2012, and now requires the
following for Direct Material Purchases (DMP) that occur after a contract has been issued:
1. A governmental entity is required to issue a Certificate of Entitlement to each
vendor and to the governmental entity's contractor to affirm that the tangible
personal property purchased from that vendor will go into or become a part of a
public work, in order to be entitled to purchase materials tax exempt for a public
works project.
2. The governmental entity's purchase order for tangible personal property to be
incorporated into the public works project must be attached to the Certificate of
Entitlement. The governmental entity must issue a separate Certificate of
Entitlement for each purchase order. Copies of the Certificate may be issued.
Under our current Direct Material Purchase Procedure, the Project Manager must issue a
Purchase Order for the DMP as well as a deductive Change Order to the contract, in the amount
of the DMP. The issuance of a Certificate of Entitlement concurrent with the issuance of the
Purchase order is a new requirement, and the DMP procedures have been updated accordingly.
Because the Division Administrators and their Project Managers are most directly familiar with
the procurement of Board approved goods to be used on Board approved projects in their
respective Divisions, it is appropriate that the Administrators sign off on the required Certificate
of Entitlement form. The County Attorney's Office is recommending that staff request
authorization from the Board to allow the appropriate Division Administrator to perform the
ministerial function of signing the Certificate of Entitlement required for each DMP.
FISCAL IMPACT: The fiscal impact will depend on the actual number of Direct Material
Purchases that are made by the County, each one of which would result in the associated 6%
sales tax savings.
GROWTH MANAGEMENT IMPACT: There is no Growth Management Impact resulting
from this action.
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3/13/2012 Item 16.E.3.
LEGAL CONSIDERATIONS: This item has been reviewed and approved by the County
Attorney's Office, is legally sufficient for Board action and only requires a majority vote for
approval —SRT.
RECOMMENDATION: That the Board of County Commissioners authorize the County
Division Administrators to execute the Certificate of Entitlement for each eligible DMP.
Prepared by: Kelsey Ward, Contract Administration Manager
Attachments: The Florida Administrative Code related to the Department of Revenue Sales and
Use Tax Rule 12A -1.094
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3/13/2012 Item 16.E.3.
COLLIER COUNTY
Board of County Commissioners
Item Number: 16.E.3.
Item Summary: Recommendation to approve delegation of authority for County Division
Administrators to sign Certificate of Entitlement related to Direct Material Purchases (DMP).
Meeting Date: 3/13/2012
Prepared By
Name: WardKelsey
Title: Manager - Contracts Administration,Purchasing & Ge
2/27/2012 10:48:25 AM
Submitted by
Title: Manager - Contracts Administration,Purchasing & Ge
Name: WardKelsey
2/27/2012 10:48:26 AM
Approved By
Name: MarkiewiczJoanne
Title: Manager - Purchasing Acquisition,Purchasing & Gene
Date: 2/27/2012 11:23:27 AM
Name: pochopinpat
Title: Administrative Assistant,Facilities Management
Date: 2/27/2012 1:29:54 PM
Name: WardKelsey
Title: Manager - Contracts Administration,Purchasing & Ge
Date: 2/27/2012 4:20:07 PM
Name: MuckelCynthia
Title: Applications Anal yst,Informati on Technology
Date: 2/28/2012 2:38:48 PM
Name: PriceLen
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Title: Administrator, Administrative Services
Date: 2/29/2012 6:01:32 PM
Name: TeachScott
Title: Deputy County Attorney,County Attorney
Date: 3/1/2012 8:55:24 AM
Name: KlatzkowJeff
Title: County Attorney
Date: 3/1/2012 9:54:26 AM
Name: FinnEd
Title: Senior Budget Analyst, OMB
Date: 3/3/2012 4:20:05 PM
Name: OchsLeo
Title: County Manager
Date: 3/4/201.2 7:53:00 PM
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3/13/2012 Item 16.E.3.
3/13/2012 Item 16.E.3.
12A -1.094 Public Works Contracts.
(1) This rule shall govern the taxability of transactions in which contractors manufacture or purchase supplies and materials for
use in public works contracts, as that term is referred to in Section 212.08(6), F.S. This rule shall not apply to non - public works
contracts for the repair, alteration, improvement, or construction of real property, as those contracts are governed under the
provisions of Rule 12A- 1.051, F.A.C. In applying this rule, the following definitions are used.
(a)1. "Contractor" is one that supplies and installs tangible personal property that is incorporated into or becomes a part of a
public facility pursuant to a public works contract with a governmental entity exercising its authority in regard to the public property
or facility. Contractors include, but are not limited to, persons engaged in building, electrical, plumbing, heating, painting,
decorating, ventilating, paperhanging, sheet metal, roofing, bridge, road, waterworks, landscape, pier, or billboard work. This
definition includes subcontractors.
2. "Contractor" does not include a person that furnishes tangible personal property that is not affixed or appended in such a
manner that it is incorporated into or becomes a part of the public property or public facility to which a public works contract relates.
A person that provides and installs tangible personal property that is freestanding and can be relocated with no tools, equipment, or
need for adaptation for use elsewhere is not a contractor within the scope of this rule.
3. "Contractor" does not include a person that provides tangible personal property that will be incorporated into or become part
of a public facility if such property will be installed by another party.
4. Examples.
a. A vendor sells a desk, sofas, chairs, tables, lamps, and art prints for the reception area in a new public building. The sales
agreement requires the vendor to place the furniture according to a floor plan, set up the lamps, and hang the art prints. The vendor is
not a contractor within the scope of this rule, because the vendor is not installing the property being sold in such a way that it is
attached or affixed to the facility.
b. A security system vendor furnishes and installs low voltage wiring behind the walls, motion detectors, smoke alarms, other
sensors, control pads, alarm sirens, and other components of a security system for a new county courthouse. The components are
direct wired, fit into recesses cut into the walls or other structural elements of the building, and are held in place by screws. The
vendor is a contractor within the scope of this rule. The security system is installed and affixed in such a manner that it has been
incorporated into the courthouse.
c. A vendor enters an agreement to provide and install the shelving system for a new public library. The shelves are built to bear
the weight of books. The shelf configuration in each unit maximizes the number of books the shelves can hold. The number and size
of the units ordered is based on the design for the library space. The units will run floor to ceiling and will be anchored in place by
bolts or screws. The vendor is a contractor within the scope of this rule. The shelving system will be affixed in such a manner that it
becomes a part of the public library.
d. A vendor agrees to provide and install the computer terminals, monitors, keyboards, servers, and related equipment for a
county tax collector's office in central Florida. The job includes connecting the equipment to the structural cabling system that has
been installed by an electrical contractor. The cables running to the computer terminals are held in place by screws that fit into the
back of the terminal units. The vendor is not a contractor within the scope of this rule. The computer equipment has not been affixed
in such a way as to become a part of the facility. The equipment has not been attached to any structural element of the building.
e. A manufacturer agrees to provide the prestressed concrete forms for a public parking garage. A construction company is
awarded the bid to install those forms and build the garage. The manufacturer is not a contractor within the scope of this rule,
because the manufacturer will not install any tangible personal property that becomes a part of the garage. The construction
company is a contractor within the scope of this rule.
(b) "Governmental entity" includes any agency or branch of the United States government, a state, or any county, municipality,
or political subdivision of a state. The term includes authorities created by statute to operate public facilities using public funds, such
as public port authorities or public -use airport authorities.
(c) "Public works" are defined as projects for public use or enjoyment, financed and owned by the government, in which private
persons undertake the obligation to do a specific piece of work that involves installing tangible personal property in such a manner
that it becomes a part of a public facility. For purposes of this rule, a public facility includes any land, improvement to land,
building, structure, or other fixed site and related infrastructure thereon owned or operated by a governmental entity where
governmental or public activities are conducted. The term "public works" is not restricted to the repair, alteration, improvement, or
construction of real property and fixed works, although such projects are included within the term.
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3/13/2012 Item 16.E.3.
(d) "Real property" within the meaning of this rule includes all fixtures and improvements to real property. The status of a
project as an improvement or fixture to real property will be determined by reference to the definitions contained in subsection 12A-
1.051(2), F.A.C.
(2) The purchase or manufacture of supplies or materials by a public works contractor, when such supplies or materials are
purchased for the purpose of going into or becoming part of public works, whether the purchase or manufacture occurs inside or
outside Florida, is taxable to the public works contractor if the public works contractor also installs such supplies or materials, since
the public works contractor is the ultimate consumer of such supplies or materials. Public works contractors that purchase or
manufacture such supplies and materials in Florida are liable for sales tax or use tax on such purchases and manufacturing costs. A
public works contractor that purchases supplies or materials that may be sold as tangible personal property or may be incorporated
into a public works project may purchase such supplies or materials without tax by issuing a copy of the contractor's Annual Resale
Certificate and accrue and remit tax upon withdrawing such supplies or materials from inventory to go into or become a part of
public works. Public works contractors that purchase or manufacture such materials outside the State of Florida are liable for use
tax, subject to credit for any sales or use tax lawfully imposed and paid in the state of purchase or manufacture.
(3) The purchase or manufacture of tangible personal property for resale to a governmental entity is exempt from tax, provided
this exemption shall not include sales of tangible personal property made to, or the manufacture of tangible personal property by,
public works contractors when such tangible personal property goes into or becomes a part of public works.
(4)(a) The exemption in Section 212.08(6), F.S., is a general exemption for sales made directly to the government. A
determination whether a particular transaction is properly characterized as an exempt sale to a governmental entity or a taxable sale
to or use by a contractor shall be based on the substance of the transaction, rather than the form in which the transaction is cast. The
Executive Director or the Executive Director's designee in the responsible program will determine whether the substance of a
particular transaction is a taxable sale to or use by a contractor or an exempt direct sale to a governmental entity based on all of the
facts and circumstances surrounding the transaction as a whole.
(b) The following criteria that govern the status of the tangible personal property prior to its affixation to real property will be
considered in determining whether a governmental entity rather than a contractor is the purchaser of materials:
1. Direct Purchase Order. The governmental entity must issue its purchase order directly to the vendor supplying the materials
the contractor will use and provide the vendor with a copy of the governmental entity's Florida Consumer's Certification of
Exemption.
2. Direct Invoice. The vendor's invoice must be issued to the governmental entity, rather than to the contractor.
3. Direct Payment. The governmental entity must make payment directly to the vendor from public funds.
4. Passage of Title. The governmental entity must take title to the tangible personal property from the vendor at the time of
purchase or delivery by the vendor.
5. Assumption of the Risk of Loss. Assumption of the risk of damage or loss by the governmental entity at the time of purchase
is a paramount consideration. A governmental entity will be deemed to have assumed the risk of loss if the governmental entity
bears the economic burden of obtaining insurance covering damage or loss or directly enjoys the economic benefit of the proceeds of
such insurance.
(c)1. To be entitled to purchase materials tax exempt for a public works project, a governmental entity is required to issue a
Certificate of Entitlement to each vendor and to the governmental entity's contractor to affirm that the tangible personal property
purchased from that vendor will go into or become a part of public work. This requirement does not apply to any agency or branch
of the United States government.
2. The governmental entity's purchase order for tangible personal property to be incorporated into the public works project must
be attached to the Certificate of Entitlement. The governmental entity must issue a separate Certificate of Entitlement for each
purchase order. Copies of the Certificate may be issued.
3. The governmental entity will also affirm that if the Department determines that tangible personal property sold by a vendor
tax- exempt pursuant to a Certificate of Entitlement does not qualify for the exemption under Section 212.08(6), F.S., and this rule,
the governmental entity will be liable for any tax, penalty, and interest determined to be due.
4. The following is the format of the Certificate of Entitlement to be issued by the governmental entity:
CERTIFICATE OF ENTITLEMENT
The undersigned authorized representative of
(hereinafter "Governmental Entity"), Florida Consumer's
Certificate of Exemption Number , affirms that the tangible personal property purchased pursuant to Purchase
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3/13/2012 Item 16.E.3.
Order Number from (Vendor) on or after (date) will be incorporated into or become a part of a public
facility as part of a public works contract pursuant to contract # with (Name of Contractor) for the
construction of
Governmental Entity affirms that the purchase of the tangible personal property contained in the attached Purchase Order meets
the following exemption requirements contained in Section 212.08(6), F.S., and Rule 12A- 1.094, F.A.C.:
You must initial each of the following requirements.
1. The attached Purchase Order is issued directly to the vendor supplying the tangible personal property the Contractor
will use in the identified public works.
2. The vendor's invoice will be issued directly to Governmental Entity.
3. Payment of the vendor's invoice will be made directly by Governmental Entity to the vendor from public funds.
4. Governmental Entity will take title to the tangible personal property from the vendor at the time of purchase or of
delivery by the vendor.
5. Governmental Entity assumes the risk of damage or loss at the time of purchase or delivery by the vendor.
Governmental Entity affirms that if the tangible personal property identified in the attached Purchase Order does not qualify for
the exemption provided in Section 212.08(6), F.S., and Rule 12A- 1.094, F.A.C., Governmental Entity will be subject to the tax,
interest, and penalties due on the tangible personal property purchased. If the Florida Department of Revenue determines that the
tangible personal property purchased tax- exempt by issuing this Certificate does not qualify for the exemption, Governmental Entity
will be liable for any tax, penalty, and interest determined to be due.
I understand that if I fraudulently issue this certificate to evade the payment of sales tax I will be liable for payment of the sales
tax plus a penalty of 200% of the tax and may be subject to conviction of a third degree felony.
Under the penalties of perjury, I declare that I have read the foregoing Certificate of Entitlement and the facts stated in it are
true.
Signature of Authorized Representative Title
Purchaser's Name (Print or Type)
Federal Employer Identification Number:
Telephone Number:
Date
You must attach a copy of the Purchase Order to this Certificate of Entitlement.
Do not send to the Florida Department of Revenue. This Certificate of Entitlement must be retained in the vendor's and the
contractor's books and records.
(d) Sales to contractors, including subcontractors, are subject to tax.
(e) The governmental entity may not transfer liability for such tax, penalty, and interest to another party by contract or
agreement.
(f) In the case of contracts with any agency or branch of the United States government in which the federal governmental
agency or branch is not required to produce a Certificate of Entitlement, the purchase must comply with the five criteria provided in
paragraph (b), for the purchase of tangible personal property to be exempt from sales and use tax. If the criteria in paragraph (b) are
not met, the contractor is the ultimate consumer of such tangible personal property and is liable for sales or use tax on such
purchases and manufacturing costs.
(5) Contractors, including subcontractors, that manufacture, fabricate, or furnish tangible personal property that the contractor
incorporates into public works are liable for tax in the manner provided in subsection (10) of Rule 12A- 1.051, F.A.C. The contractor
and subcontractors, not the governmental entity, are deemed to be the ultimate consumers of the articles of tangible personal
property they manufacture, fabricate, or fumish to perform their contracts and may not accept a Certificate of Entitlement for these
articles.
(6) Contractors that supply raw materials such as rock, shell, fill dirt, and similar materials for incorporation into public works
shall be liable for tax in the manner provided in subsection (10) of Rule 12A- 1.051, F.A.C.
(7) Contractors that manufacture and incorporate asphalt into public works projects are liable for tax on their costs, as provided
in subsection (12) of Rule 12A- 1.051, F.A.C., subject to a partial exemption, as provided in Section 212.06(1)(c), F.S.
(8) Contractors that install people mover systems in public works projects are exempt from sales and use tax on their purchases
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3/13/2012 Item 16.E.3.
of such systems or components of such systems and on any other costs incurred in the manufacture of such systems that would be
taxable under the provisions of subsection (10) of Rule 12A- 1.051, F.A.C.
(a) A "people mover system" includes wheeled passenger vehicles and related control and power distribution systems that form
a transportation system owned by a public entity and used by the general public. The vehicles may be operator - controlled, driverless,
self - propelled, or externally powered. They may run on roads, rails, guidebeams, or other permanent structures that are an integral
part of the system. "Related control and power distribution systems" includes electrical or electronic control or signaling equipment
that distributes power or signals from the control center or centers or from the power source throughout the system. Embedded
wiring, conduits, or cabling and the roads, rails, guidebeams, or other permanent structures on which the vehicles run are not
included within the term "people mover system." A contractor that installs such embedded wiring, conduits, or cabling or that builds
such a road, rail, guidebeam, or permanent structure is taxable on the purchase or use of tangible personal property incorporated into
the project.
(b) A people mover system contractor should claim the exemption by providing a vendor with a certificate of entitlement to the
exemption. The vendor must maintain copies of certificates until tax imposed by Chapter 212, F.S., may no longer be determined
and assessed under Section 95.091, F.S. Possession by a vendor of such a certificate from the purchaser relieves the vendor from the
responsibility of collecting tax on the sale, and the Department shall look solely to the purchaser for recovery of tax if it determines
that the purchaser was not entitled to the exemption. A suggested form of certificate follows:
SUGGESTED PURCHASER'S EXEMPTION CERTIFICATE
PEOPLE MOVER SYSTEMS AND PARTS
(Purchaser's Name) certifies that the tangible personal property purchased on or after (date) will be
used as part of a people mover system that will become a part of a publicly owned facility pursuant to a contract with the United
States, a state, a county, a municipality, a political subdivision of a state, or the public operator of a public -use airport as defined in
Section 332.004, F.S. Such contract requires Purchaser to purchase the tangible personal property for use in manufacturing,
installing, manufacturing and installing, repairing, or maintaining, all or part of a people mover system operated by the
governmental entity as a public facility.
(Purchaser's Name) further certifies: a) that all of the tangible personal property purchased pursuant to this
certificate is or will be part of a wheeled passenger vehicle or of related control or power distribution systems that are part of a
transportation system for use by the general public; and b) none of the tangible personal property purchased pursuant to this
certificate will be used as embedded wiring, conduits, or cabling to transmit signals among the vehicles, control equipment, power
distribution equipment, and signaling equipment that make up the people mover system.
The undersigned understands that if such tangible personal property does not qualify for this exemption, the undersigned will be
subject to sales and use tax, interest, and penalties. The undersigned further understands that when any person fraudulently, for the
purpose of evading tax, issues to a vendor or to any agent of the state a certificate or statement in writing in which he or she claims
exemption from the sales tax, such person, in addition to being liable for payment of the tax plus a mandatory penalty of 200% of
the tax, shall be liable for fine and punishment provided by law for conviction of a felony of the third degree, as provided in Section
775.082, 775.083, or 775.084, F.S.
Purchaser's Name (Print or Type)
Signature and Title Date Florida Sales Tax Number
Federal Employer Identification Telephone Number
Number or Social Security Number
Retain in vendor's records. Do not send to the Department of Revenue.
(c) Contractors that maintain an inventory of parts that may be incorporated into people mover system components that are sold
as tangible personal property, may be used in performing real property contracts, and may be incorporated into exempt people mover
systems pursuant to a public works contract may purchase such inventory parts by issuing a copy of the contractor's Annual Resale
Certificate in lieu of providing a certification of specific eligibility under the people mover system exemption. If appropriate, tax
should be remitted upon subsequent taxable sale or use of such parts.
Rulemaking Authority 212.08(6), 212.17(6), 212.18(2), 212.183, 213.06(1) FS. Law Implemented 92.525(1), 212.02(4), (14), (15), (16), (19), (20), ,
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3/13/2012 Item 16.E.3.
(21), 212.06(1), (2), (14) 212.07(1), 212.08(6), (7)(bbb), 212.085, 212.18(2), 212.183, 213.37 FS. History —New 6 -3 -80, Amended 11- 15 -82,
Formerly 12A -1.94, Amended 1 -2 -89, 8- 10 -92, 6- 28 -04, 1- 12 -11.
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