Press Room: Tax Release

May 28, 2013

Recent Florida State Tax Legislative Updates

Are you wondering what the Florida Legislature has been up to? Well, taxes have been a significant item on the agenda as well as a number of bills recently passed that impact both businesses and individuals. The following are the taxation bills that were passed within the Florida Legislature on the last day of the Session that is part of the 2013 $74.5 billion state budget.

Manufacturing Machinery and Equipment Sales and Use Tax Exemption

House Bill (HB) 7007 expands the exemption from sales and use tax to all purchases of manufacturing machinery and equipment from the current exemption, which only applies for manufacturing machinery and equipment for new businesses or businesses that can verify the new equipment would increase output by at least 5%. With the enactment of this expanded exemption, Florida will be more competitive for manufacturers currently located in other states that have this exemption. This expanded exemption is effective January 1, 2014. Currently, the estimate made is that the removal of the manufacturing exemption restriction will save businesses $115.3 million in state sales taxes and $26 million in local sales taxes annually.

While the bill passed, there is some controversy surrounding the bill. House Democrats have threatened a lawsuit because the bill did not pass by a 2/3 majority.  The Florida Constitution requires a 2/3 vote for bills that affect local revenues. Yet, the House Speaker says he is confident that passage of the bill is on firm legal ground, because the impact to local government is minimal.

Florida has restricted itself from becoming a potential major manufacturing state by taxing capital at higher rates than many other states as it assesses tax on manufacturing companies in two ways: sales and use tax on the purchase of machinery and equipment and tangible personal property tax on the equipment. This could have a great impact on the state as manufacturing is the highest economic multiplier for the state of Florida (according to a study by Florida Tax Watch), meaning it likely creates more indirect and induced jobs than any other industry.

Sales Tax Holiday

Senate Bill (SB) 406, a “Back to School” holiday is returning for Florida taxpayers. From August 2, 2013 through August 4, 2013, purchases of clothing costing $75 or less per item, school supplies costing $15 or less per item, and personal computers costing $750 or less per item would be exempt from state and local sales taxes. It is estimated that the holiday would save taxpayers approximately $35 million.

Expanding a Sales Tax Exemption for Aircraft Maintenance
SB 406 Also Includes Language to Extend a Tax Exemption on Maintenance and Repair of Aircraft

All labor charges for the repair and maintenance of qualified aircraft and aircraft of more than 2,000 pounds, including rotary wing aircraft, are exempt from sales tax. Prior to the passage of this bill, an exemption only applied to aircraft weighing more than 10,300 pounds. Furthermore, replacement engines, parts, and equipment used in the repair or maintenance of qualified aircraft and aircraft of more than 2,000 pounds, including rotary wing aircraft, are exempt from sales tax if such parts or equipment are installed on the aircraft that is being repaired or maintained in the state of Florida. As a result, an increase in jobs and revenue is expected for the aviation industry.

Expanding Tax Refund Programs

HB 4013 passed the full House to delete the $7 million lifetime cap ($7.5 million if the project is within an Enterprise Zone) on tax refunds for qualified defense contractors, space flight businesses and qualified target industry businesses as approved by the state. Target business industries are corporate headquarters or businesses that reflect the following attributes developed by the department: future growth, stability, high wage, market and resource independent, industrial base diversification and strengthening or positive economic impact.  Pursuant to an agreement with the state, the qualified defense contractors, space flight businesses and qualified targeted industries can apply for refunds for corporate income, sales and use, property and stamp taxes, subject to annual and lifetime caps.  Removing the lifetime cap will help Florida retain qualified businesses already taking advantage of the program and hopefully attract new business to Florida. This amendment does not change the current yearly limits per company, or size of the fund.