HB 415

1	A bill to be entitled
2	An act relating to the tax on sales, use, and other
3	transactions; amending s. 212.052, F.S.; deleting an
4	exception to an exemption from the tax for research or
5	development costs; amending s. 212.08, F.S.; deleting
6	provisions providing an exemption on account of use for
7	machinery and equipment used for research and development;
8	revising provisions for application for the exemption;
9	specifying the term of validity of an exemption
10	certification; providing for biennial renewal of
11	certifications; providing criteria; deleting a limitation
12	on number of exemption applications by a business in a
13	year; exempting machinery and equipment used predominantly
14	for research and development activities; providing
15	definitions; authorizing the Department of Revenue to
16	adopt rules administering and implementing the exemption;
17	providing requirements and procedures for claiming the
18	exemption; requiring an affidavit to be given by a
19	taxpayer claiming entitlement to the exemption; providing
20	penalties for fraudulently claiming the exemption;
21	providing recordkeeping requirements; providing an
22	effective date.
23
24	Be It Enacted by the Legislature of the State of Florida:
25
26	Section 1.  Subsection (2) of section 212.052, Florida
27	Statutes, is amended to read:
28	212.052  Research or development costs; exemption.--
29	(2)  Notwithstanding any provision of this chapter to the
30	contrary, any person, including an affiliated group as defined
31	in s. 1504 of the Internal Revenue Code of 1954, as amended, who
32	manufactures, produces, compounds, processes, or fabricates in
33	any manner tangible personal property for such taxpayer's own
34	use directly and solely in research or development shall not be
35	subject to the tax imposed by this chapter upon the cost of the
36	product so manufactured, produced, compounded, processed, or
37	fabricated. However, the tax imposed by this chapter shall be
38	due on the purchase, rental, or repair of real property or
39	tangible personal property employed in research or development
40	which is subject to the tax imposed by this chapter at the time
41	of purchase or rental.
42	Section 2.  Paragraph (j) of subsection (5) of section
43	212.08, Florida Statutes, is amended, and subsection (18) is
44	added to that section, to read:
45	212.08  Sales, rental, use, consumption, distribution, and
46	storage tax; specified exemptions.--The sale at retail, the
47	rental, the use, the consumption, the distribution, and the
48	storage to be used or consumed in this state of the following
49	are hereby specifically exempt from the tax imposed by this
50	chapter.
51	(5)  EXEMPTIONS; ACCOUNT OF USE.--
52	(j)  Machinery and equipment used in semiconductor,
53	defense, or space technology production and research and
54	development.--
55	1.a.  Industrial machinery and equipment used in
56	semiconductor technology facilities certified under subparagraph
57	5. 6. to manufacture, process, compound, or produce
58	semiconductor technology products for sale or for use by these
59	facilities are exempt from the tax imposed by this chapter. For
60	purposes of this paragraph, industrial machinery and equipment
61	includes molds, dies, machine tooling, other appurtenances or
62	accessories to machinery and equipment, testing equipment, test
63	beds, computers, and software, whether purchased or self-
64	fabricated, and, if self-fabricated, includes materials and
65	labor for design, fabrication, and assembly.
66	b.  Industrial machinery and equipment used in defense or
67	space technology facilities certified under subparagraph 5. 6.
68	to design, manufacture, assemble, process, compound, or produce
69	defense technology products or space technology products for
70	sale or for use by these facilities are exempt from 25 percent
71	of the tax imposed by this chapter.
72	2.a.  Machinery and equipment are exempt from the tax
73	imposed by this chapter if used predominately in semiconductor
74	wafer research and development activities in a semiconductor
75	technology research and development facility certified under
76	subparagraph 6. For purposes of this paragraph, machinery and
77	equipment includes molds, dies, machine tooling, other
78	appurtenances or accessories to machinery and equipment, testing
79	equipment, test beds, computers, and software, whether purchased
80	or self-fabricated, and, if self-fabricated, includes materials
81	and labor for design, fabrication, and assembly.
82	b.  Machinery and equipment are exempt from 25 percent of
83	the tax imposed by this chapter if used predominately in defense
84	or space research and development activities in a defense or
85	space technology research and development facility certified
86	under subparagraph 6.
87	2.3.  Building materials purchased for use in manufacturing
88	or expanding clean rooms in semiconductor-manufacturing
89	facilities are exempt from the tax imposed by this chapter.
90	3.4.  In addition to meeting the criteria mandated by
91	subparagraph 1. or, subparagraph 2., or subparagraph 3., a
92	business must be certified by the Office of Tourism, Trade, and
93	Economic Development as authorized in this paragraph in order to
94	qualify for exemption under this paragraph.
95	4.5.  For items purchased tax exempt pursuant to this
96	paragraph, possession of a written certification from the
97	purchaser, certifying the purchaser's entitlement to exemption
98	pursuant to this paragraph, relieves the seller of the
99	responsibility of collecting the tax on the sale of such items,
100	and the department shall look solely to the purchaser for
101	recovery of tax if it determines that the purchaser was not
102	entitled to the exemption.
103	5.6.a.  To be eligible to receive the exemption provided by
104	subparagraph 1. or, subparagraph 2., or subparagraph 3., a
105	qualifying business entity shall apply initially to Enterprise
106	Florida, Inc. The original certification shall be valid for a
107	period of 2 years. In lieu of submitting a new application, the
108	original certification may be renewed biennially by submitting
109	to the Office of Tourism, Trade, and Economic Development a
110	statement, certified under oath, that there has been no material
111	change in the conditions or circumstances entitling the business
112	entity to the original certification. The initial application
113	and the certification renewal statement shall be developed by
114	the Office of Tourism, Trade, and Economic Development in
115	consultation with Enterprise Florida, Inc.
116	b.  Enterprise Florida, Inc., shall review each submitted
117	initial application and information and determine whether or not
118	the application is complete within 5 working days. Once an
119	application is complete, Enterprise Florida, Inc., shall, within
120	10 working days, evaluate the application and recommend approval
121	or disapproval of the application to the Office of Tourism,
122	Trade, and Economic Development.
123	c.  Upon receipt of the initial application and
124	recommendation from Enterprise Florida, Inc., or upon receipt of
125	a certification renewal statement, the Office of Tourism, Trade,
126	and Economic Development shall certify within 5 working days
127	those applicants who are found to meet the requirements of this
128	section and notify the applicant, Enterprise Florida, Inc., and
129	the department of the original certification or certification
130	renewal. If the Office of Tourism, Trade, and Economic
131	Development finds that the applicant does not meet the
132	requirements of this section, it shall notify the applicant and
133	Enterprise Florida, Inc., within 10 working days that the
134	application for certification has been denied and the reasons
135	for denial. The Office of Tourism, Trade, and Economic
136	Development has final approval authority for certification under
137	this section.
138	7.a.  A business may apply once each year for the
139	exemption.
140	d.b.  The initial application and certification renewal
141	statement must indicate, for program evaluation purposes only,
142	the average number of full-time equivalent employees at the
143	facility over the preceding calendar year, the average wage and
144	benefits paid to those employees over the preceding calendar
145	year, the total investment made in real and tangible personal
146	property over the preceding calendar year, and the total value
147	of tax-exempt purchases and taxes exempted during the previous
148	year. The department shall assist the Office of Tourism, Trade,
149	and Economic Development in evaluating and verifying information
150	provided in the application for exemption.
151	e.c.  The Office of Tourism, Trade, and Economic
152	Development may use the information reported on the initial
153	application and certification renewal statement for evaluation
154	purposes only and shall prepare an annual report on the
155	exemption program and its cost and impact. The annual report for
156	the preceding fiscal year shall be submitted to the Governor,
157	the President of the Senate, and the Speaker of the House of
158	Representatives by September 30 of each fiscal year.
159	6.8.  A business certified to receive this exemption may
160	elect to designate one or more state universities or community
161	colleges as recipients of up to 100 percent of the amount of the
162	exemption for which they may qualify. To receive these funds,
163	the institution must agree to match the funds so earned with
164	equivalent cash, programs, services, or other in-kind support on
165	a one-to-one basis in the pursuit of research and development
166	projects as requested by the certified business. The rights to
167	any patents, royalties, or real or intellectual property must be
168	vested in the business unless otherwise agreed to by the
169	business and the university or community college.
170	7.9.  As used in this paragraph, the term:
171	a.  "Predominately" means at least 50 percent of the time
172	in qualifying research and development.
173	b.  "Research and development" means basic and applied
174	research in the science or engineering, as well as the design,
175	development, and testing of prototypes or processes of new or
176	improved products. Research and development does not include
177	market research, routine consumer product testing, sales
178	research, research in the social sciences or psychology,
179	nontechnological activities, or technical services.
180	a.c.  "Semiconductor technology products" means raw
181	semiconductor wafers or semiconductor thin films that are
182	transformed into semiconductor memory or logic wafers, including
183	wafers containing mixed memory and logic circuits; related
184	assembly and test operations; active-matrix flat panel displays;
185	semiconductor chips; semiconductor lasers; optoelectronic
186	elements; and related semiconductor technology products as
187	determined by the Office of Tourism, Trade, and Economic
188	Development.
189	b.d.  "Clean rooms" means manufacturing facilities enclosed
190	in a manner that meets the clean manufacturing requirements
191	necessary for high-technology semiconductor-manufacturing
192	environments.
193	c.e.  "Defense technology products" means products that
194	have a military application, including, but not limited to,
195	weapons, weapons systems, guidance systems, surveillance
196	systems, communications or information systems, munitions,
197	aircraft, vessels, or boats, or components thereof, which are
198	intended for military use and manufactured in performance of a
199	contract with the United States Department of Defense or the
200	military branch of a recognized foreign government or a
201	subcontract thereunder which relates to matters of national
202	defense.
203	d.f.  "Space technology products" means products that are
204	specifically designed or manufactured for application in space
205	activities, including, but not limited to, space launch
206	vehicles, space flight vehicles, missiles, satellites or
207	research payloads, avionics, and associated control systems and
208	processing systems and components of any of the foregoing. The
209	term does not include products that are designed or manufactured
210	for general commercial aviation or other uses even though those
211	products may also serve an incidental use in space applications.
212	(18)  MACHINERY AND EQUIPMENT USED PREDOMINANTLY FOR
213	RESEARCH AND DEVELOPMENT.--
214	(a)  Machinery and equipment used predominantly for
215	research and development as defined in this subsection are
216	exempt from the tax imposed by this chapter.
217	(b)  For purposes of this subsection:
218	1.  "Machinery and equipment" includes, but is not limited
219	to, molds, dies, machine tooling, other appurtenances or
220	accessories to machinery and equipment, testing and measuring
221	equipment, test beds, computers, and software, whether purchased
222	or self-fabricated, and, if self-fabricated, includes materials
223	and labor for design, fabrication, and assembly.
224	2.  "Predominantly" means at least 50 percent of the time.
225	3.  "Research and development" means research that has one
226	of the following as its ultimate goal:
227	a.  Basic research in a scientific field of endeavor;
228	b.  Advancing knowledge or technology in a scientific or
229	technical field of endeavor;
230	c.  The development of a new product, whether or not the
231	new product is offered for sale;
232	d.  The improvement of an existing product, whether or not
233	the improved product is offered for sale;
234	e.  The development of new uses of an existing product,
235	whether or not a new use is offered as a rationale to purchase
236	the product; or
237	f.  The design and development of prototypes, whether or
238	not a resulting product is offered for sale.
239
240	The term "research and development" does not include ordinary
241	testing or inspection of materials or products used for quality
242	control, market research, efficiency surveys, consumer surveys,
243	advertising and promotions, management studies, or research in
244	connection with literary, historical, social science,
245	psychological, or other similar nontechnical activities.
246	(c)  The department may adopt rules pursuant to ss.
247	120.536(1) and 120.54 that provide for administering and
248	implementing this exemption.
249	(d)  A person who claims the exemption provided in this
250	subsection shall furnish the vendor of the machinery or
251	equipment, including the vendor of materials and labor used in
252	self-fabrication of the machinery or equipment, an affidavit
253	stating that the item or items for which an exemption is claimed
254	are machinery and equipment that will be used predominantly for
255	research and development as required by this subsection. A
256	purchaser who claims the exemption by refund shall include the
257	affidavit with the refund application. The affidavit must
258	contain the purchaser's name, address, sales and use tax
259	registration number, and, if applicable, federal employer's
260	identification number. Any person fraudulently furnishing an
261	affidavit to the vendor for the purpose of evading payment of
262	any tax imposed under this chapter shall be subject to the
263	penalty set forth in s. 212.085 and as otherwise provided by
264	law.
265	(e)  In lieu of furnishing an affidavit, a purchaser
266	claiming the exemption provided in this subsection who has a
267	direct-pay permit may furnish the vendor with a copy of the
268	direct-pay permit and shall maintain all documentation necessary
269	to prove the exempt status of the purchases and fabrication
270	activity.
271	(f)  Purchasers shall maintain all documentation necessary
272	to prove the exempt status of purchases and fabrication activity
273	and make such documentation available for inspection pursuant to
274	the requirements of s. 212.13(2).
275	Section 3.  This act shall take effect July 1, 2006.

CODING: Words stricken are deletions; words underlined are additions.