Know The Florida Facts Before You File Your Tax

There has been a longstanding Florida sales tax exemption for food, however that exemption was limited to specific categories and types of food and did not extend to all food sales. In a restaurant setting, all food purchases would be exempt from Florida sales and use tax because of the intent to resell the food to its customers. In healthcare facilities, as well as other types of facilities that provide food services to the individuals occupying them, the line of demarcation between who is the ultimate consumer of the food can be more complex. Agile Consulting Group’s sales tax consultants have received a ruling from the Florida Department of Revenue that entitles facilities that furnish meals to individuals housed within them to make non-taxable purchases of all food under an expanded interpretation of the Florida sales tax exemption for food.

Section 212.08(1), F.S. provides a sales and use tax exemption for food products for human consumption, however, the extent of that exemption is limited by the caveats provided within subparagraph (c). For example, meats, cheese and bread bought independently are considered non-taxable, while prepared combinations of meats, cheese and bread are considered to be taxable as “sandwiches for immediate consumption.” This example is merely one of the thirteen limitations on the Florida sales tax exemption for food for human consumption. Other notable exceptions include soft drinks and other canned beverages, bakery products, and ice cream.

Effective June 9, 1995, a Florida sales and use tax exemption for hospital meals can be found in Section 212.08(7)(i), F.S., and while the title appears to restrict the exemption to hospital facilities only, a more in-depth reading of the exemption expands its scope.

(i) Hospital meals and rooms. — Also exempt from payment of the tax imposed by this chapter on rentals and meals are patients and inmates of any hospital or other physical plant or facility designed and operated primarily for the care of persons who are ill, aged, infirm, mentally or physically incapacitated, or otherwise dependent on special care or attention. Residents of a home for the aged are exempt from payment of taxes on meals provided through the facility. A home for the aged is defined as a facility that is licensed or certified in part or in whole under chapter 400, chapter 429, or chapter 651, or that is financed by a mortgage loan made or insured by the United States Department of Housing and Urban Development under s. 202, s. 202 with a s. 8 subsidy, s. 221(d)(3) or (4), s. 232, or s. 236 of the National Housing Act, or other such similar facility designed and operated primarily for the care of the aged.

As the Florida Department of Revenue is wont to do, it adopted a Rule within the Florida Administrative Code, to clarify upon the exemption drafted by the Florida Legislature. This Rule 12A-1.0115(11), F.A.C., addresses and further clarifies the exemption found in Section 212.08(7)(i), F.S. and states,

(11) Hospitals and homes for the aged.

(a) Meals furnished to residents of homes for the aged, as defined in section 212.08(7)(i), F.S., are exempt.

(b) Meals furnished to patients and inmates of any hospital or other institution designed and operated primarily for the care of persons who are ill, aged, infirm, mentally or physically incapacitated, or for any reason dependent upon special care or attention are exempt.

(c) Meals sold and delivered as a charitable function by a nonprofit volunteer organization to handicapped, elderly, or indigent persons at their residences are exempt.

Although the Rule was intended to clarify the Florida sales tax exemption for food, in our work with Florida healthcare organizations, Agile’s sales tax consultants identified that confusion nevertheless existed about what qualified for the exemption. Our sales tax consultants found that many food distributors were erroneously billing sales tax to healthcare facilities and those facilities were often paying it either unknowingly or unquestioningly.

In response to this reality, Agile’s sales tax consultants submitted a request to the Florida Department of Revenue for a Letter of Technical Advice (“Florida Sales and Use Tax LTA”). Within that request, Agile’s sales tax consultants shared the common facts involving these purchases, outlined 14 different types of facilities or entities we believed should qualify for the Florida sales tax exemption for food and shared our position as to why purchases of all food products made by these organizations should fall within the interpretation of this exemption.

Agile received a response from the Technical Assistance and Dispute Resolution (“TADR”) section of the Florida Department of Revenue that confirmed their attorneys agreed with our interpretation of the Florida sales tax exemption for food.

What does this mean for Florida taxpayers?

In essence, this means that certain healthcare organizations and facilities can now purchase all food products exempt from Florida sales and use tax. Furthermore, not only does this exemption take effect on all future purchases, it also allows for recoveries of any taxes collected in error by food distributors, or remitted as use tax directly to the Florida Department of Revenue.

This expansion of the Florida sales tax exemption for food is yet another example of the forward, outside-the-box thinking Agile Consulting Group’s sales tax consultants demonstrate on a regular basis in their efforts to make sure that our clients

Additionally, opportunities to take advantage of other Florida sales and use tax exemptions exist for many healthcare facilities. Which other exemptions those facilities may qualify for is largely dependent upon the level of care required by the patients or residents. Those facilities where the residents require a higher level of care will make a larger volume of purchases that qualify for the other medical exemptions including prescription-required, single-use medical items, or medical gases. There are also other Florida sales and use tax exemptions that would apply to all facilities, including the software used in operations or financial reporting of the business.

Have a question? Contact Aaron Giles, Agile Consulting Group.