THE POWER OF PERFORMANCE 51 TH ANNUAL CONFERENCE MAY 22-25, 2018 ORLANDO, FLORIDA

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1 THE POWER OF PERFORMANCE 51 TH ANNUAL CONFERENCE MAY 22-25, 2018 ORLANDO, FLORIDA SHAKE THAT MONEY TREE! Sales Tax Savings Through Owner Direct Purchase Joanne Flick, CPPO, CPPB Purchasing Agent, City of Daytona Beach

2 THE CHURCH BUILDING FUND

3 TODAY S DISCUSSION What is an Owner Direct Purchase? When can Owner Direct Purchases be made? Why make Owner Direct Purchases? Who can make Owner Direct Purchases? How are Owner Direct Purchases be made? Where s the statutes addressing Owner Direct Purchases?

4 WHAT S AN ODP? Supplies or materials going into or becoming part of public works Purchase is made by the public entity Cost of supplies or materials included in Trade Sub-Contract

5 WHAT S AN ODP? Cost of supplies/materials, including sales tax, deducted from Trade Sub-Contract Sales tax savings accrue to public agency Not raw materials fabricated on-site by separate trade contractor

6 WHEN? Negotiated construction contracts Prime using Trade Sub-Contractors for specific portions of the work

7 OWNER FURNISHED VS. OWNER DIRECT PURCHASE Owner Furnished Specs Quotes or Bids Separate Award Delivery Terms Storage Who owns the problems? Owner Direct Purchase Market Share Relationships Flexibility Delivery Terms Who owns the problems?

8 WHY MAKE ODPS? Reduce construction cost Return funds to Owner Feed Contingency Market Share

9 WHO MAKES THE ODP? Public agencies Exempt from sales and use tax under Consumer s Certificate of Exemption NOT contractors working for public agencies

10 EXACTLY WHO IS THE PURCHASER? According to the Dept. of Revenue Direct Purchase Order Direct Invoice Direct Payment Passage of Title Assumption of Risk of Loss Obtain Insurance for loss/damage

11 HOW DO WE MAKE ODPS? Prime deducts cost of goods and tax from Trade sub-contract Agency purchases good directly from the Supplier Direct Purchase Order: to supplier with tax exempt certificate & Certificate of Entitlement

12 OWNER/AGENCY CONTRACTOR/PRIME ELECTRICAL ROOFING MECHANICAL SUB SUB SUB Wire Supplier Fixture Supplier Underlayment Supplier Membrane Supplier Duct Supplier Chiller Supplier

13 HOW DO WE MAKE ODPS? First Things First! Get a Technical Assistance Advisement from the DOR

14 THE TECHNICAL ASSISTANCE ADVISEMENT Agency petitions DOR for review of contract Request for Technical Assistance Advisement DOR evaluates, provides specific comments Certificate of Entitlement language

15 MAKING THE ODP Agency directs Contractor to supply quote from Supplier to Sub-Contractor Material/equipment cost, freight, tax, labor Contractor deducts materials + tax from Sub s sub-contract

16 MAKING THE ODP Agency deducts materials + tax from Contractor Supplier sends invoice to Agency Agency issues PO to Supplier Tax Exempt certificate Certificate of Entitlement

17 CERTIFICATE OF ENTITLEMENT With each PO Agency name Tax Exempt Number PO number Vendor Date incorporated into public facility Prime Contract Number Prime Contractor Initial all requirements Purchasing Agent signature, Title, Date, Phone, FEIN

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21 DIRECT INVOICE Prime Contractor: Orders materials Coordinates delivery Securely stores Incorporates into Work NEVERTHELESS Supplier invoices Agency

22 DIRECT PAYMENT To Supplier Public Funds Copy to Prime

23 PASSAGE OF TITLE When purchased or delivered FOB!!!

24 ASSUMPTION OF RISK OF LOSS You buy, You break, You pay Insurance Agency pays Agency benefits from claims

25 CAUTION! CAUTION! CAUTION! Contractors, including Trade contractors, that manufacture, fabricate, or furnish tangible personal property that the contractor incorporates into public works are liable for tax The contractor not the governmental entity, are deemed to be the ultimate consumers of the articles of tangible personal property they manufacture, fabricate, or furnish to perform their contracts and may not accept a Certificate of Entitlement for these articles

26 A SCARY STORY Orange County Convention Center Phase III & IV 850,000 SF $418 Million Chiller Delivered in pieces Assembled on-site

27 WHAT, AGAIN Who is ultimate consumer? Delivered in parts Assembled on-site By Supplier Agency By Prime Prime

28 MORE HOW Tracking sales tax savings Approvals of ODP s Change Orders Prime to Trade Trade to Supplier Agency to Prime

29 PO Number Vendor Description PO Amount Sales Tax Savings Total to be deducted from CM K & PO GMP $1,822,010 after change HD Supply anchor bolts $ 29, $ 1, $ 31, Fraser Millwork architectural millwork $ 120, $ 7, $ 127, HD Supply Rough Carpentry Materials $ 74, $ 4, $ 78, vendor quote shows estimated tax of $ CED Gear and Fixtures $ 41, $ 2, $ 43, verify with rev'd quote BK Fasteners Nails, fasteners, joint hangers $ 23, $ 1, $ 24, CO #1 $ 288, $ 17, $ 306, done $ 1,515, ABM Amer Bldg Materials EIFS Materials $ 16, $ 1, $ 17, CO#2 $ 16, $ 1, $ 17, done $ 1,498, YKK AP America Ext Doors $ 23, $ 1, $ 25, PGT Industries Windows $ 54, $ 3, $ 57, CO #2A $ 78, $ 4, $ 83, CO#2 TTL $ 94, $ 5, $ 100, $ 1,415, Company Roof materials $ 13, $ $ 14, Contractors Depot Jax Sto materials (stucco) $ 11, $ $ 11, Depot Jax Chg Ord #1 Cost Issue 36 $ (76.27) $ (4.58) $ (80.85) HD Supply Chg Ord #1 $ 1, $ $ 1, HD Supply Chg Ord #1 $ $ 6.63 $ HD Supply Chg Ord #2 $ $ 3.43 $ Wasco Products Skylight $ 9, $ $ 10, CO Fraser Millwork Change Order 1 $ 35, $ 2, $ 38, American Bldg. Chg Ord #1 $ (14,839.77) $ (890.39) $.5% tax surcharged on (15,730.16) initial PO CED Chg Ord #1 $ (14,714.00) $ (882.84) $.5% tax surcharged on (15,596.84) initial PO CO #3 $ 41, $ 2, $ 44, $ 1,370, TOTAL $ 1,822,010.00

30 WHERE CAN YOU FIND INFORMATION? Section Florida Statutes (Sales Tax Exemption) Rule 12A-1.038(4) Florida Administrative Code (Guidelines for claiming Sales Tax Exemption) Rule 12A (Status of tangible personal property prior to affixation to real property) Technical Assistance and Dispute Resolution (Not for requesting information regarding child support, property tax oversight, computer or system-related issues) For a binding legal opinion, write to: Technical Assistance and Dispute Resolution Florida Department of Revenue P.O. Box 7443 Tallahassee, FL

31 SUMMARY What is an ODP? When is ODP made? Why make ODP s? Who makes ODP s?

32 SUMMARY How is ODP made? Direct PO Direct Invoice Direct Payment Passage of Title Risk of Loss Certificate of Entitlement Tax Exempt Certificate

33 SUMMARY Change Orders The Ultimate Consumer Certificate of Entitlement TAA

34 QUESTIONS??