Was electricity used in restricted residential-condominium common areas exempt from Florida sales tax?

Subject

Purchase of Electricity Used in the Common Areas of a Residential Condominium

Plain-English summary

The association's electricity for restricted condominium common areas qualified for the residential exemption. It powered the cooling tower serving hallways, elevators, coin-operated washers and dryers, vending machines, and game machines in areas limited to owners, tenants, and guests.

The decisive conditions were residential use, restricted access, and no commercial enterprise at the condominium. The statute treated a meter with any nonexempt use as fully taxable, so an on-site commercial operation could change the result for the entire electricity sale.

What this means for you

Resident-serving amenities in private common areas can remain part of residential household use. Public-facing or independently commercial activity on the same meter presents a different tax result.

Common questions

Q: Did elevators and common-area cooling qualify? Yes.

Q: Did resident-only laundry, vending, and game machines defeat the exemption? No.

Q: Could commercial use on the same meter matter? Yes; the ruling said it could make the entire sale taxable.

Citations and references

• Fla. Stat. § 212.08(7)(j) — residential household utility exemption
• Fla. Stat. § 203.01 — utility gross receipts tax referenced by the exemption
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01A-001

Original ruling text

SUMMARY

QUESTION: Does the purchase of electricity by a condominium
homeowners association for use in its common areas qualify
for the residential exemption provided in section
212.08(7)(j)?

ANSWER - Based on Facts Below: Yes. To the extent that
access to the common areas of the residential condominium
is restricted to its owners, tenants, and guests and that
no operation of a commercial endeavor is operated at the
residential condominium, the residential exemption provided
in s. 212.08(7)(j), F.S., is applicable. The homeowners
association may purchase electricity used in its common
areas tax exempt, under the noted conditions.

Jan 04, 2001

Re: Technical Assistance Advisement 01A-001
Purchase of Electricity Used in the Common Areas of a
Residential Condominium
Section 212.08(7)(j), F.S.
Taxpayer: XXX ("Taxpayer")
FEI No.: XX

Dear :

This response is to your petition of October 26, 2000,
requesting the Department's issuance of a Technical Assistance
Advisement (TAA) pursuant to s. 213.22, Florida Statutes (F.S.),
and Chapter 12-11, Florida Administrative Code (F.A.C.),
regarding the referenced Taxpayer and matter. The Department
has carefully examined your request and supporting documents and
finds them to be in order.

BACKGROUND AND REQUESTED ADVISEMENT

Taxpayer is a condominium homeowners association consisting of

all the owners of a 166 unit residential condominium. Access to
the common areas of the condominium is controlled. Twenty-four
hour security to the condominium is provided. Taxpayer
currently receives electrical power to its residential
condominium from a local power company. The electric power
billed to the association is used to provide electricity to the
building's cooling tower used to heat and cool the hallways of
the condominium and to operate the elevators located within the
building. In addition, the electric power is also used to
operate the coin-operated washers and dryers, as well as a soft
drink machine, a snack machine, and several game machines. The
access to the areas where the machines are located is restricted
to use by owners, tenants, and guests of the facility.

You have requested that the Department provide you with a ruling
that the electricity purchased by Taxpayer for use in the areas
indicated qualifies for an exemption from sales tax pursuant to
s. 212.08(7)(j), F.S.

TAXPAYER'S POSITION

It is your position that the purchase of electricity used in the
condominium's cooling tower to heat and cool the common areas of
the condominium, to operate its elevators, and to operate coinoperated washers and dryers, as well as a soft drink machine, a
snack machine, and several game machines in the restricted
common areas, is exempt from sales tax pursuant to s.
212.08(7)(j), F.S.

LAW AND DISCUSSION

Section 212.08(7)(j), F.S., provides that electricity is not
subject to sales or use tax when sold to:

... residential households... by utility companies who pay
the gross receipts tax imposed under s. 203.01,...
regardless of whether such sales of utilities... are
separately metered and billed direct to the residents are
metered and billed to the landlord. If any part of the
utility... is used for a nonexempt purpose, the entire sale
is taxable. The landlord shall provide a separate meter

for nonexempt utility... consumption....

To qualify to receive such an exemption, the electricity, if
served through a single meter, must not be used for a nonexempt
purpose. A "nonexempt purposes," in the case of a residential
condominium, would be the consumption of electricity in a part
of the facility premises used for conducting activities of a
commercial nature.

The common areas of a condominium association may be used for
various purposes, some of which are not strictly residential.
If a nonresidential use is in conjunction with operation of the
residential households, or fills the special needs of residents,
is intended for the exclusive use of residents, and is not held
out for use by the public, that nonresidential use is considered
to be covered by the exemption. On the other hand, the
operation of a commercial endeavor is not covered by the
exemption, even if the operation takes place on the common
areas. For example, if part of the electricity is used in the
operation of an on-site banking facility, the entire sale of
electricity through that meter is taxable.

DETERMINATION

To the extent that access to the common areas of the residential
condominium is restricted to its owners, tenants, and guests and
that no operation of a commercial endeavor is operated at this
residential condominium, the residential exemption provided in
s. 212.08(7)(j), F.S., is applicable to Taxpayer's purchases of
electricity used in its common areas. Electricity purchased to
operate its cooling tower to heat and cool the common areas of
the condominium, to operate its elevators, and to operate coinoperated washers and dryers, snack machine, soft drink machine,
and game machines, are covered by the residential exemption
provided in s. 212.08(7)(j), F.S.

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S., which is binding on the Department only
under the facts and circumstances described in the request for
this advice as specified in s. 213.22, F.S. Our response is
predicated on those facts and the specific situation summarized

above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the
statutes or rules upon which this advice is based may subject
similar future transactions to a different treatment than
expressed in this response.

You are further advised that this response, your request and
related backup documents are public records under Chapter 119,
F.S., which are subject to disclosure to the public under the
conditions of s. 213.22, F.S. Confidential information must be
deleted before public disclosure. In an effort to protect
confidentiality, we request you provide the undersigned with an
edited copy of your request for Technical assistance Advisement,
the backup material and this response, deleting names,
addresses, and any other details which might lead to
identification of the taxpayer. Your request should be received
by the Department within 15 days of the date of this letter.

Sincerely,

Janet L. Young
Tax Law Specialist

/jly
Control No. 42988