Could a utility stop taxing commercially coded electricity accounts after receiving a residential-use certificate, and could an earlier period be refunded?

Plain-English summary

Florida allowed the utility to stop collecting sales tax after it received a qualifying good-faith statement that the electricity was used solely for residential purposes, even though the accounts were coded commercial. The account's tariff classification did not override the written residential-use representation described in Rule 12A-1.053(1)(b).

Prospective treatment began with the certificate

The customer managed multiple timeshare developments. Its units were billed under commercial tariffs, but it gave the municipal utility an exemption certificate representing 100% exempt residential use. After receiving that document in good faith, the utility could stop collecting and remitting tax on those accounts.

The ruling also warned that if any electricity was used for a nonexempt purpose, the quoted household-utility provision made the entire sale taxable.

A past-period refund followed a separate process

Florida said it lacked authority to force the utility to refund its customer. If the utility chose to seek a refund from the Department, however, the claim could include periods before the certificate when the electricity was actually used for residential household purposes and the claim remained within the statute of limitations.

The Department conditioned approval on the utility first refunding the tax to its customer. The ruling discussed a requested lookback of 50 months and approximately $450,000 but did not approve that amount merely because it was requested.

What this means for you

Utilities should keep the customer's written representation, document good-faith acceptance, identify the receipt date, and separately verify any earlier period included in a refund claim. Property managers should not assume a commercial billing code automatically defeats residential treatment—or that a certificate alone proves earlier use.

Common questions

Q: Could the utility stop collecting tax after receiving the certificate?
A: Yes, if it accepted a qualifying residential-use document in good faith.

Q: Did the commercial account code control?
A: No. The ruling allowed exemption after receipt of the required writing despite that code.

Q: Did Florida require the utility to refund its customer?
A: No. The Department said it lacked authority to force a utility refund.

Q: Could a Department refund reach months before the certificate?
A: Potentially, if the earlier electricity was actually for residential household use, the claim was timely, and the utility first refunded the customer.

Citations and references

• Fla. Stat. § 212.05(1)(e) — tax on electric power
• Fla. Stat. § 212.08(7)(j) — residential household utilities
• Fla. Stat. § 212.085 — fraudulent exemption certificates
• Fla. Stat. § 215.26; Fla. Admin. Code r. 12A-1.014 — refund procedure discussed in the ruling
• Fla. Admin. Code r. 12A-1.053(1) — residential electricity and customer documentation
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 03A-053

Original ruling text

SUMMARY

QUESTION: Under Rule 12A-1.053, F.A.C, is a utility
required to issue a customer a refund that is retroactive
to the date of a customer's filing of an Exemption
Certificate evidencing that customer is purchasing power

for residential use?

ANSWER - Based on Facts Below: If the utility provider does

apply for a refund from the Department of Revenue, the
refund claim may include periods prior to the date of the
Exemption Certificate, provided the electricity purchased
during such periods was for residential household use, and
provided that the periods for which a refund is claimed are
within the statute of limitations. Please note that the

utility provider's claim for a refund will only be approved

by the Department is the utility provider first refunds the

tax to its customers.

QUESTION: May a utility taxpayer that bills customer
accounts for commercial use, consistent with its billing
policies and procedures and tariff classifications, cease
the collection of sales tax on these commercial accounts
upon receiving a writing from the customer representing
that the electric power purchased under the account is

being used solely for residential purposes?

ANSWER - Based on Facts Below: When a utility provider

accepts in good faith a document or writing that satisfies
the requirements of Rule 12A-1.053(1)(b)2., F.A.C., stating
that the power purchased is being used solely for

residential purposes, even though the account may be coded

"commercial" consistent with its billing policies and

procedures, the utility provider may discontinue collecting
and remitting sales tax on the accounts following the

receipt of that document.

Nov 10, 2003

Re: Technical Assistance Advisement 03A-053
Electricity Exemption
Sales and Use Tax
Sections 212.05, 212.08, and 212.085, F.S.
Rules 12A-1.053 and 12A-1.014, F.A.C.
XXX ("Taxpayer")

Taxpayer Identification Number: XX

Dear:

This response is in reply to your petition received July 31,

2003, requesting the Department's issuance of a Technical
Assistance Advisement pursuant to s. 213.22, F.S., and Chapter
12-11, F.A.C., regarding the above referenced matter and
parties. An examination of your petition has established that

you have complied with the statutory and regulatory requirements
for issuance of a TAA. Therefore, the Department is hereby

granting your request for issuance of a TAA.

FACTS

Your letter provides in part:

Taxpayer is a municipal utility providing electric service

to nearly 50,000 customers in City... and... County.
Taxpayer bills for such services according to its billing
policies and procedures and tariff, which tariff has been
approved by the Florida Public Service Commission (FPSC)
and is on file therewith.... Taxpayer provides service and
bills under a number of rate classifications, including (3)
classes relevant to this TAA request: (1) Residential, (2)

General Service Demand and (3) General Service.

Pursuant to its obligations under [section]
212.05(1)(e)1.d., Florida Statutes, taxpayer collects and
remits sales tax to the Department of Revenue for all
electric sales made under the non-residential rate

classifications.

On May 6, 2003, Taxpayer received an Exemption Certificate

and Indemnity Agreement For Residential Facilities with
Common Areas and 100% Exempt Usage ("Exemption
Certificate") from a customer. [Customer]'s Exemption
Certificate was signed and dated on May 5, 2003.
Accompanying the Certificate were a number of documents,
including a facsimile memorandum, a listing of accounts
entitled to exempt status, a copy of Department TAA 03A-
019, and a Department Letter of Technical Advice (LTA) 02A-
436.

[Customer], a property management company specializing in
the management of multiple time share developments, cited
TAA 03A-019 in support of its claims for on-going treatment
of the listed accounts as properties exempt from sales tax
and for a retroactive refund, refunding all sales tax

collected 50 months previous to the date of the filing of

the Exemption Certificate on May 6, 2003. The refund would
be approximately $450,000.

Consistent with its billing policies and procedures and its
Tariff, Taxpayer has billed the accounts referenced in
[Customer]'s Exemption Certificate as commercial accounts
and has collected and remitted to the Department sales tax
on all electric[ity] sales to those accounts. Taxpayer's
billing policies and procedures classify the following

activity as commercial:

"[T]he use of [a] short term rental or vacation villa
where normally leases or occupancy are less than six
months constitutes a business activity under this

[commercial] classification.”

Consistent with Taxpayer's billing policies and procedures,
the accounts referenced by [Customer] are billed under
commercial tariffs. Multiple short term rental or vacation
villa units served by one meter are billed under the
General Service Large Demand tariff.... Individually
metered short term rental or vacation villa units are

billed under the General Service tariff.

DOCUMENTS PROVIDED BY TAXPAYER

1. Taxpayer's General Policies and Procedures Governing
   Utility Service.

2. Exemption Certificate and Indemnity Agreement For

Residential Facilities with Common Areas and 100% Exempt

Usage for [Customer] ("Exemption Certificate").

A copy of TAA 03A-019.

A copy of LTA 02A-436.

A copy of TAA 00A-037.

oa Fw

Taxpayer Rate Schedule for General Service Large Demand
(GSLD).

7. Taxpayer Rate Schedule for General Service (GS).

APPLICABLE STATUTES AND RULES

Section 212.05(1)(e)1.c., F.S., imposes a sales tax on charges

for electrical power or energy at the rate of 7 percent.

Paragraph 212.08(7)(j), F.S., provides:

Household fuels.--Also exempt from payment of the tax
imposed by this chapter are sales of utilities to
residential households or owners of residential models in
this state by utility companies who pay the gross receipts
tax imposed under s. 203.01, and sales of fuel to
residential households or owners of residential models,
including oil, kerosene, liquefied petroleum gas, coal,
wood, and other fuel products used in the household or
residential model for the purposes of heating, cooking,
lighting, and refrigeration, regardless of whether such
sales of utilities and fuels are separately metered and
billed direct to the residents or are metered and billed to
the landlord. If any part of the utility or fuel is used

for a nonexempt purpose, the entire sale is taxable. The
landlord shall provide a separate meter for nonexempt

utility or fuel consumption...

Section 212.085, F.S., provides:

When any person shall fraudulently, for the purpose of

evading tax, issue to a vendor or to any agent of the state

a certificate or statement in writing in which he or she
claims exemption from sales tax, such person, in addition
to being liable for payment of the tax plus a mandatory
penalty of 200 percent of the tax, shall be liable for fine
and punishment as provided by law for a conviction of a
felony of the third degree, as provided in s. 775.082, s.
775.083, or s. 775.084.

Rule 12A-1.053(1), F.A.C., provides:

(1)(a) The sale of electric power or energy by an electric
utility is taxable. The sale of electric power or energy

for use in residential households, to owners of residential
models, or to licensed family day care homes by utilities
who are required to pay the gross receipts tax imposed by
Chapter 203, F.S., is exempt. Also exempt is electric power
or energy sold by such utilities and used in the common
areas of apartment houses, cooperatives, and condominiums,
in residential facilities enumerated in Chapter 400, F.S.,
and in other residential facilities. However, if any part

of the electric power or energy is used for a non-exempt

purpose, the entire sale is subject to tax.

(b) An electric utility is not obligated to collect and

remit tax on any sale of electric power or energy when:

1. The electric power or energy is sold at a rate based on
   the utility's "residential schedule," under tariffs filed

by the utility with the Public Service Commission; or

2. The utility has on file a writing or document evidencing

a representation of the utility's customer that the

electric power or energy is being purchased for residential
household use, including licensed family day care homes and
other facilities identified in paragraph (a). The writing

or document may be a customer application or a certificate
that identifies the customer as purchasing the electric

power or energy for a residential purpose. A "customer
application" includes a record of information obtained
electronically or orally from the customer in the ordinary

course of business. The electric utility must have acted in

good faith in accepting the representation of the customer.

(c) Tax is due on electric power or energy purchased by a
customer tax exempt for the claimed purposes of residential
household use that does not qualify for such exemption. In
such instances, if the electric utility complies with the
requirements of paragraph (b), the Department will look to
the customer for any applicable tax, penalty, or interest
due. The Department will look to the utility for any
applicable tax, penalty, or interest due when the electric
utility's books and records indicate a failure to comply

with the requirements of paragraph (b).

Rule 12A-1.014, F.A.C., provides in part:

(1) When a dealer refunds the sales, lease, or rental price
of admissions, tangible personal property, transient
rentals, real property, or services upon which tax has been
paid by the purchaser or lessee to the dealer and remitted
by the dealer to the state, the dealer shall also refund
the tax paid by the purchaser. If, in lieu of a refund of
the sale price, the dealer credits such amount on the
purchaser's account, a corresponding credit for sales tax
previously paid by the customer shall be made.

ke
(4) A taxpayer who has overpaid tax to a dealer, or who has
paid tax to a dealer when no tax is due, must secure a
refund of the tax from the dealer and not from the

Department of Revenue....

ISSUES

1. Under Rule 12A-1.053, F.A.C, is a utility required to issue
   a customer a refund that is retroactive to the date ofa
   customer's filing of an Exemption Certificate evidencing
   that customer is purchasing power for residential use?

2. May a utility taxpayer that bills customer accounts for
   commercial use, consistent with its billing policies and
   procedures and tariff classifications, cease the collection
   of sales tax on these commercial accounts upon receiving a

writing from the customer representing that the electric

power purchased under the account is being used solely for

residential purposes?

TAXPAYER POSITION

As of May 6, 2003, [the taxpayer] had treated [customer]'s
relevant accounts, for the previous 50 months (and more) as
commercial, non-exempt accounts pursuant to its previous
good faith determination that the accounts were of a
commercial and non-exempt nature. As of May 6, 2003, [the
taxpayer] is ready to treat these accounts as exempt; but
before that date, [the taxpayer] had a good faith reason

for treating these accounts as non-exempt for sales tax.

Taxpayer does not believe that Rule 12A-1.053[, F.A.C..,]
supports a refund retroactive to the date of receipt by the
Taxpayer of a customer's exemption certificate representing
exclusive residential use. The Rule addresses meeting
exemption requirements in the present tense. It does not
speak to refunds for past collections where the utility did
not have on file the written documentation required. It

does not speak to refunds for electric power that was
purchased, in the past, for unsubstantiated, uncertified

residential use....

In addition, Taxpayer believes that a utility taxpayer is
permitted to treat as exempt, on an on-going basis, those
accounts it bills as commercial once the utility has on file a
writing of the customer evidencing that such accounts purchase

electricity solely for residential use.

The taxpayer also believes that the Department has removed
electricity customers from the sales tax obligation on ongoing
electricity purchases, irrespective of the rate class the

utility has assigned for them, once such customers furnish the
utility a writing meeting the requirements set forth in Rule
12A-1.053(1), F.A.C.

RESPONSE

The Department is without statutory authority to force a utility

company to grant a refund to a customer. See Section 215.26,
F.S., and Rule 12A-1.014(4), F.A.C. However, Rule 12A-1.053,
F.A.C., was amended in 2001 to provide guidelines for when a

utility will be held liable for tax exempt sales of electricity

that is used for a nonexempt purpose. Specifically, the Rule

was amended to include the following language:

An electric utility is not obligated to collect and remit

tax on any sale of electric power or energy when:

1. The electric power or energy is sold at a rate based on

the utility's "residential schedule," under tariffs filed

by the utility with the Public Service Commission; or

2. The utility has on file a writing or document evidencing

a representation of the utility's customer that the

electric power or energy is being purchased for residential
household use... (Emphasis Supplied.) Rule 12A-1.053(1)(b),
F.A.C.

Therefore, when a utility provider accepts in good faith a
document or writing that satisfies the requirements of Rule 12A-
1.053(1)(b)2., F.A.C., stating that the power purchased is being

used solely for residential purposes, even though the account

may be coded "commercial" consistent with its billing policies

and procedures, the utility provider may discontinue collecting
and remitting sales tax on the accounts following the receipt of

that document.

Since customer's accounts are coded "commercial," based on the
taxpayer's filings with the Florida Public Service Commission,
sales of electricity to it do not meet the first criterion of

Rule 12A-1.053, F.A.C. However, customer has filed an exemption
certificate providing that "the purchaser... hereby certifies...

that... all electric energy or power purchased from [the

utility] Company... after the date of this certification... will

be exempt from Florida sales and use taxes|,]... based on Rule
12A-1.053(1)(a), F.A.C." Accordingly, since customer has filed
the required document evidencing that the electricity is being
purchased for residential household use, it would meet the

second criterion of Rule 12A-1.053, F.A.C., and the utility

would not be required to collect tax on those accounts following
the receipt of that document. If the utility provider does

apply for a refund from the Department of Revenue, the refund
claim may include periods prior to the date of the Exemption
Certificate, provided the electricity purchased during such
periods was for residential household use, and provided that the
periods for which a refund is claimed are within the statute of
limitations. Please note that the utility provider's claim for

a refund will only be approved by the Department is the utility

provider first refunds the tax to its customers.

This response constitutes a Technical Assistance Advisement
under Section 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 Section 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 advise 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., and 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 response should be received by the Department

within 15 days of the date of this letter.
Sincerely,

Kelley A. Cramer

Attorney

Technical Assistance and Dispute Resolution

KC/

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