Were a utility's electricity sales to a city, city agencies, and a jointly owned power plant subject to Florida gross receipts tax?

Plain-English summary

Florida concluded that the utility's electricity sales to the city, city agencies, and a jointly owned power plant were all subject to gross receipts tax. Each payment was for electricity used as a utility service rather than for a transaction excluded from gross receipts.

The taxpayer provided electric, water, and sewer services to about 600,000 accounts in the city and surrounding counties. It billed the city, city agencies, and the power plant monthly for electricity.

Government customers did not change the result

The Department answered “yes” separately for receipts from the city, its agencies, and the power plant. The ruling did not create an exclusion merely because a city or city agency bought the electricity.

Section 203.012 defined utility service to include electricity for light, heat, or power. The rule quoted in the advisement imposed gross receipts tax on payments received for those services; for the ruling period, the quoted rate was 2.5%.

Neither statutory exclusion applied

Section 203.01 excluded electricity sold to a public or private utility when:

• The electricity was bought for resale within Florida; or
• The sale was part of an electrical-interchange agreement between utilities to transfer more economically generated power.

The taxpayer confirmed that the power plant purchase met neither condition. The plant used the electricity for ordinary requirements that included heating, cooling, and lighting. Florida therefore included those receipts in the tax base, along with the city and agency receipts.

What this means for you

Electric utilities

Classify each utility-to-utility or utility-to-government sale by actual use. The buyer's identity does not establish resale or electrical-interchange treatment.

Municipal finance teams

Government ownership or agency status was not an exclusion in this ruling. Confirm whether the electricity is consumed or resold and how the supplier bills it.

Power plant operators and tax professionals

Keep contracts and usage records that distinguish facility consumption from resale electricity and qualifying economic-power interchange transactions. Verify current rates and statutory language separately.

Common questions

Q: Were electricity sales to the city taxable for gross receipts tax?
A: Yes.

Q: Were sales to city agencies treated differently?
A: No. Those receipts were also taxable.

Q: Why were power-plant sales taxable?
A: The plant consumed the electricity and the purchase was not part of the qualifying interchange arrangement described in the statute.

Q: Would every sale of electricity to another utility be taxable?
A: The ruling recognized exclusions for resale and specified electrical-interchange agreements, but neither applied to these facts.

Citations and references

• Fla. Stat. § 203.01(1), (3)(b) — gross receipts tax and the resale/interchange exclusion
• Fla. Stat. § 203.012(1) — electricity as a utility service
• Fla. Admin. Code r. 12B-6.001(1) — gross receipts from utility services
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 03A-061

Original ruling text

SUMMARY

QUESTION: Are sales of electricity made by Taxpayer to
City, City agencies and power plant subject to gross
receipts tax?

ANSWER - Based on Facts Below: Yes. The sales of
electricity described in Taxpayer's letter are sales of
utility services subject to gross receipts tax. The
definition of gross receipts does not include sales for
resale or sales that are part of an electrical interchange
agreement or contract between utilities for the purpose of
transferring more economically generated power. However,
the sales of electricity described in Taxpayer's letter are
not for resale and are not part of an electrical
interchange agreement for the purpose of transferring more
economically generated power.

Dec 18, 2003

Re: Technical Assistance Advisement 03A-061
XXX [hereinafter "Taxpayer"]
Gross Receipts Tax - Sales of Electricity
Sections: 203.01, 203.012, F.S.
Rules: 12B-6.001, F.A.C.

Dear :

This is a response to your letter of October 3, 2003, requesting
a Technical Assistance Advisement (TAA) regarding the abovereferenced matter. This response to your request constitutes a
TAA under Chapter 12-11, Florida Administrative Code (F.A.C.),
and is issued to you under the authority of Section 213.22,
Florida Statutes (F.S.).

FACTS

In your letter you state:

.... [Taxpayer] provides electric, water and sewer services
to approximately 600,000 accounts located in Jacksonville
[City] and surrounding counties. [City] previously provided
the electrical services to its residents before [Taxpayer]
was formed for that express purpose.

[City] has numerous agencies within [City] and [Taxpayer]
provides the electrical services to all of [City's]
locations. These sales are billed monthly.

[Taxpayer] and XXX [Utility], a for profit electrical
company are co-owners of the XXX [Power Park], an
electrical plant located in XXX [County]. The electrical
power that runs the [Power Park] is provided from
[Taxpayer's] other power systems located in [City]. The
sales are billed monthly to [Power Park] the same as the
sales to [City], city agencies, and other customers.

During our phone conversations on December 2, 2003, and December
4, 2003, you stated that the electricity sold to Power Park by
Taxpayer was not for resale and was not part of an electrical
interchange agreement for the purpose of transferring more
economically generated power. Rather, the electricity sold to
Power Park by Taxpayer was used for, among other things, normal
heating, cooling and lighting requirements at the Power Park.

REQUESTED ADVISEMENT

You requested three specific advisements:

Are the sales receipts received from [City] taxable for gross
receipts tax?

Are the sales receipts from [City's] agencies taxable for gross
receipts tax?

Are the sales receipts from the [Power Park] taxable for gross
receipts tax?

In your letter you state:

It has been [Taxpayer's] position that the aforementioned
sales are taxable for gross receipts tax. These sales have
been included in the taxable amount reported on the monthly
DR-133 [;] however, we desire an official reply from the
Department so we are assured of the correct tax treatment
in the future.

APPLICABLE LAW

The following statutory and administrative provisions are
relevant to the issues under advisement:

Section 203.01, F.S., provides in part:

(1)(a)1. Every person that receives payment for any utility
service shall report by the last day of each month to the
Department of Revenue, under oath of the secretary or some
other officer of such person, the total amount of gross
receipts derived from business done within this state, or
between points within this state, for the preceding month
and, at the same time, shall pay into the State Treasury an
amount equal to a percentage of such gross receipts at the
rate set forth in paragraph (b). Such collections shall be
certified by the Chief Financial Officer upon the request
of the State Board of Education.

(3) The term "gross receipts" as used herein does not
include gross receipts of any person derived from: ...

(b) The sale of electricity to a public or private utility,
including a municipal corporation or rural electric
cooperative association, for resale within the state, or as
part of an electrical interchange agreement or contract
between such utilities for the purpose of transferring more
economically generated power....

Section 203.012, F.S., provides, in part:

(1) "Utility service" means electricity for light, heat, or
power; and natural or manufactured gas for light, heat, or

power.

Rule 12B-6.001(1), F.A.C., provides in part:

(1) A tax is imposed on every person receiving payment for
any utility service at the rate of 2.5 percent on the total
amount of gross receipts derived from business done within
this state or between points within this state. Gross
receipts means total payments received in money, goods,
services, or other valuable consideration by every person
for "utility services."...

DETERMINATION

1. Are the sales receipts [from the sale of electricity]
   received from [City] taxable for gross receipts tax?

Answer: Yes.

2. Are the sales receipts [from the sale of electricity] from
   [City's] agencies taxable for gross receipts tax?

Answer: Yes.

3. Are the sales receipts [from the sale of electricity] from
   the [Power Park] taxable for gross receipts tax?

Answer: Yes.

The sales of electricity described in your letter are sales of
utility services subject to gross receipts tax. The definition
of gross receipts does not include sales for resale or sales
that are part of an electrical interchange agreement or contract
between utilities for the purpose of transferring more
economically generated power. However, the sales of electricity
described in your letter are not for resale and are not part of
an electrical interchange agreement for the purpose of
transferring more economically generated power.

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 requests
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 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., 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,

Vincent C. Aldridge
Attorney
Technical Assistance & Dispute Resolution

Control #57099
VCA/