Did a natural-gas pipeline license qualify for Florida's utility right-of-way rent-tax exemption?

Plain-English summary

A pipeline operator licensed county property to construct and operate a natural-gas pipeline. The licensed premises included temporary work areas required for construction, and the operator paid both an annual license charge and an additional amount for those work areas.

Florida concluded that all of the premises, including the temporary work areas, fit the meaning of a right-of-way occupied or used for utility purposes. A 2005 statutory amendment expanded "utility service," effective January 1, 2006, to include transportation, delivery, transmission, and distribution of natural or manufactured gas.

Because the licensee provided that utility service, charges paid under the agreement on or after January 1, 2006, qualified for the sales-tax exemption for utility rights-of-way.

What this means for you

The result depended both on the property's right-of-way use and on the effective date of the expanded utility-service definition. The ruling grants the exemption only for agreement charges paid on or after January 1, 2006.

Common questions

Did the temporary construction area count as part of the right-of-way? Yes. Florida included the identified temporary work area within the qualifying premises.

Why did the pipeline operator qualify as a utility? Effective January 1, 2006, the utility-service definition included natural-gas transportation, delivery, transmission, and distribution.

When did the agreement charges qualify? Charges paid on or after January 1, 2006.

Citations and references

• Fla. Stat. § 212.031(1)(a)5. (utility right-of-way exemption)
• Fla. Stat. § 203.012(3) (utility service definition)
• Chapter 2005-148, Laws of Florida (natural-gas transportation amendment)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 05A-044

Original ruling text

SUMMARY
QUESTION: The issues are: (1) whether real property licensed for the purpose of constructing and operating a natural
gas pipeline is exempt from tax as a public or private right-of-way occupied or used by a utility, pursuant to section
212.031(1)(a)5., F.S.; and (2) whether Licensee is a "utility" within the meaning of the exemption provided.
ANSWER - Based on Facts Below: The Department agrees that the Premises, including that portion identified as
"Temporary Work Area," fit within the definition of a "right-of-way," occupied or used by a utility for utility purposes.
Section 212.031(1)(a)5., F.S., provides relief from the sales tax on licenses to use real property for any property which
is a right-of-way used by a utility for utility purposes. For purposes of the exemption, "utility" means any person
providing utility services as defined in section 203.012, F.S. The term "utility service" is currently defined in section
203.012(3), F.S., as "electricity, for light, heat, or power; and natural or manufactured gas." With the enactment of
chapter 2005-148, L.O.F., the term "utility service" is amended, effective January 1, 2006, to include "transportation,
delivery, transmission, and distribution of electricity or natural or manufactured gas."
Pursuant to the definition of "utility service," Licensee falls within the definition of a "utility" for purposes of the
exemption provided in section 212.031(1)(a)5., F.S., and the Department agrees that charges paid by Licensee under
the Agreement on or after January 1, 2006, are entitled to the exemption provided from sales tax under section
212.031(1)(a)5., F.S.

October 25, 2005

Re: Technical Assistance Advisement 05A-044
Sales and Use Tax - Pipeline License Agreement
Section 212.031(1)(a)5., (c), (3), F.S.
Section 212.02(10)(h), (i), (12), F.S.
Section 203.012(3), F.S.
Section 2, Chapter 2005-148, L.O.F.
XXX ("Licensee") ("Petitioner")
EIN: XX
XXX("County")
Dear:
This is a response to your letter dated XX, requesting the issuance of a Technical Assistance Advisement (TAA)
concerning the above referenced party and matter. Your letter and supporting documents have been carefully
examined, and the Department finds your request to be in compliance with the requisite criteria set forth in Chapter
12-11, F.A.C. This response to your request constitutes a TAA, and is issued to you under the authority of section
213.22, Florida Statutes.

Issues
The issues are: (1) whether real property licensed for the purpose of constructing and operating a natural gas pipeline
is exempt from tax as a public or private right-of-way occupied or used by a utility, pursuant to section 212.031(1)(a)5.,
F.S.; and (2) whether Licensee is a "utility" within the meaning of the exemption provided.
Facts
Your letter provides the following facts:
Pursuant to 15 U.S.C. Sections 717b and 717f(c), on January 29, 2004, as amended on May 11, 2005, the FERC
[Federal Energy Regulatory Commission] issued its Certificate authorizing [Licensee] to construct and operate a
natural gas pipeline and ancillary facilities along a designated route that ends in south Florida, subject to specified
construction methods. The Certificate was issued by FERC pursuant to Sections 3 and 7(c) the Natural Gas Act, 15
U.S.C. Sections 717b and 717f(c). As a condition of securing the Certificate, [Licensee] was required to submit a
detailed application for the pipeline project. The FERC prepared a Final Environmental Impact Statement ("FEIS") for
the project, as part of its review of [Licensee's] application, that identifies the proposed route of the pipeline and the
attendant lands required for permanent right-of-way, construction or temporary right-of-way, and lands required for
construction spoil storage, staging, equipment movement and materials stockpiles. The Certificate approved by FERC
adopted the findings and conclusions of the FEIS, including the identification of the lands required for construction and
operation of the pipeline consistent with the standards required under the Certificate.
[Licensee], in furtherance of the construction and operation of the pipeline authorized by the FERC Certificate, has
secured from [County] a license to use certain real property ("Premises") to "lay, construct, test, operate, inspect,
maintain, monitor, replace, repair, alter and remove one natural gas pipeline with associated valves and connections,
including cathodic protection equipment and telecommunications facilities for the transmission of gas and associated
condensates under such Premises."... A portion of the Premises is further defined as "Temporary Work Areas" to be
used in the construction of the pipeline pursuant to construction methods specifically required under the FERC
Certificate.... The Premises described in the Agreement, including the Temporary Work Areas, are those described in
the FEIS.
Use of the Premises described in the Agreement by [Licensee] is expressly limited to use for the natural gas
pipeline.... [Licensee] is required to pay an annual license for the use of the Premises.... [Licensee] is required to pay
an additional amount for the use of the Temporary Work Areas.... The charges for use of these rights of way are the
charges at issue in this request for a Technical Assistance Advisement.
You further state:
The term "right-of-way" is not defined in the sales tax statute or Department of Revenue ("DOR") rules. However,
shortly after the license tax and this exemption were enacted in 1986, the DOR was asked to issue an opinion
regarding what constitutes right-of-way for purposes of the exemption in Section 212.031, Florida Statutes. The DOR

issued Technical Assistance Advisement 87A-008, which defined right-of-way to include the access granted to a pay
telephone company to install pay phones on the property of third parties. The DOR agreed that rights-of-way were not
limited to road rights-of-way, but were agreements for access and use of real property. This 1987 ruling provides
DOR's contemporaneous interpretation of the then recently-enacted 1986 law. That interpretation is consistent with a
recognized common law definition of right-of-way. Territory of New Mexico v. United States Trust Co. 172 U.S. 171, 19
S.Ct. 128, 43 L.Ed. 407 (1898).
As previously noted, the FERC Certificate authorizing the [Licensee] pipeline adopts the findings in the [Licensee]
application that identify the lands required to construct and operate the pipeline. [Licensee] has entered an Agreement
with a landowner to secure access to those lands (the Premises) in order to execute the pipeline project consistent
with the location and construction terms pursuant to which the Certificate was issued. (Possession of a Certificate
triggers the right of eminent domain in the event that a pipeline cannot acquire by contract the lands necessary to
construct and operate the pipeline. In this case, exercise of such a right was not necessary because the landowner
and [Licensee] reached a contractual agreement for use of the Premises.) Therefore, the landowner's grant of access
to and use of the Premises fits within the DOR's prior interpretation of right-of-way and the common law understanding
of what constitutes right-of-way.
You also cite the amendment to section 203.012., F.S., enacted by the 2005 Legislature, which broadened the
existing definition of "utility service" to include "transportation, delivery, transmission, and distribution of electricity or
natural or manufactured gas," and assert that: "As a result of this change, natural gas transportation is again classified
as a 'utility service' for purposes of not only for gross receipts tax, but for purposes of Section 212.031."
Taxpayer's Position
... [B]ecause the Premises fit within the definition of "right-of-way" previously provided by the DOR and recognized
under common law, and because they are the subject of the FERC Certificate, and because the transportation of
natural gas now constitutes a "utility service" for purposes of the exemption, we believe that the charges paid by
[Licensee] under the Agreement are entitled to the exemption from sales tax set forth in Section 212.031(1)(a)5.,
Florida Statutes....
Applicable Law and Discussion
Section 212.031(1)(a), F.S., states the legislative intent that every person is exercising a taxable privilege who
engages in the business of renting, leasing, letting, or granting a license for the use of any real property. For the
exercise of such privilege, a tax is levied at the rate of 6 percent on the total rent or license fee charged, and includes
base rents, percentage rents, or similar charges. Section 212.031(1)(c), F.S.
Pursuant to section 212.031(3), F.S., the tax shall be collected by the lessor or person receiving the rental or license
fee, and shall be due at the time of receipt of the rental or license fee by the lessor or person receiving the rental or
license fee.
Section 212.02(12), F.S., provides in part:

(12) "Person" includes ... any political subdivision, municipality, state agency, bureau, or department and includes the
plural as well as the singular number.
Section 212.02(10)(i), F.S., provides:
(i) "License," as used in this chapter with reference to the use of real property, means the granting of a privilege to use
or occupy a building or a parcel of real property for any purpose.
The term "real property" is defined in section 212.02(10)(h), F.S.:
(h) "Real property" means the surface land, improvements thereto, and fixtures, and is synonymous with "realty" and
"real estate."
Section 212.031(1)(a), F.S., contains enumerated exceptions from the tax imposed. One such exception is provided in
subparagraph 5. for:
A public or private street or right-of-way and poles, conduits, fixtures, and similar improvements located on such
streets or rights-of-way, occupied or used by a utility... for utility... purposes. For purposes of this subparagraph, the
term "utility" means any person providing utility services as defined in s. 203.012....
Section 203.012(1), F.S., provides:
"utility service" means electricity for light, heat, or power; and natural or manufactured gas for light, heat, or power.
The 2005 Florida Legislature enacted chapter 2005-248, Laws of Florida, to amend sections 203.01 and 203.012, F.S.
Section 2 of the chapter law defines the term "Utility service," as follows:
(3) "utility service" means electricity for light, heat, or power; and natural or manufactured gas for light, heat, or power,
including transportation, delivery, transmission, and distribution of the electricity or natural or manufactured gas. This
subsection does not broaden the definition of utility service to include separately stated charges for tangible personal
property or services which are not charges for the electricity or natural or manufactured gas or the transportation,
delivery, transmission, or distribution of electricity or natural or manufactured gas.
Pursuant to section 5, chapter 2005-246, L.O.F., section 2 of the law takes effect January 1, 2006.
Although the legislature did not define the term "right-of-way" for purposes of the exemption contained in section
212.031(1)(a)5., F.S., the term has been defined in Florida Statutes, in other contexts.
Section 177.031(16), F.S., defines the term, for purposes of land boundaries, to mean "land dedicated, deeded, used,
or to be used for a street, alley, walkway, boulevard, drainage facility, access for ingress and egress, or other purpose
by the public, certain designated individuals, or governing bodies." Section 403.503(24), F.S, defines the term, for
purposes of environmental control relating to the Florida Electrical Power Plant Siting Act, to mean "land necessary for

the construction and maintenance of a connected associated linear facility, such as a railroad line, pipeline, or
transmission line."
Further, section 403.9403, F.S., which provides definitions for purposes of environmental control relating to the
Natural Gas Transmission Pipeline Siting Act, provides, in subsection (18):
"Natural gas transmission pipeline right-of-way" or "pipeline right-of-way" means land necessary for the construction
and maintenance of a natural gas transmission pipeline.
Where the Legislature uses exact words or phrases, though in different statutory provisions, it may be assumed that
they were intended to mean the same thing. Fla. Jur. 2d Statutes s. 133.
The term "right-of-way" used in s. 212.031(1)(a)5., F.S., with no distinguishing gloss or definition, must be used in the
common sense meaning. Pederson v. Green, 105 So.2d 1 (Fla. 1958). Adherence to that principle is required
because the legislature is presumed to know the plain and ordinary meaning of the terms it uses and if other than the
plain meaning is intended, the legislature has the power to define the term used. Brooks v. Anastasia Mosquito
Control District, 148 So.2d 1239, 1242 (Fla. 4th DCA 1976).
The courts have determined that the term "right-of-way" does not necessarily mean a legal and enforceable
incorporeal right such as an easement. The term has been construed to mean not only a right of passage over the
land of another, but it is also used to describe the strip of land on which an existing road is located. Lovey v. Escambia
County, 141 So.2d 761 (Fla. DCA 1962).
Conclusion
Licensee has an agreement with County to use certain real property ("Premises") to "lay, construct, test, operate,
inspect, maintain, monitor, replace, repair, alter and remove" a natural gas pipeline. The Department agrees that the
Premises, including that portion identified as "Temporary Work Area," fit within the definition of a "right-of-way,"
occupied or used by a utility for utility purposes.
Section 212.031(1)(a)5., F.S., provides relief from the sales tax on licenses to use real property for any property which
is a right-of-way used by a utility for utility purposes. For purposes of the exemption, "utility" means any person
providing utility services as defined in section 203.012, F.S. The term "utility service" is currently defined in section
203.012(3), F.S., as "electricity, for light, heat, or power; and natural or manufactured gas." With the enactment of
chapter 2005-148, L.O.F., the term "utility service" is amended, effective January 1, 2006, to include "transportation,
delivery, transmission, and distribution of electricity or natural or manufactured gas."
Pursuant to the definition of "utility service," Licensee falls within the definition of a "utility" for purposes of the
exemption provided in section 212.031(1)(a)5., F.S., and the Department agrees that charges paid by Licensee under
the Agreement on or after January 1, 2006, are entitled to the exemption provided from sales tax under section
212.031(1)(a)5., 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 from that which is 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,
Dee Overcash
Technical Assistance and Dispute Resolution
Control No. 16524