Did a resort's owner-read residential submeters preserve Florida's electricity exemption when the utility billed one mixed-use master meter?

Plain-English summary

The cooperative operated residential RV, mobile-home, and campground areas alongside a hotel, office, restaurant, bar, and common amenities. Its utility billed all electricity through one master meter, while the cooperative read more than 250 of its own submeters and allocated charges internally.

Florida denied the residential electricity exemption for the utility's sale. Because the master meter served both residential and nonexempt commercial uses, the entire charge was taxable unless the utility itself read the separate meters and invoiced the residential and nonexempt use accordingly.

The ruling emphasized that residential use matters, but so does the utility's separately stated sale. Internal customer-owned submetering did not divide one mixed-use utility charge into exempt and taxable purchases.

What this means for you

For a mixed-use property, internal allocation may not preserve a residential utility exemption. Separate utility metering and billing can be essential when any electricity under the billed meter serves a commercial use.

Common questions

Did the cooperative's own submeters establish an exempt portion? No.

Why was the whole bill taxable? The utility read and invoiced one master meter that served both residential and nonexempt uses.

What would have changed the result? Utility-read meters and separate invoicing that distinguished residential from nonexempt use.

Citations and references

• Fla. Stat. §§ 212.08(7)(j) and 203.01, as discussed in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 09A-027

Original ruling text

SUMMARY

QUESTION: Does the electricity that the Taxpayer purchases for residential purposes from its
utility company qualify for the sales tax exemption under Section 212.08(7)(j), F.S.?
ANSWER: No. Unless the Taxpayer's utility company reads each of the Taxpayer's sub-meters
to determine residential versus nonexempt use and invoices the Taxpayer accordingly, tax is due
to the utility company on the purchase of electricity by the Taxpayer.

June 10, 2009

XXX
XXX
XXX
XXX
Re:

Technical Assistance Advisement 09A-027
Sales and Use Tax
Electricity – Residential Sales Tax Exemption

Dear :
This response is in reply to your letter dated November 7, 2008, requesting the Department’s
issuance of a Technical Assistance Advisement (“TAA”) pursuant to Section 213.22, F.S., and Rule
Chapter 12-11, F.A.C., regarding the Department’s position on the issue described below. An
examination of your letter 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
XXX (the Taxpayer) is a resident owned cooperative that is organized as a non-profit
corporation under Chapter 719, Florida Statutes (F.S.), and operates as a family nudist resort. The
residential portion of the resort includes recreational vehicle (RV) parks, mobile homes, and
campgrounds. Common areas of the resort include pools, spas, hot tub, and other recreational
facilities. The resort also has a small hotel, office, restaurant, and tiki bar. The Taxpayer offers
various memberships for a fee to members who wish to use the resort's various common area
amenities.
The residents who own or lease mobile homes and/or RV's pay a monthly maintenance, lease, or
rental fee for the right to use the mobile home and/or RV site. These fees are based on the type of
occupancy agreement the resident has entered.

The electricity for the resort is billed under one account, by XXX, through a single primary meter.
However, over 250 sub-meters that are owned by the Taxpayer are in place throughout the grounds
of the resort. In a November 7, 2008 letter to us, the Taxpayer provided that these sub-meters, except
for about 6, are for the RV parks, mobile homes, and campgrounds. In a revised TAA request, dated
April 1, 2009, the Taxpayer stated that it has not provided separate meters for its residential and
commercial uses.
Each month, the Taxpayer reads the kilowatt hours (KWH) of electricity used for the over 250 submeters. The total amount charged by XXX is divided by the total KWH used that month to arrive at
the amount charged per KWH. The rate charged per KWH is then multiplied by the amount of
KWH used by each sub-meter to arrive at the amount the Taxpayer bills to its residents.
The Taxpayer states that it has met with XXX and asked XXX if they would separately meter and
bill the resort's commercial operations from the resort's residential operations, but XXX is not
willing to provide separate meters.
Requested Advisement
The Taxpayer requests that the Department determine if the electricity that the Taxpayer purchases
from XXX for use for residential purposes, as determined by the separate meters provided by the
Taxpayer, qualifies for the sales tax exemption under Section 212.08(7)(j), F.S.
If the Taxpayer is entitled to an exemption, the Taxpayer seeks confirmation that it be allowed to
obtain a Direct Pay Permit and accrue and remit tax due with its monthly sales and use tax return on
future electricity purchases.
Taxpayer's Position
The Taxpayer provides that XXX will not separately meter the electricity it uses for nonexempt
purposes from the electricity it uses for residential purposes.
The Taxpayer argues that when determining if a customer is entitled to the exemption provided in
Section 212.08(7)(j), F.S., the statute does not impose a requirement that the Department look to the
charge or meter the utility company provides for the sale of electricity, nor does the statute provide a
requirement as to who must own the meters. The Taxpayer further argues that it is not to whom the
electricity is sold to that the statutory exemption is concerned with, but the use of the electricity by
the occupant that is the determining factor. Therefore, the billing of electricity under a single
account by XXX does not justify denying the Taxpayer the exemption provided in Section
212.08(7)(j), F.S.
Discussion
Section 212.08(7)(j), F.S., provides an exemption for the sale of utilities by a utility company that
pays the gross receipts tax imposed pursuant to Section 203.01, F.S., to “residential households”
used for residential purposes. This paragraph also provides that if any part of the utility is used for a
nonexempt purpose, the entire sale is taxable. Thus, the statute contains three requirements for

exemption:
(1) the sale must be by a utility company that pays the gross receipts tax pursuant to Section
203.01, F.S.;
(2) the sale must be to residential households; and
(3) the utilities must be used exclusively for residential purposes.
The focus of the exemption is upon the use made of the property by the occupant, regardless of who
the utility company bills for the sale. The occupant must use the household exclusively for
residential purposes and any use for a non-exempt purpose subjects the entire sale to tax. A
"nonexempt purpose" would be the consumption of utilities in a part of the resort used for
conducting activities of a commercial nature. For example, if part of the electricity is used in the
operation of a restaurant, the entire sale of electricity through that meter is taxable. If there is one
meter for multiple "residential households" and, accordingly, only one charge for electricity and any
part of the use is for a nonexempt purpose, the entire sale is taxable. Where more than one meter
serves an entire residential facility, the use related to each meter must be individually analyzed to
determine whether the exemption applies. However, because the sale of electricity by a utility
company for residential purposes is exempt, if the charge the utility company makes for that sale of
electricity does not separately state a charge for each meter or separately invoice for each meter and
the electricity through one of the meters is used for a nonexempt purpose, the entire charge is subject
to tax.
The Taxpayer has over 250 sub-meters to separately meter its various uses of electricity. XXX does
not read these sub-meters, but reads the master meter which has electricity flowing through this
meter for both residential and nonexempt purposes. The Taxpayer has asked that XXX separately
meter its nonexempt electricity which would result in XXX reading two meters (one for nonexempt
purposes and one for residential purposes), and accordingly, issuing two separate invoices.
Unfortunately, XXX has declined the Taxpayer's request. However, because part of the electricity
through the meter that XXX reads is used for a nonexempt purpose, the sale of electricity through
that meter is subject to tax.
Conclusion
Unless XXX reads each of the Taxpayer's sub-meters to determine residential versus nonexempt use
and invoices the Taxpayer accordingly, tax is due to XXX on the sale of electricity to the Taxpayer.
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., 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.

If you have any further questions with regard to this matter and wish to discuss them, you may
contact me directly at (850)414-6107.
Respectfully,

Kimberly McCorvey
Technical Assistance & Dispute Resolution
Record ID: 54423