How did Florida tax beverage carbon dioxide, tank rentals, and related delivery, fuel, hazardous-material, inspection, and property-tax charges?

Plain-English summary

The taxpayer supplied restaurants, stores, theaters, parks, and venues with CO2 for fountain drinks and either rented tanks and cylinders or delivered CO2 into customer-owned tanks.

CO2 used to carbonate drinks became a component of the finished beverage and was exempt when the customer supplied an Annual Resale Certificate. If the supplier combined CO2 and tank rental in one lump-sum charge, the entire charge was exempt under that certificate, but the supplier's own tank purchase was taxable.

If tank rental was separately stated, the rental and related delivery, fuel, hazardous-material, inspection, and tangible-property-tax charges were taxable; the supplier could buy the tank for exempt re-rental. For customer-owned tanks, fees tied to the exempt CO2 sale followed that resale treatment. Separately stated freight was nontaxable only if the purchaser could avoid it; mandatory delivery remained taxable.

What this means for you

Invoice structure changes who pays tax and on what base. Track whether the tank is separately rented, who owns it, whether the customer supplies a resale certificate, and whether delivery is genuinely optional.

Common questions

Was beverage CO2 taxable? No, when incorporated into drinks sold for resale and properly documented.

Was a separately stated tank rental taxable? Yes, along with fees imposed in connection with that rental.

Was freight taxable? Not if separately stated and avoidable solely by the purchaser; otherwise yes.

Citations and references

• Fla. Stat. §§ 212.02 and 212.05 and Fla. Admin. Code rr. 12A-1.039, 12A-1.045, 12A-1.063, and 12A-1.071, as quoted or discussed in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 10A-029

Original ruling text

SUMMARY
ISSUE: Whether carbon dioxide gas (C02), sold for use in beverage carbonation systems, used
to produce fountain sodas for resale, and the related tank rental charges and fees are subject to
sales tax.
ANSWER: Carbon dioxide gas used to carbonate soft drinks becomes a component part of the
finished product and is exempt. If Taxpayer does not separately itemize the tank rental charge
from the sale of the C02, the total lump-sum charge to the customer is not be taxable when the
customer provides an Annual Resale Certificate.
If Taxpayer separately itemizes the tank rental charge on the invoice, the tank rental charge,
including any separately stated charge imposed in connection with the tank rental charge
(delivery charge, fuel surcharge, hazardous materials fee, tank inspection fee or tangible property
tax) is taxable to the customer since the tank does not become a component part of the finished
product (fountain soda).
Separately itemized freight charges are not subject to tax if (a) the charge is separately stated on
an invoice or bill of sale and (b) the charge can be avoided by a decision or action solely on the
part of the purchaser. If the separately stated delivery charge cannot be avoided by the customer
and is therefore not an optional charge, it is subject to sales tax regardless of whether or not the
charge is separately stated on the invoice.
June 21, 2010
Re:

Technical Assistance Advisement 10A-029
Sale of C02 and Related Tank Rental Charges and Fees
Taxpayer Name: XXX
Taxpayer ID Number: XXX
Sales and Use Tax
Sections: 212.05, 212.02(16), Florida Statutes (F.S.)
Rules: 12A-1.039, 12A-1.071, and 12A-1.063, Florida Administrative Code (F.A.C.)

Dear XXX:
This response is in reply to your letter to the Department, dated September 16, 2009, received by
this office on March 10, 2010, in which you are requesting the Department's issuance of a
Technical Assistance Advisement ("TAA") pursuant to s. 213.22, F.S., and Chapter 12-11,
F.A.C., regarding the sale of carbon dioxide liquid or gas and the associated tank and cylinder
rental charges and fees. 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.

Technical Assistance Advisement
Page 2
ISSUE
Whether carbon dioxide gas (C02), sold for use in beverage carbonation systems, used to
produce fountain sodas for resale, and the related tank rental charges and fees are subject to sales
tax.
FACTS
As stated in your letter, Taxpayer is in the business of providing carbon dioxide liquid and gas
(C02) to its customers for use in beverage carbonation systems. Customers include restaurants,
convenience stores, movie theaters, theme parks, and sports venues, who in turn sell fountain
sodas to their patrons, each of whom pays sales tax as appropriate on his or her purchase of the
fountain soda.
The C02 is delivered by Taxpayer to its customers in a bulk C02 tank or high pressure cylinder.
When the liquid C02 in a bulk tank or gas C02 in a cylinder runs out, Taxpayer refills it until the
relationship with the customer terminates. Upon termination, the customer is obligated to return
the tank or cylinder to Taxpayer. Additionally, Taxpayer may also charge its customers a
separately stated tank rental charge, a delivery charge, an energy/fuel surcharge, a hazardous
materials fee (for handling hazardous materials and regulatory compliance), an inspection or
permit fee, and tangible personal property taxes.
As stated in your request for advisement, Taxpayer engages in two separate transactions. First, it
sells liquid and gas C02, and secondly, it rents tanks and cylinders. In your email dated June 8,
2010, you state that if a customer owns its own tanks, Taxpayer charges a delivery charge, a fuel
surcharge, and a hazardous materials fee.
REQUESTED ADVISEMENT
You are requesting a Technical Assistance Advisement concerning the application of sales tax to
the following:

1. The sale of C02 for use in beverage carbonation systems.
2. The rental of the bulk C02 tanks and high pressure cylinders.
3. Whether the total invoiced amount is subject to Florida sales tax if the invoice does not
   separately state the tank or cylinder rental charge from the charge for the C02.
4. Whether the following fees, charges, and surcharges are subject to sales tax:

Technical Assistance Advisement
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a.

Delivery fees for delivering C02 gas or liquid;

b.

Energy/fuel surcharge;

c.

Hazardous materials fees;

d.

Bulk C02 tank inspection fees (imposed in connection with tank rental
charge);

e.

Tangible personal property tax charge (imposed in connection with
tank rental charge).
LAW AND CONCLUSIONS

As provided in Section 212.05(1), F.S., sales tax is imposed at the rate on 6% of the sales price
of each item or article of tangible personal property sold at retail in this state. As defined in
Section 212.02(16), F.S., the term “sales price" means the total amount paid for tangible personal
property, including any services that are a part of the sale or any other expense whatsoever.
Pursuant to Rule 12A-1.039(1)(a), F.A.C., it is the specific legislative intent that each and every
sale, use, storage, consumption, or rental is taxable, unless such sale, use, storage, consumption,
or rental is specifically exempt. The exempt nature of the transaction must be established by the
selling dealer.
As provided in Rule 12A-1.039(1)(b), F.A.C., “[a] sale for resale is exempt from the tax imposed
by Chapter 212, F.S., only when the sale for resale is in strict compliance with the provisions of
this rule.” For purposes of this rule, a "sale for resale" includes “[t]he sale of tangible personal
property to a dealer when such property will be incorporated as a material, ingredient, or
component part of tangible personal property that is being produced for sale by manufacturing,
processing, or compounding.” (Subparagraph 6., emphasis added).
Pursuant to Rule 12A-1.063(12), F.A.C., carbon dioxide gas used to carbonate soft drinks and
beer becomes a component part of the finished product and is exempt. If Taxpayer does not
separately itemize the tank rental charge from the sale of the C02, the total lump-sum charge to
the customer would not be taxable when the customer provides an Annual Resale Certificate. In
this instance, Taxpayer’s initial purchase of the tank is taxable.
If Taxpayer separately itemizes the tank rental charge on the invoice, the tank rental charge,
including any separately stated charge imposed in connection with the tank rental charge
(delivery charge, fuel surcharge, hazardous materials fee, tank inspection fee or tangible property
tax) is taxable to the customer since the tank does not become a component part of the finished
product (fountain soda). In this instance, Taxpayer’s initial purchase of the tank would not be
subject to tax when purchased exclusively for re-rental. Taxpayer would issue a copy of its

Technical Assistance Advisement
Page 4
Annual Resale Certificate to the selling dealer at the time of purchase in lieu of paying sales tax
on the purchase of the tank.
In situations where Taxpayer sells C02 to customers who own their own tanks, the separately
itemized delivery charge, energy/fuel surcharge or the hazardous materials fee, imposed in
connection with sale of C02, is part of the sales price of the C02 and is not taxable when a valid
certificate of resale is received from the customer.
With regard to any separately itemized freight charges, Rule 12A-1.045(4)(a), F.A.C., states that
charges for transportation services are not subject to tax if (a) the charge is separately stated on
an invoice or bill of sale and (b) the charge can be avoided by a decision or action solely on the
part of the purchaser. If the separately stated delivery charge cannot be avoided by the customer
and is therefore not an optional charge, it is subject to sales tax regardless of whether or not the
charge is separately stated on the invoice.
This response constitutes a Technical Assistance Advisement under Section 213.22, F.S. which
is binding on the department only under 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 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 Section 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.
If you have any further questions with regard to this matter and wish to discuss them, you may
contact me directly at (850) 922-4838.
Sincerely,

Richard R. Parsons
Tax Law Specialist
Technical Assistance and Dispute Resolution

Technical Assistance Advisement
Page 5
(850) 922-4838
Control Number 80596