Were separately stated electric-utility charges for transformers subject to Florida sales tax or gross receipts tax?

Plain-English summary

Three electric utilities charged customers for transformers and other equipment. Florida ruled that the tax treatment turned on the equipment's use, its location relative to the electricity point of delivery, and whether the equipment charge was separately stated.

A separately stated charge for a transformer on the customer's side of the point of delivery was a lease or license of tangible personal property. It was subject to sales tax and was not part of gross receipts from selling electricity, because the electricity had already been delivered.

Equipment used to provide electricity on the utility's side of the point of delivery produced a facility charge subject to gross receipts tax, with the TAA stating that sales tax might or might not also apply. If a customer-side equipment charge was not separately stated from utility service, it became part of gross receipts subject to gross receipts tax. Whether the equipment was optional to the customer did not control the analysis.

What this means for you

Electric-utility billing cannot classify an equipment charge by its name alone. Map the equipment to the legally defined point of delivery, identify whether it participates in delivering electricity, and show the equipment charge separately when it is customer-premises property.

Common questions

How were separately stated customer-side transformer charges taxed? They were subject to sales tax, not gross receipts tax.

What about utility-side transformers used to deliver power? Their charges were subject to gross receipts tax, and the ruling did not categorically resolve sales tax for every such charge.

Did it matter whether the equipment was optional? No. The Department rejected optionality as the controlling test.

Citations and references

• Fla. Stat. §§ 203.01, 203.012, and 212.05 and Fla. Admin. Code rr. 12A-1.053, 12B-6.001, and 12B-6.0015, as quoted or discussed in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 11A-006

Original ruling text

SUMMARY
QUESTION: When an electric utility provides equipment that is not required as a
condition of receiving electricity from the electric utility, and such charges are separately
stated on the customer’s bill, are the charges subject to sales and use tax, gross receipts
tax, or both.
ANSWER: When equipment (transformers, etc.) that is on the customer’s side of the
point of delivery of electricity and such charge is separately stated on the customer’s
invoice: 1) the charge is for the lease or license to use such property and is subject to sales
tax; and 2) the charge is not for the sale of electricity and is not subject to gross receipts
tax.
April 6, 2011
XXX
XXX
XXX
Re:

Technical Assistance Advisement 11A-006
Transformer Rentals by Electric Utilities
XXX dba XXX
FEIN XXX
XXX
FEIN XXX
XXX*
FEIN XXX

• Jointly referred to as “the electric utilities” or “the Taxpayers”
  Sales and Use Tax and Gross Receipts Tax
  Sections 203.01, 203.012, 212.05 and 213.22, Florida Statutes (F.S.)
  Rules 12A-1.053 and 12B-6.001, Florida Administrative Code (F.A.C)

Dear XXX:
This response is in reply to your letter dated November 16, 2009, as it revises the letter of
October 12, 2006, 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 of transformers rented by electric
utilities. 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.

Technical Assistance Advisement
Page 2 of 13
Taxpayers seek this ruling at this time because of uncertainty regarding the proper tax
treatment of transformers whereby the Taxpayers provide transformers to their customers.
This uncertainty arises as a result of the Department of Revenue’s relative recent issuance
of a ruling to another utility in which the Department appears to have altered a prior
ruling on the proper classification of transactions in which equipment is provided to
customers of electric utilities. The uncertainty also arises as a result of conflict between
published rulings of the Department and the Department’s past audit practice relative to
such transactions performed by electric utilities who are requesting this ruling.
REQUESTED RULINGS

1. When an electric utility provides to a customer optional equipment that is not
   required as a condition of receiving electricity from the electric utility, and the
   charges for such equipment are separately stated on the customer’s bill, the
   transaction is properly classified as the sale or lease or license to use tangible
   personal property for Chapter 212 purposes. As such, sales tax applies to the
   charges for such equipment unless the customer is entitled to an exemption from
   tax.
2. When an electric utility provides to a customer optional equipment that is not
   required as a condition of receiving electricity from the electric utility, and the
   charges for such equipment are separately stated on the customer’s bill, the
   transaction is properly classified as the sale or lease or license to use tangible
   personal property and not the sale of electricity for Chapter 203 purposes. As
   such, gross receipts tax does not apply to the charges for such equipment.
3. If the Department determines that the use of “facilities” terminology in the tariff
   and/or billing results in taxation of the charges of “electricity please confirm that
   elimination of such terminology would result in a determination that such charges
   are not taxable.
   “

FACTS
As presented by the Taxpayers

The [transformers], at issue in this TAA request, that [are] provided by the three
electric utilities to their customers is similar and it appears to mirror some of the
equipment described in [former] TAAs . . . [issued by the Department. The
transformers] . . . are not required in order for the electric utility to provide electric
energy to the customer, but are used to alter the method by which electric energy
is provided to or consumed by the customer. It is “optional” in the sense that it is
not essential to delivery of electricity to the customer. A customer can still receive
electricity from the electric utility without acquiring [the transformer]. Similarly
situated customers do in fact receive electricity from the electric utilities without
securing such equipment [from the utility].

Technical Assistance Advisement
Page 3 of 13
The [transformers] at issue generally [are] provided pursuant to written
agreements between the electric utilities and its customers. Such agreements are
described variously as “facilities rental agreements,” “facilities rental service
agreements,” or otherwise use the word “facilities” in reference to the equipment.
. . . [The transformers] typically serves a single customer. The agreements for
provision of the equipment typically have a multi-year term. . . . [The transformers
are] not installed absent a request from the customer. . . .
The amounts that can be charged for the rental of the [transformers] are
established in the tariffs of the electric utilities, and generally relate to the installed
cost of the additional equipment. The tariffs describe the activity of providing the
[transformers] variously, with terminology such as the furnishing of “additional
equipment” or as “equipment rental” or “facilities rental.” . . . Amounts collected
from customers for rental of such additional equipment are separately itemized on
the customer’s bill and typically described with words such as “equipment rental,”
“facilities rental,” or “distribution equipment lease.” The revenues are booked for
utility regulatory purposes in account 454. which is entitled “rental of electric
property.”’
Although the [transformers] at issue for purposes of this TAA would be provided
by the electric utilities, it is possible that [the transformers] could be provided by
third-party vendors who are not regulated electric utilities. Also, it is possible that
some of the additional equipment could be purchased by the customers from the
utilities in lieu of renting the equipment. There are situations in which the
customer owns, operates, and maintains the same type of equipment that is at
issue here.
Some of the [transformers] are located on customer’s premises. . . . In all cases,
“but for” the order placed by the customer, the [transformer] would not be
provided, but the customer would still be able to obtain electricity from the utility.
As a general rule, the [transformer] owned by an electric utility and rented to a
customer is installed and maintained by the electric utility pursuant to contractual
arrangements with the utility’s customer. . . .
.

TAXPAYERS ARGUMENT

Sales and Use Tax
TAA 04A-059 considered the taxability of charges for “special equipment and
related services” provided by an electric utility to its customer, referred to therein
as “facilities” which are “required beyond the normal delivery of electric energy.”
Therein the Department, reversing the position it had taken previously in TAA
97A-032, declared that “facilities charges imposed by a utility are charges for the
provision of electric energy” and “therefore subject to sales tax and to gross

Technical Assistance Advisement
Page 4 of 13
receipts tax.” The Department cited no legal authority in support of its conclusion
that charges for facilities were charges for electrical power or energy and subject
to sales tax as such. Taxpayers herein respectfully disagree with that conclusion
and posit that such transactions instead constitute the rental of tangible personal
property.
Admittedly, sales tax applies to charges for “electrical power or energy.” Fla. Stat.
212.05(1)(e). The tax applies at the rate of 7%, but residential customers are
exempt from the tax. Taxpayers routinely collect and remit sales tax on sales of
electricity to non-residential customers.
Neither the statutes nor rules define “electrical power or energy.” Thus the statute
must be given its plain meaning. The primary consideration in the construction
and interpretation of tax statutes is to ascertain and give effect to legislative intent,
determined primarily from the language of the statute. DOR v. James B. Pirtle
Const. Co., Inc., 690 So.2d 709, 711 (Fla. 4th DCA 1997). The dictionary defines
“electrical power” as “the product of voltage and current,” and “energy” as
“usable heat or power.” Dictionary.com. The optional equipment at issue herein
does not fit within either definition.
As the Department is aware, taxing statutes, as a rule, are strictly construed so all
doubts or ambiguities are resolved in favor of the taxpayer. Metropolis Pub. Co. v.
Lee 170 So. 442, 444 (Fla. 1936). To be sustained, a tax must be clearly
authorized by the express terms of the statute. Id. “The courts are not taxing
authorities and cannot rewrite the statute.” Mikos v. Ringling Bros -Barnum &
Bailey Combined Shows, Inc., 497 So.2d 630, 632 (Fla. 1986). Taxing authority
must be applied as written by the legislature and “should not be broadened by
semantics.” State v. City of Port Orange, 650 So.2d 1, 3 (Fla. 1994). Thus, it
would appear that classifying separately-stated charges for optional equipment as
“electrical power” or “energy” for purposes of taxing them as such would
constitute over-reaching by the state.
In contrast, Section 212.05, Florida Statutes, imposes sales and use tax on sales
and rentals of tangible personal property. Section 212.02(15)(a), Florida Statutes,
defines “sale” to include a transfer of title or possession or both, along with a
license, lease or rental of tangible personal property. Rule 12A-1.071(1)(b),
Florida Administrative Code, describes transfer of possession under an operating
lease as including “the right to use and control or direct the use of the property.”
As explained, the equipment at issue is specific to a single customer, it is placed in
service only at the direction of that customer, and it remains in use subject to the
direction of that customer pursuant to a contract with that customer. The
equipment is not electrical power or energy that is sold to the customer, but
tangible personal property that is rented to the customer, and the only Chapter 212
tax that applies is the tax on such rentals.

Technical Assistance Advisement
Page 5 of 13
As previously noted, the electric utilities who are requesting this ruling have
classified these equipment transactions as rentals of tangible personal property. As
such, they have collected sales tax on the charges for such rentals unless the
customer at issue documents entitlement to a sales tax exemption on the rental.
This practice has not been challenged during regular and routine audits undertaken
by the Department, and taxpayers respectfully submit that the Department’s
acceptance of this practice was legally correct and proper under the sales tax law.
Gross Receipts Tax
The gross receipts tax imposed by Chapter 203, Florida Statutes, applies to [gross
receipts from] “electricity for light, heat or power, including transportation,
delivery, transmission, and distribution of electricity,” but “does not include
separately stated charges for tangible personal property or services which are not
charges for the electricity ….or the transportation, delivery, transmission, or
distribution of electricity.” . . . Fla. Stat[.] 203.012(3). . . . [T]he law also includes
a statement that “gross receipts subject to the tax imposed by this section for the
provision of electricity shall include receipts from monthly customer charges or
monthly customer facility charges.” However, history of this language, coupled
with the express legislative direction contained within the law enacting this
language, must be considered to avoid an overly-broad interpretation of the
provision.
As previously explained, the equipment at issue is optional. It need not be
provided to the customer as a condition of delivery to the customer of electricity
for light, heat or power. It is not required to generate, transmit, distribute or
deliver electricity to the end customer. The equipment simply alters the method by
which such electricity is received by the customer. As such, the equipment itself is
not electricity for light, heat or power, or the service of delivery, transmission or
distribution of the electricity to the customer’s [point of delivery], all of which can
occur without the equipment. TAA 04-059 does not argue otherwise.
In TAA 04A-059, the Department relied upon Section 203.01(7), Florida Statutes,
as the basis for determining that the equipment charges at issue therein were for
the provision of electric energy. Section 203.01(7), while providing that gross
receipts from certain charges described as “monthly customer charges” or
“monthly customer facility charges” are subject to gross receipts tax, does not
define those charges as “electricity for light, heat or power.” In fact,, it does not
define those terms at all and, unlike terms such as “electricity” and “electric
power” and “energy,” which have a commonly-understood meaning, the phrases
used in Section 203.01(7) are ambiguous.

Technical Assistance Advisement
Page 6 of 13
However, legislative history demonstrates the intent of the Legislature in enacting
Section 203.01(7) (which at that time was numbered as subsection (8)). This
language was added to Section 203.01 in 1991, pursuant to Chapter 91-112, [Laws
of Florida]. Section 12 of that chapter law states:
It is the intent of the Legislature that subsection (8) that is added to section
203.01, Florida Statutes, by this act is remedial legislation intended to
clarify the application of the tax, both under current law and under the law
as it existed prior to the enactment of chapter 90-132, Laws of Florida. It is
not the intent of the Legislature to change the definition of gross receipts
under current law or to tax gross receipts that have not previously been
subject to tax.
This language was added in the aftermath of a settlement of litigation between the
Department of Revenue and the electric utilities who are requesting this ruling.
The litigation involved a dispute regarding application of gross receipts tax to
customer charges including service drops to the customer’s point of delivery, the
customer meter, customer accounting and information costs related to plant
accounts 369 (services); 370 (meters); expense accounts 586 and 597 (distribution
expenses); 901, 902, 903 and 905 (customer accounts expenses); and 907, 908,
909 and 910 (customer service and informational expenses).
In 1988, [one of the Taxpayers] was audited for the period 10/1/86 through
3/31/88, and assessed additional gross receipts tax upon “customer charges” and
“rental charges.” . . . In September 1988, [this Taxpayer] protested this
assessment, and in its protest explained that the charges at issue were for “street
lighting, traffic signals, outdoor lights, and other similar items” and for “customer
facilities’ charges.” . . . At that time, [this Taxpayer’s] tariff as filed with the
Florida Public Service Commission, defined the “customer facilities charge” as
“[a] charge comprised of the return on the Company’s investment in a customer’s
meter and service equipment plus the recurring cost of reading the meter,
calculating and mailing the bill, processing payment and maintaining the
customer’s records.” . . . On December 14, 1988, the Department of Revenue
issued its Notice of Decision (NOD) [to this Taxpayer] and concluded therein that
gross receipts tax was not due upon charges for street lighting, traffic signals,
outside lighting, and other similar transactions, but that tax was due upon
customer facilities charges. . . . [This Taxpayer] challenged the NOD decision in
. . . Circuit Court . . . Meanwhile, in January of 1987, [this Taxpayer] filed a
refund claim for gross receipts taxes it had paid upon customer facilities charges
from an earlier period of 10/1/83 through 9/30/86, and when that claim was denied
by the Department, it filed a separate complaint in . . . Circuit Court, challenging
the refund denial. . . . Similar refund claims were made by [the other two
Taxpayers and another similar taxpayer, which were] denied by the Department,
and pursued in litigation. . . .

Technical Assistance Advisement
Page 7 of 13
Ultimately, the Department and the utilities agreed that such charges would be
treated as charges for electricity and subject to gross receipts tax. These customer
charges were imposed at a flat rate per customer, and applicable to every customer
regardless of whether any electricity was consumed or regardless of how much
electricity was consumed by the customer. As articulated in the legislation, the
agreement was not intended to expand the law to capture gross receipts not
previously taxed; instead, the 1991 legislation was intended to eliminate claims by
the utilities for refunds of taxes paid by the utilities on these fixed customer
charges paid by all customers.
This point is reinforced by the presence of the modifier “monthly” in the statutory
language. The monthly billing for electric energy is a regulatory requirement, PSC
Rule 25-6.100, F.A.C. (requiring monthly billing, to include the “customer
charge,” and prescribing the other contents of monthly bills without reference to
equipment charges). The thrust of the 1991 law change was to require that
minimum amounts which were payable monthly as a condition of receiving
electricity be included in the tax base. The equipment charges at issue here,
however, are not only provided only at the request of the customer, but the
frequency with which they are billed is a matter of custom and convenience rather
than an attribute that defines the nature of the charges. Rental charges for such
equipment can be, and on occasion have been, paid “up front” or on some other
schedule than monthly. Had the legislature intended to tax charges for such
equipment, it is inconceivable that it would have conditioned the tax on the timing
of billing. The word “monthly” in section 203.01(7) makes sense only as a
modifier that defines the character of the charge to be taxed, as a charge which is
an essential element of the purchase of energy and is therefore billed on the same
prescribed schedule as energy.
An insistence that taxation turns on the use of nomenclature such as the word
“facilities” would not only result in the imposition of tax where it was not
intended, but would also threaten the continued taxation of charges that were the
very purpose of the legislation to tax. We doubt the Department would accept that
the tax on the “monthly customer charges” and “monthly customer facility
charges” that were the obvious subject of the statutory amendment could be
avoided simply by changing the label applied to such amounts. But that is the
result of basing the tax determination on labels. Just as the terminology used
should not be controlling in that context, it should not be controlling here.
The “facilities” verbiage does not convert a nontaxable amount into a taxable
amount. It is not used consistently across all utilities, and in any event, can be
altered. The tax treatment depends upon the nature of the charge, not the words
used to describe it. To read Section 203.01(7), so expansively as to tax optional
equipment charges is to hold that the legislature intended to tax amounts that are

Technical Assistance Advisement
Page 8 of 13
not inherent in the sale of energy and that can be readily avoided by changing the
nomenclature or schedule of payment. Such devotion to form over substance
should be avoided in the interpretation of a statute.
Taxpayers respectfully suggest that a more appropriate framework for analyzing
the taxability of equipment rentals of the sort at issue here is to determine whether
or not the equipment at issue fits within the parameters of the equipment at issue
in the litigation that prompted the 1991 legislative change and is required as a
condition of providing electricity to the customer. If the equipment is not critical
to generation, transmission or distribution of the electricity to the customer, but is
provided at the request of the customer for purposes of altering the method of
receiving or consuming the electricity, such equipment, when charged separately,
should not be subject to gross receipts tax, but should instead be treated as the
lease of tangible personal property.

APPLICABLE STATUTES AND RULES
The charge for electricity is subject to sales tax pursuant to Section 212.05(1)(e), F.S.,
which provides, in part:
212.05 Sales, storage, use tax. --It is hereby declared to be the legislative intent
that every person is exercising a taxable privilege who engages in the business of
selling tangible personal property at retail in this state, including the business of
making mail order sales, or who rents or furnishes any of the things or services
taxable under this chapter, or who stores for use or consumption in this state any
item or article of tangible personal property as defined herein and who leases or
rents such property within the state.
(1) For the exercise of such privilege, a tax is levied on each taxable transaction
or incident, which tax is due and payable as follows:

(e)1.c. Electrical power or energy, except that the tax rate for charges for
electrical power or energy is 7 percent.

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

Technical Assistance Advisement
Page 9 of 13
enumerated in Chapters 400 and 429, 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.
Section 203.01, F.S., provides, in part:
(1 )(a) 1. A tax is imposed on gross receipts from utility services that are delivered
to a retail consumer in this state....

(7) Gross receipts subject to the tax imposed by this section for the provision of
electricity shall include receipts from monthly customer charges or monthly
customer facility charges.
Section 203.012(3), provides:
(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.
Section 213.22(1), provides, in part:
. . . Technical assistance advisements shall have no precedential value except to
the taxpayer who requests the advisement and then only for the specific
transaction addressed in the technical assistance advisement, unless specifically
stated otherwise in the advisement. . . .
Rule 12B-6.0015(2), F.A.C., relating to electricity, provides, in part:

1. The tax imposed in paragraph (2)(a) does not apply to:

c. Receipts from customers for separately itemized charges for the sale, lease,
rental, repair, or maintenance of customer premises equipment.

Technical Assistance Advisement
Page 10 of 13
DISCUSSION
For the reasons stated below, the Department concludes that the use of the equipment and
the location of the equipment will determine whether it is subject to gross receipts tax or
sales tax. If the equipment is used in the provision of electricity and is on the “electric
utility’s side” of the “point of delivery,” then gross receipts tax is imposed, and sales tax
may or may not be due. If the equipment is either on the “customer side” of the “point of
delivery” or not used in the provision of electricity (e.g., a light pole or light pole fixture),
and is separately stated from the charge for utility services in general, then sales tax is
imposed on the leasing of that equipment.
There is one central issue to the three (3) requested rulings submitted by the Taxpayers,
and that is: what exactly is meant by the phrase “monthly customer facility charges” as
that phrase is used in Section 203.01(7), F.S. Section 203.01(7), F.S., provides that
“monthly customer facility charges” are subject to Gross Receipts Tax imposed on the
provision of electricity. The facts presented involve situations wherein electric utilities
provide transformers to customers for an additional charge.
Words of common usage, when used in a statute, should be construed in their plain and
ordinary sense. Pederson v. Green, 105 So.2d 1,4 (Fla. 1958). The meanings of the words
“monthly,” “customer” and “charges” appear to be straightforward as they apply to our
discussion. The word “facility” is at the heart of the central issue presented and is defined
to include:
…something (as a hospital) that is built, installed, or established to serve a
particular purpose. Merriam-Webster’s Collegiate Dictionary 416 (Tenth ed.
1999).
Recall, that Chapter 203, F.S., addresses the central issue presented here in two different
places: Sections 203.01 and 203.012(3), F.S. Section 203.01(l)(a)l., F.S. provides that a
tax is imposed on gross receipts from utility services that are delivered to a retail
customer in this State. Section 203.01(7), F.S., provides that the tax imposed for the
provision of electricity shall include receipts from monthly customer charges or monthly
customer facility charges. Section 203.012(3), F.S., defines the term “utility services”
and it provides, in part, that it does not include separately stated charges for tangible
personal property or services which are not charges for the transportation or distribution
of electricity. (Emphasis supplied)
It is a fundamental rule of statutory construction that statutes should be read together and
harmonized when, and if, there is any apparent conflict between them. See 48A Fla.
Jur.2d Statutes, Section 183. The Department is not suggesting there is any conflict
between the applicable statutes. Instead, the Department reminds itself and the reader that
the applicable statutes should be read together.

Technical Assistance Advisement
Page 11 of 13
Your letter requesting this TAA describes the equipment at issue as follows:

. . . [The transformers] are not required in order for the electric utility to provide
electric energy to the customer, but are used to alter the method by which electric
energy is provided to or consumed by the customer. . . . (See page 2 of your
letter.) (Emphasis supplied)

. . . [The transformer] is not required to generate, transmit, distribute or deliver
electricity to an end customer. The equipment simply alters the method by which
such electricity is received by the customer. . . . (See page 5 of your letter.)
(Emphasis Supplied)

The description, above, distinguishes equipment such as transformers from light poles
and light pole fixtures. Namely, transformers generally go to the provision of electric
power, while light poles and light pole fixtures do not.
The Department respectfully disagrees that our inquiry should include a second step that
asks whether or not the equipment is optional to the customer. The Department notes that
a host of equipment (“facilities”) could be optional, but not part of the provision of
electric power (and vice versa). Any analysis of whether or not something is “optional”
would invite a large degree of subjectivity.
But the Department does agree that any inquiry cannot stop at determining how the
transformer is used. The Department submits that the second inquiry has to examine
whether or not the transformer is involved in the delivery of electricity from the electric
utility to the customer.
Gross Receipts Tax is imposed on the gross receipts from utility services that are
delivered to a retail customer. See Section 203.01(l)(a)1., F.S. The second inquiry for our
purposes should be to ask whether the transformer in question is part of the delivery of
electricity to the retail customer. In other words, is the transformer altering the flow of
electricity that has yet to be delivered, or is it altering electricity that has been delivered?
The key to this inquiry is determining on which side of the “point of delivery” the
transformer is installed. If the transformer is installed on the “electric utility’s side” of the
“point of delivery,” the electricity has yet to be delivered to the retail customer (and gross
receipts tax would be due on the transformer charge). If the transformer is installed on
the “customer’s side” of the “point of delivery,” then the electricity has already been
delivered (and sales and use tax would be due on the separately stated lease charges, in
that situation). Point of delivery being defined as: the first point of connection between
the facilities of the serving utility and the utility customer’s premises wiring, or with
respect to conjunctive billing, a single geographical point where a single class of electric

Technical Assistance Advisement
Page 12 of 13
service is delivered from the facilities of the serving utility to the facilities of the
customer.” See Rules 25-6.003(2)(d) and 25-6.102(2), Florida Administrative Code.
The Department also notes that Section 203.012(3), F.S., provides that “Utility service” is
not broadened to include separately stated charges for tangible personal property or
services which are not charges for electricity or the transportation, delivery, transmission,
or distribution of electricity. Rule 12B-6.00l5(2)(a)1.c., F.A.C., provides that “gross
receipts” do not include separately stated charges for the sale, lease, rental, repair, or
maintenance of customer premises equipment.
If the equipment: (1) goes to the provision of electricity (i.e., transformers, switches, and
distribution equipment or those things that are involved in the provision of electric
power); and, (2) is on the “electric utility’s side” of the point of delivery” as defined
above, then the charge for such equipment is subject to Florida’s gross receipts tax,
because the transformer or other piece of equipment is used for the delivery of electricity
to the customer. If this analysis is not satisfied, then the charge is not subject to gross
receipts tax, because the electricity has already been delivered to the customer, provided
the charge for the equipment is separately stated from the charge for utility service. In
this case, the customer is renting the equipment which is subject to sales and use tax. If
the charge for the equipment is not separately stated from the charge for utility services,
the charge for the equipment becomes part of the gross receipts subject to gross receipts
tax.
-

CONCLUSION
Regarding your requested rulings, provided that the charge for transformers, or any other
piece of equipment, that is on the customer’s side of the point of delivery and such charge
is separately stated on the customer’s invoice: 1) the charge is for the lease or license to
use such property pursuant to Chapter 212, F.S., and is subject to sales tax; and, 2) the
charge is not for the sale of electricity and is not subject to gross receipts tax under
Chapter 203, F.S. Charges for transformers and other equipment that are used for the
provision of electricity on the Taxpayers side of the point of delivery are facility charges
subject to gross receipts tax, which may or may not be subject to sales tax. Charges for
tangible personal property located on the customer’s side of the “point of delivery,” as
that term is defined above, that are separately stated from a facility charge are subject to
sales tax and not gross receipts tax. The response to requested ruling 3 is moot, because
the use of the term “facilities” is not dispositive of the treatment of that charge as a
taxable utility service for gross receipts tax.
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

Technical Assistance Advisement
Page 13 of 13
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.
Sincerely,

Horace Royals
Tax Law Specialist
Technical Assistance and Dispute Resolution
Record ID: 74198