Was separately metered natural gas used to wash, sanitize, and dry rented hospital linens exempt as boiler fuel in Florida?

Plain-English summary

The taxpayer rented linens and other textiles to healthcare customers, collected the soiled items, and washed, sanitized, and dried them at two Florida plants. Natural gas fired boilers for high-temperature water and heated the dryers, and the utilities separately metered that gas from gas used for other purposes.

Florida ruled that the natural gas qualified for the boiler-fuel exemption. Laundering changed the textiles from a soiled or unsanitary condition to a clean and sanitary condition, so it was an industrial processing operation. Because Florida's definition of a sale included renting tangible personal property, the processed linens were being prepared for sale.

The taxpayer had to sign and give its utilities a certificate stating that the exempt gas was used exclusively for the statutory purpose. The TAA cautioned that ordinary commercial cleaning of customer-owned linens generally would not qualify because the cleaner would not be selling or renting the property.

What this means for you

The exemption depends on the industrial process, disposition of the processed property, exclusive qualifying use, and documentation. Separate metering supported the taxpayer's claim that the exempt gas was not also used for building heat or another nonqualifying purpose.

Common questions

Did gas used in the boilers and dryers qualify? Yes, under the stated separately metered uses.

Why did renting the linens matter? The cited definition treated rental of tangible personal property as a sale.

Was a certificate required? Yes. The taxpayer had to certify the gas's exclusive exempt use to the utilities.

Citations and references

• Fla. Stat. §§ 212.02(15)(a) and 212.08(7)(b) and Fla. Admin. Code r. 12A-1.096(1)(d), as quoted or discussed in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 11A-011

Original ruling text

SUMMARY
QUESTION: Whether Taxpayer’s purchases of natural gas for its Florida plants that exclusively
launder hospital linens for rent are exempt from sales and use tax under the provisions of s.
212.08(7)(b), F.S., as a boiler fuel.
ANSWER: Taxpayer’s purchases of natural gas for its Florida plants are exempt from sales and
use tax under the provisions of s. 212.08(7)(b), F.S., as a boiler fuel. Taxpayer shall sign and
issue a certificate to the utilities stating that the natural gas to be exempted is for the exclusive
use as designated by the exemption statute. A sample format of the appropriate certificate is
provided with the advisement.

April 28, 2011

XXX
XXX
XXX
Re: Technical Assistance Advisement 11A-011
Sales and Use Tax
Boiler fuels exemption
Section 212.08(7)(b), F.S.
Dear
This is in response to your request dated February 28, 2011, for a Technical Assistance
Advisement (TAA) pursuant to section 213.22, F.S., and Rule Chapter 12-11, F.A.C., regarding
a tax exemption issue for XXX. (“Taxpayer”). 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 a TAA.
Facts
Taxpayer’s parent corporation is a manufacturer and retailer of uniforms for service
businesses. Taxpayer operates as a subsidiary and rents linens and other textiles to hospitals and
other customers in the healthcare industry. Taxpayer and its customers enter into textile rental
services agreements. Under these agreements, the customers agree to rent textiles exclusively
from Taxpayer. Taxpayer agrees to supply the customers with textiles, pick up those textiles
when they have become soiled, process (launder and sanitize) the soiled textiles, and return
cleaned textiles on a periodic basis for an agreed fee.
Taxpayer has two processing plants in Florida that launder and sanitize the rented linens
and other textiles. The laundering and sanitizing process takes place in a tunnel washer system

that uses chemicals and high temperature water to remove chemical and waste contaminants as
required by healthcare regulations governing the continued use of the items. Natural gas is
purchased from local utilities to fire the boilers that are used to produce the hot water. The
natural gas is also used to heat air in the dryers that are used to dry the linens and other textiles.
The natural gas utilized in the boilers and the dryers is separately metered by the utilities from
other uses of natural gas at the processing plants.
Issue
Whether Taxpayer’s purchases of natural gas for its Florida plants are exempt from sales
and use tax under the provisions of s. 212.08(7)(b), F.S., as a boiler fuel.
Applicable Authority
The following passages from the Florida Statutes (F.S.) and the Florida Administrative
Code (F.A.C.) are pertinent to the issue under consideration.
Section 212.02, F.S., provides in part:
(15) “Sale” means and includes:
(a) Any transfer of title or possession, or both, exchange, barter, license, lease, or rental,
conditional or otherwise, in any manner or by any means whatsoever, of tangible
personal property for a consideration. . . .
Section 212.08(7), F.S., provides in part:
(b) Boiler fuels.— When purchased for use as a combustible fuel, purchases of natural
gas, residual oil, recycled oil, waste oil, solid waste material, coal, sulfur, wood, wood
residues or wood bark used in an industrial manufacturing, processing, compounding, or
production process at a fixed location in this state are exempt from the taxes imposed by
this chapter; however, such exemption shall not be allowed unless the purchaser signs a
certificate stating that the fuel to be exempted is for the exclusive use designated herein.
This exemption does not apply to the use of boiler fuels that are not used in
manufacturing, processing, compounding, or producing items of tangible personal
property for sale, or to the use of boiler fuels used by any firm subject to regulation by
the Division of Hotels and Restaurants of the Department of Business and Professional
Regulation.
Rule 12A-1.096(1), F.A.C., provides in part:
(d) “Manufacture, process, compound, or produce for sale” means the various industrial
operations of a business where raw materials will be put through a series of steps to make
an item of tangible personal property that will be sold. The industrial

operations must bring about a change in the composition or physical nature of the raw
materials. . . .
Discussion
In order for Taxpayer to be eligible for the boiler fuel exemption, it must use the natural
gas in manufacturing, processing, compounding, or producing items of tangible personal
property for sale, and that fuel must be exclusively used for one of those purposes. The burning
of natural gas to make hot water or steam, and to dry air, for industrial processes are uses that
qualify the natural gas as a “boiler fuel.” Under the definition in Rule 12A-1.096(1)(d), F.A.C.,
a manufacturing, processing, compounding, or production process must bring about a change in
the composition or physical nature of the tangible personal property. The laundering of linens
and other textiles to change those items from a soiled or unsanitary condition to a clean and
sanitary condition is a process that satisfies that criterion.
Here, Taxpayer utilizes the natural gas in the laundering of linens and other textiles that it
rents to customers. Pursuant to the definition provided by Section 212.02(15)(a), F.S., the term
“sale” also includes the rental of tangible personal property for a consideration. Therefore, the
Taxpayer is manufacturing, processing, compounding, or producing the linens and textiles for
sale as required by the exemption. Generally, commercial laundry cleaning of a customer’s
linens and textiles does not fall under this exemption, as the commercial cleaner is not selling
tangible personal property.
Further, it has been stated that the utilities separately meter Taxpayer’s natural gas
utilized in the industrial process from any natural gas that is utilized for other purposes, such as
heating the building. Accordingly, the exemption criterion that the boiler fuel must be
exclusively used in manufacturing, processing, compounding, or producing items of tangible
personal property for sale is satisfied.
Conclusion
Taxpayer’s purchases of natural gas for its Florida plants are exempt from sales and use
tax under the provisions of s. 212.08(7)(b), F.S., as a boiler fuel. Taxpayer shall sign and issue a
certificate to the utilities stating that the natural gas to be exempted is for the exclusive use as
designated by the exemption statute. A sample format of the appropriate certificate is attached to
this advisement.
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 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 documents are public
records under Chapter 119, F.S., which are subject to disclosure to the public under the
conditions of Section 213.22, F.S. Your name, address, and any other details, which might lead
to identification of the taxpayer, must be deleted before disclosure. In an effort to protect the
confidentiality of such information, we request you provide the undersigned with an edited copy
of your request for Technical Assistance Advisement, backup material and response within
fifteen days of the date of this advisement.
Sincerely,

Jeffery L. Soff
Tax Law Specialist
Technical Assistance and
Dispute Resolution

ctrl# 99415

EXEMPTION CERTIFICATE
BOILER FUELS USED TO PRODUCE TANGIBLE
PERSONAL PROPERTY FOR SALE
____, incorporated in the State of __, its undersigned
officer who is duly authorized, hereby certifies to ____ that
purchases of natural gas, residual oil, recycled oil, waste oil, solid waste material as defined in
s. 403.703(13), F.S., coal, sulfur, wood, wood residues, or wood bark under account number
____ will be exclusively used as a combustible fuel in the
manufacturing, processing, compounding, or production of tangible personal property for sale.
This industrial process is located at ______ in
____, Florida, County of __. Further, it is certified
that _____ is not subject to regulation by the Division of
Hotels and Restaurants of the Department of Business and Professional Regulation. The
purchase of the combustible fuel pursuant to this certification is exempt from tax, pursuant to s.
212.08(7)(b), F.S.
Dated at ___, Florida, this _ day of __, 20.
AUTHORIZED OFFICER OF COMPANY
BY: ____
TITLE: _______