Which equipment for a Florida municipal natural-gas power project qualifies for the electricity-generation sales-tax exemption?

Plain-English summary

The Florida Department of Revenue approved the sales-tax exemption for the municipal utility's listed machinery and equipment directly used in two natural-gas electricity-generation projects, while rejecting other listed materials that did not qualify.

The exemption followed the integrated generation process and could cover qualifying items bought directly or through the general contractor. The public copy redacts the item descriptions, so this page cannot identify the approved and rejected equipment individually.

The Department rejected the city's proposed exemption affidavit because it omitted the required warning that furnishing a false affidavit to evade tax triggers the penalty in section 212.085. The ruling supplied language to add.

What this means for you

Utilities and project contractors

Classify every purchase by its direct role in electricity generation and preserve the project equipment schedules.

Accountants and tax professionals

Review both substantive eligibility and affidavit wording. A qualifying purchase can still lack proper exemption documentation.

Common questions

Q: Did generation equipment qualify?
A: Yes, for the listed items directly used in producing electricity.

Q: Did every project item qualify?
A: No. The ruling separately listed redacted nonqualifying equipment and materials.

Q: Was the proposed affidavit sufficient?
A: No. It needed the false-affidavit penalty statement.

Citations and references

• Fla. Stat. §§ 212.05, 212.055, 212.08(5)(c), 212.085, and 213.22
• Fla. Admin. Code r. 12A-1.051

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 18A-005

Original ruling text

Executive
Director
Leon M. Biegalski

QUESTION:
ARE PURCHASES OF MACHINERY AND EQUIPMENT USED TO PRODUCE ELECTRICITY
EXEMPT FROM TAX UNDER THE PROVISIONS OF S. 212.08(5)(C), F.S.?
ANSWER:
PURCHASES OF MACHINERY AND EQUIPMENT DIRECTLY USED TO PRODUCE
ELECTRICITY ARE EXEMPT FROM TAX UNDER THE PROVISIONS OF S. 212.08(5)(C), F.S.

March 28, 2018

XXXX
XXXX
XXXX
Re:

Technical Assistance Advisement No. 18A-005
XXXXXXXXXXXXXXX
Florida Sales and Use Tax
Machinery and Equipment Used to Produce Electricity
Sections 212.05, 212.055, 212.08(5)(c), 212.085, Florida Statute (F.S.)
Rule 12A-1.051, Florida Administrative Code (F.A.C.)
BP#: XXXXXX

Dear XXXXXX:
This letter is in response to your request dated July 27, 20171, and received in this office on August 1,
2017, for issuance of a Technical Assistance Advisement (“TAA”) pursuant to Section 213.22, F.S., and
Rule Chapter 12-11, F.A.C., concerning manufacturing exemptions. An examination of your request has
established you complied with the statutory and regulatory requirements for issuance of a TAA.
Therefore, the Department is hereby granting your request for a TAA.
STATED FACTS
1

Pertaining to the request for the Technical Assistance Advisement, additional clarifying information was submitted to the
Department’s Office of General Counsel on January 3, 2018.
Child Support – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Dr. Maurice Gogarty, Director  Information Services – Damu Kuttikrishnan, Director

www.floridarevenue.com
Florida Department of Revenue
Tallahassee, Florida 32399-0100

TAA
Page 2

Taxpayer is a city municipality that operates an electrical utility. The electricity produced by Taxpayer is
sold to the general public. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. The
equipment for both projects will be powered by natural gas fuel. XXXXXXXXXXXXXXXXXXXXXX.
Taxpayer believes that the machinery and equipment to be purchased for both projects, and identified
within Attachment 4 and 6 of its request, meet the requirements for tax exemption under s. 212.08(5)(c),
F.S., for machinery and equipment used in the production of electrical or steam energy.
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
TAXPAYER’S REQUESTED ADVISEMENT
Based on the facts and analysis set forth above, Taxpayer requests the following guidance:

1. Does all the equipment needed for the XXXXXXXXXXXXXXXXXX, as set forth in Taxpayer’s
   Attachment 4, qualify for the exemption from tax set forth in section 212.08(5)(c), F.S.?
2. Does all the equipment needed for the XXXXXXXXXXXXXX, as set forth in Taxpayer’s
   Attachment 6, qualify for the exemption from tax set forth in section 212.08(5)(c), F.S.?
3. Does the draft affidavit enclosed as Attachment 2 meet the requirements of section 212.08(5)(c)3.,
   Florida Statutes for purposes of claiming the exemption?
   LAW & DISCUSSION
   Unless a specific exemption applies2, s. 212.05, F.S., provides it is the legislative intent that every person
   is exercising a taxable privilege that engages in the business of selling tangible personal property3 in this
   state. For exercising such a privilege, a tax is levied on each taxable transaction or incident. The tax is
   due and payable at the rate of 6 percent, plus any applicable surtaxes imposed under s. 212.055, F.S., on
   2

The Department must point out that while taxing statutes are strictly construed against the taxing authority, statutes that grant
an exemption are strictly construed against the taxpayer. See Asphalt Pavers v. Dept. of Revenue, 584 So.2d 55 (Fla. 1st DCA
1991), at 57 (citing the rule that exemptions from tax are strictly construed against the taxpayer, with any ambiguity resolved in
favor of the administrative agency); State ex rel. Szabo Food Services Inc. v. Dickinson, 286 So.2d 529 (Fla. 1973)
(“Exemptions to taxing statutes are special favors granted by the Legislature and are to be strictly construed against the
taxpayer.”). See also, United States Gypsum Co. v. Green, 110 So.2d 409 (Fla. 1959) (also stating that exemptions from tax are
strictly construed against the taxpayer) and Wanda Marine Corp. v. Dep’t of Revenue, 305 So.2d 65, 69 (Fla. 1st DCA 1975).
3
Tangible personal property means and includes personal property which may be seen, weighed, measured, or touched or is in
any manner perceptible to the senses. See s. 212.02(19), F.S.

TAA
Page 3

the total consideration received for each item or article of tangible personal property when sold at retail in
this state.
Machinery and Equipment used in Production of Electrical or Steam Energy
Section 212.08(5)(c), F.S., provides that the purchase of machinery and equipment for use at a fixed
location in which the machinery and equipment are necessary in the production of electrical or steam
energy resulting from the burning of fuels other than residual oil is exempt from Florida sales and use the
tax. Such electrical or steam energy must be primarily for use in manufacturing, processing,
compounding, or producing for sale items of tangible personal property in Florida. Additionally, the
exemption provided by s. 212.08(5)(c), F.S., is not limited to the original machinery and equipment used
in the construction of an electrical or steam generation facility. The exemption also extends to repairs,
maintenance, and replacement of such machinery, equipment, and parts thereof.
The scope of s. 212.08(5)(c), F.S., as determined in the JEA/FPL Declaratory Statement was reviewed by
the First District Court of Appeal of Florida in Jacksonville Electric Authority v. Department of Revenue,
486 So.2d 1350 (Fla. 1st DCA 1986). That case involved the taxable status of certain machinery and
equipment purchased by the Jacksonville Electric Authority to be used in the burning of coal to produce
electrical energy.
The District Court of Appeal determined that it was the legislative intent, based on the tape-recorded
proceedings of the Florida Senate Committee on Ways and Means, to embrace the “integrated plant
theory” as a basis for interpreting the exemption for machinery and equipment provided in s. 212.08(5)(c),
F.S. Under the “integrated plant theory,” machinery and equipment used in the process of generating
electrical energy, regardless of the fact that such machinery and equipment was not intrinsically necessary
to generate electrical energy, or the sole purpose of such machinery and equipment was to make the plant
function more practically, would be considered a component part of the manufacturing process.
Therefore, only the machinery and equipment used in the process of generating electrical energy, would
qualify for the exemption provided in s. 212.08(5)(c), F.S. The exemption does not extend to switchyard,
distribution, or transmission machinery and equipment at a facility. Generally, the exemption is
considered as ending at the first step-up transformer, or at that point where the electrical power is at such a
voltage level that is necessary for transmission to the electrical grid. The exemption will include all such
electrical equipment as is necessary for internal plant purposes, such as cabling, rack systems, ducts,
instrumentation, monitoring equipment, grounding, cathodic protection, and interconnect facilities.
Additionally, the exemption under s. 2l2.08(5)(c), F.S., does not extend to real property improvements at a
generating facility. Accordingly, site improvements that do not constitute foundations or sub-surface
improvements for foundations for machinery and equipment that is integral to the production of electrical
energy will not qualify for exemption. Contractors performing real property improvements are subject to
the provisions of Rule 12A-1.051, F.A.C. Generally, contractors will be subject to tax on all materials
consumed in the real property improvement activities. Structures or facilities whose only purpose is to
enclose, provide shelter, or control environments for qualifying items of machinery and equipment are
considered to be an integral part of that machinery and equipment and do not constitute real property
improvements. Accordingly, such structures or facilities will qualify for exemption.

TAA
Page 4

Last, the exemption under s. 212.08(5)(c), F.S., is only applicable to items that are installed as a
permanent part of the machinery and equipment that is integral to the production of electrical energy.
Accordingly, the rental of any construction equipment, such as cranes, scaffolding, or earthmovers, etc.,
will remain fully taxable to the contractors.
It should be noted that this exemption is subject to audit verification by the Department, and Taxpayer,
must be able to substantiate its eligibility for the exemption with proper documentation and records.
Affidavit Procedures
Section 212.08(5)(c)3., F.S., provides in part that purchasers of machinery and equipment qualifying for
the exemption provided in s. 212.08(5)(c), F.S., shall furnish the vendor with an affidavit stating that the
item or items to be exempted are for the use designated therein. Any person furnishing a false affidavit to
the vendor for the purpose of evading payment of any tax imposed under Chapter 212, F.S., shall be
subject to the penalty set forth in s. 212.085, F.S., and as otherwise provided by law.
For this specific situation, the benefit of the exemption inures to Taxpayer and to the contractors. The
exemption is implemented by extending an affidavit to the machinery and equipment or materials vendor
at the time of the purchase transaction. At no time when extending an affidavit for the exemption
provided in s. 212.08(5)(c), F.S., should anyone include another business entity’s Certificate of
Registration number (sales tax number), Consumer’s Certificate of Exemption number, or Direct Pay
Certificate number. Each of those numbers may only be used by the business entity to which it was
assigned.
Procedurally, an affidavit must be given by Taxpayer to the contractor. The contractor, in turn, would then
issue its own affidavit to any subcontractors along with a copy of the affidavit provided by Taxpayer. This
process continues from subcontractors to sub-subcontractors until the actual purchase order is issued to the
vendor or supplier for the qualifying machinery and equipment or materials.
The affidavit may be a separate document attached to purchase orders or it may be incorporated within the
purchase order itself. If the affidavit is incorporated within the purchase order, a statement that would
have the same effect as the statement regarding a false affidavit, as provided in the sample affidavit, must
be incorporated within the purchase order. Further, it is the position of the Department that the affidavit
must be notarized regardless of whether the affidavit is incorporated within the purchase order or is an
independent affidavit attached to the purchase order. Attached is a suggested format for the affidavit.
Taxpayer’s Proposed Projects
XXXXXXXXXXXXXXXXXX
For the XXXXXXXXXXXXXXXXXXXX, the equipment denoted below and referenced in Attachment 4
will be directly purchased by Taxpayer. These items will qualify for tax exemption under s. 212.08(5)(c),
F.S., based on a review of Taxpayer’s documents which indicate the items are machinery and equipment
that is directly related to production of electricity or an item that is integral to qualifying machinery and
equipment.

TAA
Page 5

• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
Taxpayer will also acquire additional equipment and materials for the XXXXXXXXXXXXXXXXXX
through its General Contractor Contract for the purposes of generating electricity for sale. The equipment
obtained through the contractor and identified immediately below will qualify for tax exemption:
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
Listed below is the machinery, equipment, and materials obtained and installed through the general
contractor that will not qualify for the tax exemption:
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX

XXXXXXXXXXXXXXXXXXXX

TAA
Page 6

For the XXXXXXXXXXXXX, the machinery, equipment, and materials denoted below and referenced in
Attachment 6 will be directly purchased by Taxpayer and will qualify for tax exemption.
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
The XXXX will acquire the balance of the necessary equipment and materials for the XXXXXXXX
XXXXX through the General Contractor Contract. The equipment purchased from the contractor and
identified immediately below will qualify for tax exemption:
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX
• XXXXXXXX

Listed below is the machinery, equipment, and materials utilized or installed that will be purchased for the
XXXXXXXXXXXX that do not qualify for the tax exemption:
• XXXXXXXX
• XXXXXXXX

Taxpayer’s Proposed Affidavit

TAA
Page 7

In response to Taxpayer’s request for advisement under question number three, the answer is “no.”. The
affidavit submitted by Taxpayer omits language relating to the furnishing of a false affidavit to the vendor.
The following language should be added to Taxpayer’s affidavit:
I understand any person furnishing a false affidavit to a vendor for the purpose of evading
payment of any tax imposed under Chapter 212, Florida Statutes, shall be subject to the
penalty set forth in Section 212.085, Florida Statutes, and as otherwise provided by law.
For more information concerning all the taxes administered by the Department of Revenue, please
refer to the Department’s Internet site at:
http://floridarevenue.com
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 and 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.
Kind Regards,
Alan R. Fulton
Alan R. Fulton
Tax Law Specialist
Technical Assistance & Dispute Resolution
850-717-6735
Enclosure:

Section 212.08(5)(c), F.S. – Suggested Affidavit

ARF\tadrstaff
Record ID: 17035