Which machinery and equipment used to generate electricity qualifies for Florida's sales-tax exemption?

Plain-English summary

The Florida Department of Revenue approved the sales-tax exemption for the taxpayer's qualifying machinery and equipment used to generate electricity from natural gas for sale to the public. The exemption also covered the specific affidavit the taxpayer proposed for claiming it.

Florida applies an "integrated plant" approach. Equipment used in the generation process can qualify even if it is not intrinsically necessary to create electricity, when it is part of making the plant function. The exemption included internal plant cabling, racks, ducts, instrumentation, monitoring, grounding, cathodic protection, interconnection facilities, and structures whose only purpose was to enclose or protect qualifying equipment.

The boundary was important. The exemption generally ended at the first step-up transformer or when voltage reached the level needed for transmission to the grid. It did not cover switchyard, distribution, or transmission equipment; general site improvements unrelated to foundations for qualifying machinery; or rented construction equipment such as cranes, scaffolding, and earthmovers.

What this means for you

Power-generation developers

Classify each purchase by its function in generation, not merely its location at the plant. Equipment past the generation-to-transmission boundary may be taxable.

Contractors and procurement teams

The exemption can flow through contractors using affidavits, but each tier must pass along the taxpayer's affidavit and issue its own affidavit until the vendor receives the documentation.

Accountants and tax professionals

Maintain detailed equipment lists, functional descriptions, purchase records, and notarized affidavits. The Department stated that eligibility remained subject to audit verification.

Common questions

Q: Does the exemption cover repairs and replacement parts?
A: Yes, for qualifying electricity-generation machinery and equipment; it is not limited to original construction.

Q: Does transmission equipment qualify?
A: No. The ruling excludes switchyard, distribution, and transmission machinery and equipment.

Q: Can a dedicated equipment enclosure qualify?
A: Yes, when its only purpose is to enclose, shelter, or control the environment for qualifying machinery.

Q: Are rented cranes or scaffolding exempt?
A: No. The ruling says rented construction equipment remains taxable.

Q: Did the taxpayer's proposed affidavit work?
A: Yes. The Department found it met section 212.08(5)(c)3., and stated that the affidavit must be notarized.

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
• Jacksonville Electric Authority v. Department of Revenue, 486 So. 2d 1350 (Fla. 1st DCA 1986)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 19A-008

Original ruling text

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 18, 2019

XXXX
XXXX
XXXX
XXXX
XXXX
Re:

Technical Assistance Advisement 19A-008
XXXX (“Taxpayer”)
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#: XXXX

Dear XXXX:
This letter is in response to your request dated January 14, 2019, and received in this office on
January 16, 2019, 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

Technical Assistance Advisement
March 18, 2019
Florida Department of Revenue
Page 2

Taxpayer is XXXX. The electricity produced by Taxpayer is sold to the general public. XXXX. The
equipment will be powered by natural gas fuel. XXXX. Taxpayer believes that the machinery and
equipment to be purchased and identified within Attachment 3 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.
XXXX. This XXXX will allow XXXX to”: XXXX
XXXX

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 XXXX, as set forth in Taxpayer’s Attachment 3, qualify
   for the exemption from tax set forth in section 212.08(5)(c), F.S.?
2. 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 applies1, 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
   property2 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 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

1

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).
2
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.

Technical Assistance Advisement
March 18, 2019
Florida Department of Revenue
Page 3

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 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 taperecorded 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. 212.08(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

Technical Assistance Advisement
March 18, 2019
Florida Department of Revenue
Page 4

an integral part of that machinery and equipment and do not constitute real property
improvements. Accordingly, such structures or facilities will qualify for exemption.
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.

Technical Assistance Advisement
March 18, 2019
Florida Department of Revenue
Page 5

Taxpayer’s Proposed Project
XXXX – Attachment 3
For XXXX, the machinery, equipment, and materials denoted below and referenced in
Attachment 3 will be directly purchased by Taxpayer and will qualify for tax exemption.
• XXXX
o XXXX
o XXXX
o XXXX
o XXXX
o XXXX
o XXXX
XXXX plans to acquire the balance of the equipment and materials for the project through XXXX.
XXXX. The equipment purchased from the contractor and identified immediately below will
qualify for tax exemption:
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
Taxpayer’s Proposed Affidavit
In response to Taxpayer’s request for advisement under question number two, the answer is
“yes.”. The affidavit submitted by Taxpayer in Attachment 2 complies with the statutory
requirements of s. 212.08(5)(c)3., F.S.

Technical Assistance Advisement
March 18, 2019
Florida Department of Revenue
Page 6

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
ARF\tadrstaff
Record ID: 152975