When could a Florida utility treat electricity sold to a residential household or model home as sales-tax exempt?

Plain-English summary

Residential electricity was exempt when the utility properly classified the account as residential, kept a certification of exclusive household use, and accepted it in good faith. The exemption applied whether residents were billed directly or electricity was billed to a landlord.

Mixed use was not prorated: if any electricity served a nonexempt purpose, the entire sale was taxable. The Department could pursue the account owner when a properly classified, certified account was actually used for a nonexempt purpose, but could assess the utility when its records showed the account should not have been residential.

This revised advisement expressly superseded the original TAA 98A-068.

What this means for you

Utilities needed both proper tariff-based account coding and reliable customer documentation. A “residential” label alone was not enough, and good-faith certification did not protect an account that the utility's own records showed was commercial or otherwise nonresidential.

Common questions

Q: Did the customer have to own the residence? No. The ruling focused on exclusive residential household use, not resident-versus-transient ownership status.

Q: Could exempt and taxable electricity use be prorated? No. Any nonexempt use made the entire sale taxable.

Q: Who was liable after a false certification? For a properly classified account with a good-faith certification, the Department could look to the account owner; the utility remained exposed when its records showed misclassification.

Citations and references

• Fla. Stat. § 212.08(7)(j) — residential electricity exemption
• Fla. Stat. § 212.05(1)(e)1.d. — utility tax
• Fla. Admin. Code r. 12A-1.053 — electricity and fuel
• Fla. Stat. §§ 203.01, 213.22 — gross receipts tax and Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98A-068R

Original ruling text

SUMMARY

The provisions Revised TAA98A-068R supersede those
contained in the original TAA. Charges for electricity
sold to residential households or owners of residential
models by utility companies that pay the gross receipts tax
are exempt from sales tax. The Department in determining
whether an electric utility company has properly applied
this exemption will look to the following provisions.
First, the unit to which the electricity is sold must be
coded as "residential," based on its tariffs filed with the
PSC. Second, whether the utility has on file an
application for services or other certification from the
customer attesting that the electricity is purchased for
exclusive residential household use. This certification
may take the form of a separate document, be part of the
application for service, or be made a part of the
customer's utility billing statement. Finally, the
certification must be accepted in good faith by the utility
provider.

Jul 30, 1999

Re: Technical Assistance Advisement 98(A)-068R
Sales of Utilities and Certain Fuels to Residential
Households
Sections 212.05(1)(e)1.d. and 212.08(7)(j), F.S.
Taxpayer: XXX ("Utility")
FEI No.: XX
STN: XX

Dear

In response to your petition of October 6, 1997, the Department
issued to you Technical Assistance Advisement No. 98A-068, dated
August 28, 1998, pursuant to s. 213.22, Florida Statutes (F.S.),
and Chapter 12-11, Florida Administrative Code (F.A.C.),
regarding the referenced Taxpayer and matters. After further
consideration of the issues at hand, the Department has revised

its response to the questions contained in your petition. This
response constitutes Revised Technical Assistance Advisement No.
98(A)-068R.

BACKGROUND

Your petition provides that Utility is a Florida electric
utility company that pays the gross receipts tax levied by s.
203.01, F.S. Certain of Utility's customers have claimed the
exemption from sales tax provided in s. 212.08(7)(j), F.S., by
advising Utility that their purchase of electricity is for
residential use. A recent audit of the Utility, "... has raised
questions about premises that appear to be rental units or
rental property, where sales tax on utility sales has not been
collected." You request guidance from the Department so as "...
to assist [Utility] in its efforts to ensure compliance with its
sales tax collection obligations."

REQUESTED ADVISEMENT

Your request presents the following questions regarding the
issue at hand for which you seek a response:

Question No. 1: Is the sales tax exemption stated in
Section 212.08(7)(j) based on the type of use to which the
utility service is put, that is, residential rather than a
commercial use, or is the exemption based on the
characterization of the owner/user as a resident or a
transient?"

Question No. 2: Who is responsible for determining whether
the use of electricity at a particular location is exempt
from sales tax? The utility provider or the owner/user at
the location?

Question No. 3: If [Utility] has coded an electric service
as residential and exempt from sales tax, and it is
subsequently determined by the Department that the use was
non-exempt, who is responsible for any assessment that may
be due?"

Question No. 4: If [Utility] has coded an electric service
as residential and exempt from sales tax in reliance on a
written statement, agreement or affidavit from the account
holder (the customer) that the electricity will be or is
being used solely for exempt residential purposes, will the
Department of Revenue relieve [Utility] of liability for
sales tax, interest and penalties if the DOR subsequently
determines that the use was or is non-exempt?

Question No. 5: Which of the following electric use
locations qualify for non-exempt status for purposes of
section 212.08(7)(j)?

a. A residential single family dwelling or separately
metered unit of a multi-family dwelling owned and
occupied by the owner who conducts no business
activities from the dwelling.
b. A residential single family dwelling or a separately
metered unit of a multi-family dwelling owned and
occupied by the owner, who also conducts a home based
business from the dwelling, whether allowed by current
zoning regulations or not.
c. A residential single family dwelling or a separately
metered unit of a multi-family dwelling, where the
owner has rented the unit to tenants for six months or
more under a written lease.
d. A residential single family dwelling or a separately
metered unit of a multi-family dwelling, where the
owner has rented the unit to tenants on a month to
month basis.
e. A residential condominium unit owned and occupied by
the owner who conducts a home-based business from the
unit.
f. A residential condominium unit where the owner rents
out the unit to others for all or a part of each year
under rental agreements that may be on a daily,
weekly, or monthly basis. Assume a variety of
circumstances:

1. The owner occasionally occupies the unit as a
   "second home" and rents it out himself to others
   on a daily, weekly, or monthly basis.

2. The owner occasionally occupies the unit as a
"second home" and has placed the unit in the
rental program of an onsite condominium
association run rental program for rent on a
daily, weekly, or monthly basis.

3. The owner occasionally occupies the unit as a
   "second home" and has placed the unit in the
   rental program with an offsite property
   management office for rent on a daily, weekly, or
   monthly basis.
4. The owner does not occupy the unit at all and
   makes it available for rent at all times during
   each year on a daily, weekly, or monthly basis
   through either an onsite or offsite rental
   program.
   g. A time share dwelling unit (interval ownership) where
   the owner occupies the unit during his interval of
   ownership.
   h. A time share dwelling unit where the owner rents out
   the unit to other[s] during his interval of ownership.
   i. An apartment complex of multiple units where the
   owners of the complex rent dwelling units containing
   the usual amenities of a home (e.g., sleeping
   quarters, bathroom, kitchen facilities, heating,
   refrigeration and air conditioning) for periods of
   more than six months under written leases.
   j. An apartment complex of multiple units where the
   owners of the complex rent dwelling units containing
   the usual amenities of a home (e.g., sleeping
   quarters, bathroom, kitchen facilities, heating,
   refrigeration and air conditioning) for periods of
   less than six months, that is, on a daily weekly, or
   monthly basis.
   k. A hunting lodge or cabin that has the rustic amenities
   of a home (e.g., sleeping quarters, bathroom, kitchen
   facilities, heating and refrigeration) that is
   occasionally used by the owner and occasionally rented
   to hunters for a fee on a daily basis. (Original
   Emphasis Removed)

APPLICABLE STATUTORY AUTHORITY

Section 212.05(l)(e)1.d., Florida Statutes (F.S.), imposes a
sales tax on charges for electrical power or energy.

Section 212.08(7)(j), F.S., provides:

(j) Household fuels. -- Also exempt from payment of the tax
imposed by this chapter are sales of utilities to
residential households or owners of residential models in
this state by utility companies who pay the gross receipts
tax imposed under s. 203.01, and sales of fuel to
residential households or owners of residential models,
including oil, kerosene, liquefied petroleum gas, coal,
wood, and other fuel products used in the household or
residential model for the purposes of heating, cooking,
lighting, and refrigeration, regardless of whether such
sales of utilities and fuels are separately metered and
billed direct to the residents or are metered and billed to
the landlord. If any part of the utility or fuel is used
for a non-exempt purpose, the entire sale is taxable. The
landlord shall provide a separate meter for non-exempt
utility or fuel consumption. For the purposes of this
paragraph, licensed family day care homes shall also be
exempt.

Rule 12A-1.053, Florida Administrative Code (F.A.C.), provides
that "hotels and motels cater primarily to transient guests and
are not considered to be residential households." The exemption
provided in s. 212.08(7)(j), F.S., does not apply to electric
power or energy sold for use in hotels and motels.

TAXPAYER'S POSITION

The first question in your petition requests a determination on
how the sales tax exemption provided in s. 212.08(7)(j), F.S.,
should be based. Section 212.08(7)(j), F.S., provides that
electricity and fuels sold to residential households are exempt
from sales tax. The statute also provides an exemption for
"other fuel products used in the household or residential model
for purposes of heating, cooking, lighting, and refrigeration."
It is your position that the statute implies that residential

use means using electricity for heating, cooking and
refrigeration and that the exemption exists "because of the use
[to which] the electricity is put." Further, a "non-exempt
purpose" is meant to include electricity used for "conducting
activities of a commercial nature" or that use which is not
"directly related to the care and daily living needs of the
residents occupying the premises."

It is also your position that persons residing in rental units
are using electricity for their care and daily living needs, and
not for conducting commercial activities on the premises. You
argue that it is irrelevant whether the premises are owned by
the occupant or rented by the occupant, "as long as the
electricity is used by the occupant/resident for residential
purposes, i.e., their care and daily living needs for cooking,
heating, lighting, refrigeration and for other household uses."

You conclude that the exemption provided by s. 212.08(7)(j),
F.S., is "based on the use of the electricity for residential
purposes ... and is not based on the characterization of the
user as a resident or transient." The consideration of the
status of the occupant relevant to the imposition of sales tax
on rental payments is irrelevant to the determination of the use
of the electricity for residential purposes. Further, "sales tax
on the rental payments to the landlord is an entirely different
issue."

Your second question seeks a determination as to who is the
responsible party for determining whether the use of electricity
at a particular location is exempt from sales tax. It is your
position that the "... owner/user of electricity at a particular
location is the responsible party for declaring whether the use
is exempt or non-exempt, and in the absence of a declaration,
[Utility] may rely on the apparent use based on the
circumstances (e.g., the location is a single or multi-family
dwelling, apartment, condominium, or time share unit)."

You cite a Department communication which stated that the
Department is guided by the coding given the service by a
utility, unless there is independent knowledge possessed by the
Department that such electricity is used for a non-exempt

purpose. It is your position that "the coding assigned by the
utility may be based on the use that the applicant for the
electric service declares to the utility." It is your position
that Utility does not have an obligation to go beyond the
applicant's request and independently determine whether the use
of the electricity is exempt or taxable.

The third question in your petition requests a determination as
to who is responsible for any assessment determined to be due by
the Department. The fourth question requests further clarity in
determining whether Utility is liable for an assessment
determined to be due by the Department for accounts coded as
residential in reliance on a written statement, agreement, or
affidavit from the account holder/customer.

It is your position that, "absent a patently obvious non-exempt
use, [Utility] should not be liable for failing to collect sales
tax and that any sales tax, interest and penalties should be the
responsibility of the electric account owner and not the
electric utility." You urge that "... when an electric utility
has coded an electric service as residential, and exempt from
sales tax, and it is subsequently determined by the DOR that the
use of the electricity was for non-exempt purposes, the electric
account owner is responsible for the sales tax... together with
any interest and penalties." You further urge that "reliance on
a written statement, agreement, or affidavit should be
conclusive of [Utility's] non-liability for any sales tax,
interest or penalties that may later be deemed to be due."

DISCUSSION AND DETERMINATION

Charges for electricity sold to residential households or owners
of residential models by utility companies that pay the gross
receipts tax are exempt from sales tax. (s. 212.08(7)(j), F.S.)
This is true whether such charges for electricity are separately
metered and billed direct to the residents or are metered and
billed to the landlord. If any part of the electricity is used
for a non-exempt purpose, the entire sale is taxable. There is
no statutory provision for prorating the exempt/non-exempt use.

Electric utility companies, subject to regulation by the Public

Service Commission (PSC), generally classify their accounts as
"residential" and as "non-residential," "business," or similar
classification. The Department takes the position that when a
unit is properly classified as "residential" by an electric
utility company, based on its tariffs filed with the PSC, the
unit will be considered a "residential household" for sales tax
purposes.

The responsibility of determining the existence of a taxable
event and the collection and remittance of sales tax applies to
electric utility companies no differently than to any other
sales tax dealer. Electric utility companies must make a
decision with each customer's account that is opened whether
sales tax should be collected on its charges to that account
owner.

The Department, in determining whether an electric utility
company has properly applied the exemption provided in s.
212.08(7)(j), F.S., is guided by the following provisions.
First, the unit to which the electricity is sold must coded as
"residential," based on its tariffs filed with the PSC. Second,
whether the electric utility provider has on file an application
for services or other certification from the customer attesting
that the electricity is purchased for exclusive residential
household use. The certification may take the form of a separate
document, be part of the application for service, or be made a
part of the customer's utility billing statement. Finally, the
certification must be accepted in good faith by the utility
provider.

The Department will consider charges for electricity to accounts
properly classified by Utility as "residential," based on its
tariffs filed with the PSC, exempt from sales tax if Utility has
on file the required certification, accepted in good faith. See
Motorola v. Green, 130 So.2d 65 (Fla. 1960). In reviewing
accounts that meet these qualifications, the Department is
authorized to look to the account owner for any tax, penalty or
interest due if it determines that the electricity was used for
a non-exempt purpose. The Department will assess tax, plus any
applicable penalty or interest, against Utility for any account
erroneously classified as "residential" in those instances in

which the Utility's records indicate that the account should
have been properly classified as "non-residential," "business,"
or similar classification.

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, your request and
related backup documents are public records under Chapter 119,
F.S., which are subject to disclosure to the public under the
conditions of s. 213.22, F.S. Your name, address, and any other
details which might lead to identification of the taxpayer must
be deleted by the Department before disclosure. In an effort to
protect confidential information, we request you notify the
undersigned in writing within 15 days of any deletions you wish
made to the request, your backup materials or the response.

Sincerely,

Charles B. Strausser, Revenue Program Administrator II
Technical Assistance and Dispute Resolution

/jy
Control No. 37376