Were wholesale electricity purchases and sales exempt from Florida sales, use, and gross receipts tax?

Plain-English summary

Florida found that electricity bought and sold for wholesale resale was not subject to sales or use tax when the seller obtained proper resale certificates.

The transactions also avoided gross receipts tax when they occurred under qualifying electrical interchange agreements or contracts. The TAA said the result was the same whether the sales took place inside or outside Florida.

Common questions

What supported the sales-tax exemption? Proper resale certificates.

What supported the gross-receipts-tax treatment? A qualifying electrical interchange agreement or contract.

Did transaction location change the result? No, according to the TAA.

Citations and references

• Fla. Stat. §§ 203.01, 203.012(9)
• Fla. Stat. § 212.05
• Fla. Admin. Code R. 12A-1.038
• Fla. Admin. Code R. 12B-6.004
• Fla. Stat. § 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99A-011

Original ruling text

SUMMARY

A determination concerning the applicability of sales or
use tax, and gross receipts tax, to the purchase or sale of
electricity by a corporation formed by three electric
utilities for resale to other wholesalers or utilities.
Sales are not subject to sales or use tax, or gross
receipts tax, if proper resale certificates are obtained in
connection with the sales, or the sales, in the case of the
gross receipts tax, are part of an electrical interchange
agreement or contract. It makes no difference whether the
sales take place in or out of Florida.

Mar 08, 1999

Re: Technical Assistance Advisement 99A-011
Gross Receipts Tax; Sales & Use Tax - Purchase and Sale of
Electricity
Sections 203.01; 203.012(9); 212.05, F.S.
Rules 12A-1.038; 12A-1.064; 12B-6.004, F.A.C.
XXX ("Corporation")

Dear :

This is in response to your letter dated XX, for the
Department's issuance of a supplemental Technical Assistance
Advisement ("TAA") concerning the above referenced party and
matter. Your letter has been carefully examined and the
Department finds it to be in compliance with the requisite
criteria set forth in Chapter 12-11, F.A.C. This response to
your request constitutes a TAA and is issued to you under the
authority of section 213.22, F.S.

Discussion of Facts

The basic facts are as set forth in our TAA (TAA No. 98A-003)
addressed to you on XX. They may be briefly stated as follows:

Corporation is a XXX corporation comprised of three
members. Each member owns and operates electricity
generation and transmission facilities and is engaged in
the business of selling and buying electricity to and from
wholesale customers. One of the purposes of the
Corporation is to maximize the efficient use of energy
resources.

The Corporation may purchase electricity from sources
within Florida as well as sources out of Florida. The
Corporation may also sell electricity within Florida and
outside Florida. The purchase and sale may involve
electricity never transmitted across Florida lines. All
purchases are for resale, and all sales are to other
wholesalers or utilities, who in turn resell to others.
Some of the sellers and purchasers may be registered in
Florida as dealers for gross receipts tax and sales tax,
while others may have no contact with Florida and may not
be registered in Florida.

Requested Advisements

You ask that we elaborate on our answer to issue 3, set forth in
TAA No. 98A-003, to the extent that it discusses purchases of
electricity outside Florida.

You ask for our review of the resale certificate form, for
purchasers doing business in Florida, attached to your letter as
Exhibit 3.

You ask for our review of the resale certificate form, for
purchasers not doing business in Florida, attached to your
letter as Exhibit 4.

Discussion and Analysis of Law

Advisement (1). Issue 3 was stated in TAA No. 98A-003 as
follows:

How does the location of the seller of the electricity, in
Florida or out of Florida, affect the taxability of the

sale for gross receipts tax or sales tax?

Under your specific facts, all sales are for resale to other
wholesalers or utilities. In such circumstances, as we described
in TAA No. 98A-003, the sales are not subject to sales or use
tax, or gross receipts tax, if proper resale certificates are
obtained in connection with the sales, or the sales, in the case
of the gross receipts tax, are part of an electrical interchange
agreement or contract under section 203.01(3)(b), F.S. See
Department of Revenue v. Anderson, 403 So.2d 397 (1981), for a
discussion of the requirements of following the resale
certificate procedure set forth in Rule 12A-1.038, F.A.C. If
the resale certificate procedure is followed and the sales are
pursuant to interchange agreements, it makes no difference
whether the sales take place in or out of Florida: the sales
will not be subject to sales or use tax, or gross receipts tax..

Advisement (2). The resale certificate form attached to your
letter as Exhibit 3 appears to contain all of the elements
required for resale certificates under Rule 12A-1.038, F.A.C.,
which states that a certificate shall contain a statement to the
effect that a purchase is for resale and contain the date,
purchaser's name, address, dealer's certificate of registration
number and effective date of the certificate, and the dealer's
signature (or that of his authorized representative).

Your form also appears to comply with Rule 12B-6.004, F.A.C.,
which sets forth the required elements of a resale certificate
for gross receipts tax purposes. The certificate shall be dated
and executed by an officer or authorized representative of the
vendee, contain the name and address of the vendee, the gross
receipts tax registration number and its effective date, and the
vendee's statement that its purchases are for resale and that
the vendee shall pay the tax on things or services that are not
resold.

Advisement (3). The resale certificate form attached to your
letter as Exhibit 4 appears to contain all of the elements
required for resale certificates under Rule 12A-1.064, F.A.C.,
for sales tax purposes.

For purposes of the gross receipts tax, however, please note
that in order for a sale to a purchaser who intends to resell
outside the state of Florida to be exempt, the sale must be
pursuant to an electrical interchange agreement or contract as
described in section 203.01(3)(b), F.S., which provides:

The sale of electricity to a public or private utility,
including a municipal corporation or rural electric
cooperative association, for resale within the state, or as
part of an electrical interchange agreement or contract
between such utilities for the purpose of transferring more
economically generated power....

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 upon 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 from that which is expressed in this response.

You are further advised that this response and your request 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 that might lead
to identification of the taxpayer must be deleted by the
Department before disclosure. In an effort to protect the
confidentiality of such information, we request you notify the
undersigned in writing within 15 days of any deletions you wish
made to the request or this response.

Should you have any further questions concerning this matter,
please do not hesitate to contact me.

Sincerely,

Robert D. Heyde
Senior Attorney

Technical Assistance & Dispute Resolution
Control #35759