Could a Florida vessel contractor prorate sales tax on dyed diesel used to transport property from another state and retrieve property from the high seas?

Plain-English summary

Florida ruled that the contractor's two vessel activities qualified for the statutory sales-tax proration on dyed diesel fuel. Voyages transporting power sources from another state to Florida were interstate commerce, while voyages retrieving expendable property from the high seas and bringing it to Florida were foreign commerce.

The fuel was not described as wholly exempt from Florida sales tax. Section 212.08 required a proration based on the carrier's ratio of intrastate mileage to interstate or foreign mileage for qualifying vessels with Florida mileage during the previous fiscal year. Fuel used exclusively in intrastate commerce did not qualify.

What this means for you

Commercial vessel operators

Document the business purpose and mileage of each voyage. The ruling tied proration to vessels transporting property in interstate or foreign commerce and to the statutory mileage formula.

Fuel purchasers

Authorization to use dyed diesel in a commercial vessel did not itself eliminate sales tax. The TAA separately applied the partial exemption and proration rules in section 212.08.

Common questions

Was transport from another state to Florida interstate commerce? Yes.

Was retrieval from the high seas for transport to Florida foreign commerce? Yes.

Was all dyed diesel for the vessels exempt? No. The ruling authorized proration under sections 212.08(4) and (8), not a complete sales-tax exemption.

Did exclusively intrastate fuel use qualify? No. The quoted statute expressly excluded fuel used exclusively in intrastate commerce from proration.

Citations and references

• Fla. Stat. § 206.874(3)(e)
• Fla. Stat. § 212.05(1)(l)
• Fla. Stat. § 212.08(4)(a)2., (8)(c)
• Fla. Stat. § 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99B5-002

Original ruling text

TAA 99B5002
SUMMARY
The taxpayer requested information on whether the sale of diesel fuel used by vessels engaged in the business of
obtaining salvage from international waters for transport to Florida is subject to the proration of sales tax.
Determination is made that such vessels are engaged in foreign commerce under the provisions of subsections (4)
and (8) of section 212.08, F.S., and are authorized to prorate sales tax on the fuel used by the vessels.

[[March 1, 1999]]

Re:Technical Assistance Advisement No. 99(B)(5)-002
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Chapters 206 and 212, Florida Statutes
I.(hereinafter referred to as Contractor)
II.(hereinafter referred to as Commercial Carriers)
III.(hereinafter referred to as Management)
IV.(Owner A)
V.(hereinafter referred to as Owner B)
VI.(hereinafter referred to as Contract)
VII.(hereinafter referred to as Expendables)
VIII.(hereinafter referred to as Port A)
IX.(hereinafter referred to as Port B)
X.(hereinafter referred to as Power Sources)
XI.(hereinafter referred to as Hometown, USA)
XII.(hereinafter referred to as High Seas)
Dear :
This is in response to your request for a Technical Assistance Advisement regarding dyed diesel fuel used by vessels
engaged in interstate or foreign commerce.
FACTS AS PRESENTED
Under a Contract, Contractor:
... has the responsibility for conducting all aspects of the [Management] operations for [Owner B]....
One service provided by [Contractor] for [Management] operations is the ocean transportation of [Management's
Expendables] from... the [High Seas] to the... facility at [Port A]. Another service is the ocean transportation of
[Management's Power Sources] from the manufacturer's facility at [Hometown, USA] to [Port B]....

In providing transportation services [Contractor] uses two specially configured and modified vessels owned by [Owner
A], the [Commercial Carriers]....
[Contractor] uses the vessels under [Contract] for retrieving [Expendables], from the [High Seas], transporting [Power
Sources] from [Hometown, USA] to Florida,....
As part of the [Contract], responsibility for purchasing the fuel has been shifted to [Contractor]....
Contractor requests that the Department issue an advisement concluding that the purchase of dyed diesel fuel for use
in the Commercial Carriers, under the facts as stated, qualifies as an exempt use pursuant to section 206.874(3)(c),
F.S.
ISSUE 1
This issue is whether Contractor is engaged in interstate or foreign commerce while the Commercial Carriers, owned
by Owner A, but under contract to Contractor, are used to transport Management's Power Sources from Hometown,
USA to Florida. Further, the issue is whether Contractor is authorized to prorate sales tax on dyed diesel fuel used in
the Commercial Carriers.
ISSUE 2
This issue is whether Contractor is engaged in interstate or foreign commerce while the Commercial Carriers owned
by Owner A, but under contract to the Contractor, are used to retrieve and transport, from the High Seas,
Expendables into Florida after the Expendables are caused by Management to be unloaded in the High Seas.
Further, the issue is whether Contractor is authorized the proration of sales tax on dyed diesel fuel used by the
Commercial Carriers.
LAW AND DISCUSSION
As indicated in your request, authorization for the use of dyed diesel fuel is given in paragraph (e) of subsection (3) of
section 206.874, Florida Statutes, on dyed diesel fuel's:
Use in a vessel employed in the business of commercial transportation of persons or property or in commercial
fishing.
The sale of dyed diesel fuel is, however, taxable under the provisions of paragraph (l) of subsection (1) of section
212.05, F.S.,:
At the rate of 6 percent of the sales price of each gallon of diesel fuel not taxed under chapter 206 purchased for use
in a vessel.
Subparagraph 2., of paragraph (a) of subsection (4) of section 212.08, F.S., provides a partial exemption from sales

tax by providing:
... Motor fuels and diesel fuels are taxable as provided in chapter 206, with the exception of those motor fuels and
diesel fuels used by... vessels to transport persons or property in interstate or foreign commerce, which are taxable
under this chapter only to the extent provided herein. The basis of the tax shall be the ratio of intrastate mileage to
interstate or foreign mileage traveled by the carrier's... vessels that were used in interstate or foreign commerce and
that had at least some Florida mileage during the previous fiscal year of the carrier,... such ratio to be determined at
the close of the fiscal year of the carrier. This ratio shall be applied each month to the total Florida purchases made in
this state of motor and diesel fuels to establish that portion of the total used and consumed in intrastate movement
and subject to tax under this chapter. Fuels used exclusively in intrastate commerce do not qualify for the proration of
tax.
Paragraph (c) of subsection (8) of section 212.08, F.S., provides further:
It is the intent of the Legislature that neither subsection (4) nor this subsection shall be construed as imposing the tax
provided by this chapter on vessels used as common carriers, contract carriers, or private carriers, engaged in
interstate or foreign commerce, except to the extent provided by the pro rata formula provided in subsection (4) and in
paragraph (a).
With regard to Issue 1, Contractor's towing of a barge which transports Management's Power Sources from
Hometown, USA to Florida, falls within the partial exemption provisions of s. 212.08(4) and (8), F.S. This specific
business activity of Contractor, likewise, falls within the definition of Interstate Commerce. The Contract between
Contractor and Owner B requires Contractor to enter Hometown, USA for the purpose of towing a barge upon which
Management's Power Sources are placed for importation into Florida. This activity clearly falls within the definition of
interstate commerce which includes:
Literally, commerce between states.
With regard to Issue 2, the Contractor's retrieval of expendables from the High Seas for transport to Port A, also falls
within the partial exemption provisions of s. 212.08(4) and (8), F.S. This specific business activity of contractor is
deemed to be engaging in foreign commerce.
CONCLUSION
We conclude that Contractor is engaged in interstate commerce on the voyages of the Commercial Carriers from
Florida to Hometown, USA to transport Power Sources to Port B. It is further concluded that the Contractor is
engaged in foreign commerce on voyages of the Commercial Carriers to the High Seas for the retrieval of
Expendables for transport to Port A. The activity of the Commercial Carriers in both interstate and foreign commerce
subjects the fuel purchased to the provisions for proration of sales tax found in s. 212.08(4) and (8), F.S.
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 based 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 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 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 the response. Please note that we already have in file some documents
evincing some desired deletions.
Sincerely,
Lynwood Taylor
Senior Tax Specialist
Technical Assistance and Dispute Resolution
LNT/lt
Con. #:34906