Who had to prove Florida's residential-electricity exemption, and who owed tax after misuse?

Subject

Sales of Electricity

Plain-English summary

The electricity account owner had the burden of proving entitlement to Florida's residential-household exemption. Exclusive residential use controlled; if any part of a metered sale was used for a nonexempt purpose, the entire sale was taxable.

When the utility followed its filed tariffs and accepted a customer's residential declaration in good faith, the Department said it would pursue the customer for tax, penalty, and interest if the use was actually nonexempt. It would look to the utility when the utility's own records indicated an improper or erroneous classification.

The ruling also treated temporary residential stays as potentially qualifying. Resident-only common facilities could qualify, while commercial use, admission charges, business farm uses, or a temporary sales office could disqualify the affected metered sale.

What this means for you

The account name or length of stay did not decide the exemption. Actual use, meter boundaries, good-faith classification, and supporting records did.

Common questions

Q: Who had to establish residential use? The account owner.

Q: Could mixed residential and nonresidential use share one exempt meter? No; any nonexempt use made the entire metered sale taxable.

Q: Was the utility protected by a customer's affidavit? Generally yes when it followed its tariffs and accepted the declaration in good faith, unless its own records showed an improper classification.

Citations and references

• Fla. Stat. § 212.05(1)(e)1.d. — tax on electrical power or energy
• Fla. Stat. § 212.08(7)(j) — residential household utilities exemption
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00A-071

Original ruling text

SUMMARY

QUESTION 1: Is a utility company responsible for
determining whether the exemption provided for the sale of
electricity to residential households applies to the use of
the electricity at a particular location, or whether the
location owner is responsible for such determination.

ANSWER 1 - Based on Facts Below: It is the burden of the
account owner to establish entitlement to the exemption.

QUESTION 2: Relying upon the customer's written affidavit
that electricity will be purchased and used solely for
residential purposes, the utility company coded the
customer as residential in accordance with its tariff. The
utility company subsequently determines that the sale was
not exempt. Is the utility company or the utility customer
liable to the Department for penalty and interest?

ANSWER 2 - Based on Facts Below: In such instances, the
Department will look to the utility customer for any tax,
penalty, and interest due if the electricity was used for a
non-exempt purpose. The Department will look to the
utility company only when the utility company's records
indicated an improper or erroneous classification.

Nov 08, 2000

Re: Technical Assistance Advisement 00(A)-071
Florida Sales Tax Imposed on Sales of Electricity
Sections 212.08(7)(j), F.S.
Taxpayer: XXX. ("Taxpayer")
FEI: XX

Dear

This response is to your petition of September 29, 2000,
requesting the Department's issuance of a Technical Assistance

Advisement (TAA) pursuant to s. 213.22, F.S., and Ch. 12-11,
F.A.C., on behalf of the referenced Taxpayer regarding the
referenced matter. The Department has carefully examined your
request and supporting documents and finds them to be in order.
Therefore, the Department is hereby issuing the requested TAA to
the referenced Taxpayer.

DISCUSSION OF ISSUE

The issue is the application of section 212.08(7)(j), F.S.,
which provides an exemption for "sales of utilities to
residential households or owners of residential models," to a
number of factual situations. A discussion of each of these
factual situations will be provided after a general discussion
of the issue at hand. You have asked whether the utility
company is responsible for determining whether the exemption
applies to the use of electricity at a particular location, or
whether the location owner is responsible for such
determination.

You have also requested a determination based on the following
situation. Relying upon the customer's written affidavit that
electricity will be purchased and used solely for residential
purposes, the utility company coded the customer as residential
in accordance with its tariff. The utility company subsequently
determines that the sale was not exempt. Is the utility company
or the utility customer liable to the Department for penalty and
interest?

STATUTORY LAW

Section 212.05(1)(e)1.d., 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 nonexempt purpose, the entire sale is taxable. The
landlord shall provide a separate meter for nonexempt
utility or fuel consumption. For the purposes of this
paragraph, licensed family day care homes shall also be
exempt.

DISCUSSION

The Statute. Prior to discussion of specific factual
situations, several points should be made concerning section
212.08(7)(j), F.S.

1. The statute exempts sales of utilities "to residential
   households." The statute also states, however, that if any part
   of the utility is used for a nonexempt purpose, the entire sale
   is taxable. Thus, the statute contains two requirements: (1)
   the sale must be to residential households, and (2) there can be
   no use for a nonexempt purpose. Another way of stating the
   second requirement is that the use must be exclusively for
   exempt purposes, which, in the context of the statute, must be
   taken to mean for "residential" purposes.

2. The statute states that it makes no difference whether the
   sales of utilities "are separately metered and billed direct to
   the residents or are metered and billed to the landlord." Thus,
   it makes no difference in whose name the meters are listed.

3. From the focus on "use" of the property, as well as the
   statement that it makes no difference whether the actual
   residents receive the bill, it can be inferred that the
   legislature was concerned with the use of the residents or
   occupants and not the use of the landlord. That is, the
   landlord of an apartment building might own and operate

literally hundreds of apartments for commercial gain, and if the
statute required focus on the landlord's use, all apartment
residents would be taxed on their purchases of utilities, even
though the apartments were their only and permanent residences.
The same is true of a landlord who owns multiple single-family
houses that are rented to individual families. That rental
business might be the landlord's sole livelihood, yet the fact
that the landlord is in business does not prevent the houses
from qualifying as "residential households."

4. Because it is the use of the occupant of the residential
   household with which the statute is concerned, the occupant must
   use the household exclusively for residential purposes. In
   other words, he or she must make the household his or her
   residence, temporary or permanent, and engage in no use other
   than residential.

5. If there is only one meter for multiple units and,
   accordingly, only one charge for electricity, it is that charge
   or "sale" that must qualify under the statute. That sale must
   be to "residential households" for exclusively residential use.
   Although the sale can be to the landlord of the residential
   households, if any part of the use is non-residential, the
   entire sale is taxable. Thus, if the landlord uses part of the
   electricity for his own purposes, which are not exclusively
   residential, the entire sale to the complex is taxable. Or, if
   there is one occupant of a multiple-unit complex that is making
   a non-residential use of the unit, the sale to the entire
   complex is taxable. On the other hand, if the units are
   individually metered, so that a separate sale is being made to
   each unit, then each sale must be individually considered under
   the statute.

Residential facilities include multiple unit structures where
each unit, room, or accommodation is intended for use as a
private temporary or permanent residence, but does not include a
facility that is intended for commercial or industrial purposes.
The typical hotel or motel cannot qualify for the exemption
because the hotel or motel may use some of the electricity for
its own commercial purposes. (In other words, not all of the
electricity is being passed through for the use of residents,

however temporary. Some of the electricity is being directly
used by the landlord). Even though a hotel may have units on its
property that are individually metered, the units continue to
remain a part of the facility that is used for commercial
purposes. As such, these separately metered units would not be
classified as "residential," based on a utility's tariffs filed
with the Public Service Commission, and would not qualify for
the exemption.

6. Section 212.03, F.S., dealing with transient rentals, has
   nothing whatsoever to do with section 212.08(7)(j), F.S. There
   are no cross references, and the statutes have entirely
   different purposes. It merely confuses the issues that must be
   examined under section 212.08(7)(j), F.S., to think in terms of
   the test for transient rentals under section 212.03, F.S. The
   landlord of an apartment building in which every apartment is
   subject to annual leases is just as much in business as is the
   landlord of an apartment building in which there are no leases,
   or in which every lease is month-to-month. As noted under point
   four, it is not the use of the landlord that is of concern under
   section 212.08(7)(j), F.S.; it is the use of the apartment
   occupant.

7. The statute imposes no requirements as to ownership (whether
   the property is owned by a hotel company, a partnership, a
   corporation, or other entity), no requirements as to type of
   business (whether the property is operated as a hotel, marina,
   apartment building, or RV park), no requirements as to
   advertising (whether the properties are being held out for
   short-term or long-term rental), and no requirements as to type
   of units (whether the units are apartments, cottages, rooms,
   houses, or condominium units). Those factors are simply not
   relevant to the application of the statute.

8. It is the burden of the account owner to establish
   entitlement to the exemption. The account owner must establish
   from its books and records that it is entitled to the exemption
   because a particular unit was used exclusively for residential
   purposes. See Department of Revenue v. Anderson, 403 So.2d 397
   (Fla. 1981); Housing by Vogue, Inc. v. Department of Revenue,
   403 So.2d 478 (Fla. 1 DCA 1981); Pioneer Oil Co. v. Department

of Revenue, 401 So.2d 1319 (Fla. 1981), affirmed, 422 So.2d 3
(Fla. 1982); State ex rel. Szabo Food Services, Inc. v.
Dickinson, 286 So.2d 529 (Fla. 1973).

Responsibilities of Utility Companies. In TAA 98A-068R, we
stated the responsibilities of utility companies in connection
with the exemption provided in section 212.08(7)(j), F.S. We
stated that an electric utility company must make a decision
when a customer's account is opened whether sales tax should be
collected on its charges to the customer. We stated that the
Department would accept the utility company's decision when the
following three factors were present:

1. The unit to which the electricity is sold must be coded as
   "residential," based on the utility company's tariffs filed with
   the Public Service Commission.

2. The utility company must have on file an application for
   services or other certification from the customer attesting to
   the fact that the electricity is being purchased for exclusive
   residential household use. We stated that the certification
   need not be a formal document; it could be as part of an
   application for service, or it could be inferred from a pattern
   of billing statements that referred to the service as being
   residential.

3. The utility company must have accepted the certification in
   good faith.

We noted that even though the utility company's classification
would not be disturbed when those three factors were present,
the Department would look to the account owner for any tax,
penalty, and interest due if the electricity was used for a nonexempt purpose. The Department would look to the utility
company only when the utility company's records indicated an
improper or erroneous classification.

PRESENTATION AND RESPONSES TO FACTUAL SITUATIONS

1.a. A residence that is rented out on a daily or weekly
basis[,] such as a second home, condominium or trailer in

a mobile home park[,] where the account is in the name of
the owner rather than the occupant, a real estate company
or other company and may have an out of state address.

b.

A residence that is rented out on a daily or weekly
basis[,] such as a second home, condominium or trailer in
a mobile home park[,] where the account is in the name of
a real estate company or other company.

c.

A residence that is rented out on a daily or weekly
basis[,] such as a second home, condominium or trailer in
a mobile home park[,] where the account is in the name of
an out-of-state company.

The requirements of section 212.08(7)(j), F.S., are that (1) the
electricity be sold to a "residential household" and (2) the
electricity be used exclusively for residential purposes.
Therefore, it is the use of each second home, each unit of a
condominium, and each mobile home or "trailer" located in a
mobile home park that is determinative. Although each of these
types of residential units may qualify as "residential
households" in the sense that each is occupied by someone
residing there, either permanently or temporarily, it is
possible that some of the units may be used for commercial
purposes, such as an individual conducting a commercial business
from the unit.

To the extent that each second home, each unit of a condominium,
and each mobile home or "trailer" located in a mobile home park
is (1) separately metered and (2) used exclusively for
residential household purposes, either permanently or
temporarily, the exemption provided in s. 212.08(7)(j), F.S.,
would apply. It makes no difference in whose names the meter
accounts are listed.

1.d. When a landlord or reality company transfers a
residential electric service to their name during the
cleanup between renters or to show a unit for sale or
rental.

The transfer of residential electric service for a "unit" to the

property owner, or reality company, between renters is not
determinative of whether the electric service is exclusively for
residential use. In the event that the use of the unit during
periods between renters is for the purpose of cleaning the unit
and showing the unit to prospective renters, the use of the unit
remains exclusively for residential household use. In the event
that the landlord or reality company uses the unit for any nonresidential purpose, such as a temporary office, the sale of
electric service to the unit becomes taxable.

1.e. A well pump, pool and/or other common facilities/areas
used by the residents and served by meter that is in the
name of the Homeowner's Association. If exempt, what
documents are required to secure the exception? See TAA
92A-062, TAA 90A-005, TAA 85A-016.

Residential cooperatives, condominiums, timeshares, mobile home
parks and similar multi-unit complexes contain common elements
that are available for use to all residents of the complex or
park. Pool areas, club houses, benches, sidewalks, playgrounds,
tennis courts, and similar recreational facilities are often
provided without charge for the use by all residents of the
complex or park. Although these common elements are not
contiguous to each residential unit or park space, they are
provided as an extension to each residential unit or park space.
To the extent that the use of the common elements is limited to
residential use, the electricity provided to the common elements
would qualify for the exemption. The fact that an electric
meter account is in the name of the Homeowner's Association of
the complex or mobile home park does not disqualify the
residential household use of electricity in elements common to
all residential units or park spaces. It should be noted that
any non-residential use of electricity in the common elements,
such as admission charges to enter the pool or other
recreational areas, would disqualify the sale from exemption.

1.f. Campsite or marina hookups that are individually metered
and rented to mobile units (i.e.[,] Recreational
vehicles, yachts) for residential use under the utility's
tariff and the electric accounts are in the name of the
campsite or marina rental sites. See TAA 86A-018. If

exempt, what documents are required to secure the
exemption?

As each campsite or marina hookup is individually metered, it is
the use of each campsite or marina hookup that would be
determinative; the use must be for residential purposes,
transient or long-term. The owner of the campsite or marina
hookup must establish the use of the electricity for each meter.
When the owner provides an electric account to a campsite or
marina hookup where such electricity is used by the temporary or
long-term resident for residential household purposes, the use
of the electricity qualifies for exemption. When the owner uses
any portion of the electricity passed through the meter for
purposes other than providing the resident at the campsite or
marina hookup electricity for residential household usage, the
entire sale is taxable.

To exempt the sale of electricity, the campsites or marina
hookups must be coded as "residential," based on Taxpayer's
tariffs filed with the Public Service Commission. Taxpayer must
have on file an application for services or other certification
from the owner of the campsite or marina that the electricity
for that account is being purchased for exclusive residential
household use. Further, Taxpayer must have accepted such
application or certification in good faith.

1.g. Campsite or marina hookups that are individually metered
and rented to mobile home units for residential use under
the utility's tariff and the owner of the campsite
charges a usage fee to its renters for electricity use
rather than the actual cost of electricity.

See the discussion provided in the response to 1.f. The fact
that the owner charges each tenant a usage fee for the
electricity, rather than the actual cost of the electricity,
does not alter the usage of the electricity. The usage of the
electricity is determinative of whether the charge qualifies for
the exemption provided for residential household usage of
electricity.

1.h. Barns and other [outbuildings] on a farm where the

electric customer lives on the farm and sells crops
raised on the farm, but the buildings are separately
metered from the residence.

Here again, the use of the barns and other outbuildings on the
farm to which the electricity is separately metered must be
examined to determine whether the use of the electricity is
limited for exclusively residential household purposes. In this
instance, the electricity in the barns and other outbuildings is
used in the process of producing agricultural products for sale,
an activity which extends beyond exclusive residential household
use. Although the separate sale to the residence qualifies for
the exemption provided for residential household use, the sale
to the separately metered barns and other outbuildings does not
qualify for the exemption.

1.i. Drinking water wells on the resident's farm used
primarily to serve the house but also used for watering
troughs (separately metered from the home).

In this instance, we must examine whether the electricity used
to provide water to troughs is beyond that for exclusive
residential household use. The use of electricity to provide
water for animals that are a part of the household would not
disqualify the residential household use of the electricity.
However, in the event that the electricity is used in providing
water in troughs for animals used in a for-profit agricultural
endeavor, that use would disqualify the entire sale of
electricity to the drinking well. The owner of the farm must
establish the use of the water. In the event that the
electricity is used for exclusive residential household
purposes, Taxpayer is required to maintain the documentation, as
previously discussed.

1.j. Time shares and/or condominiums used for vacations by
various owners.

Each timeshare unit and each condominium unit may be a
residential household, even though in this case the occupant may
be residing in the unit on a temporary basis. To the extent
that use of electricity to each unit is used for residential

household purposes, the exemption would apply. However, in the
event that any unit is used for non-exempt purposes while it is
not being used as a temporary residence, such as a temporary
sales office, that unit would be disqualified from the
exemption.

CONCLUSION

It is particularly important to note that the concepts of
section 212.03, F.S., have no application to the exemption
granted under section 212.08(7)(j), F.S. The length of
residence in a unit is not relevant: a unit used for overnight
stays may qualify as a residential household. The important
point is that there be no non-residential use of the "sale" of
the electricity. That is, there can be no use of the
electricity by the operator or landlord of a multiple-unit
complex with one meter (other than for the operator's or
landlord's own residential purposes) or by an occupant of a
unit.

Utility companies have limited responsibilities in connection
with the exemption. If Taxpayer acts in accordance with its
filed tariffs and accepts in good faith a customer's declaration
that the service is residential, the Department will not pursue
Taxpayer for any erroneously classified accounts. The
Department will, however, look to the account owner, and the
account owner has the burden of showing entitlement to the
exemption.

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., 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.

Sincerely,

Janet L. Young
Tax Law Specialist

JLY/pb
Control No. 42599