Was a new water-treatment system exempt machinery for a natural-gas electricity and steam generating facility?

Subject

Construction of Electricity and Steam Generating Facility

Plain-English summary

The new water-treatment system qualified for the machinery-and-equipment sales-tax exemption. The owner originally expected to use an adjacent system, but it proved insufficient for the natural-gas facility's electrical and steam production.

Because the facility could not operate without water, the Department found the new treatment system necessary to produce electrical and steam energy at the fixed location. This advisement supplied the answer that earlier TAA 99A-077 had left open for that equipment category.

What this means for you

The exemption depended on the system's operational necessity and direct role in qualifying energy production, not simply its location at the plant.

Common questions

Q: Was the water-treatment system exempt? Yes.

Q: Why was a new system needed? The existing adjacent system could not support the facility.

Q: What fuel did the facility use? Natural gas.

Citations and references

• Fla. Stat. § 212.08(5)(c)1. — machinery for electrical or steam energy production
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01A-017

Original ruling text

SUMMARY

QUESTION: Contractor and Owner have entered into an
agreement for the construction of an electricity and steam
generating facility that will be fueled by natural gas.
The issue is whether a water treatment system that will
provide water for the operation of the generating plant
will qualify for exemption from Florida sales and use tax
pursuant to Section 212.08(5)(c), Florida Statutes.

ANSWER - Based on the Facts Below: The water treatment
system is necessary in the production of steam and
electrical energy that results from the burning of a boiler
fuel other than residual oil. Therefore, the water
treatment system qualifies for exemption.

Mar 22, 2001

Re: Technical Assistance Advisement 01A-017
Sales and Use Tax
Construction of Electricity and Steam Generating Facility
Section 212.08(5)(c), F.S.

Dear

This is in response to your letter of March 12, 2001, which
requests an amended opinion from the Department with respect to
Technical Assistance Advisement (TAA) 99A-077, dated December
28, 1999. That advisement concerned the construction of an
electricity and steam generating facility (hereinafter
"Facility") by XXX (hereinafter "Contractor") for XXX
(hereinafter "Owner").

ISSUE OF TAA 99A-077

Whether the items listed in Exhibit G of the Agreement
between Owner and Contractor constitute machinery and equipment
necessary in the production of electrical or steam energy and,

therefore, qualify for exemption from Florida sales and use tax
pursuant to Section 212.08(5)(c), Florida Statutes.

REQUEST FOR AMENDMENT

Exhibit G of the Agreement enumerated 28 separate
categories of machinery and equipment to be utilized or
installed at the Facility. The Department expressed an opinion
as to their qualification for exemption on all except seven
categories. Those seven categories were noted in Exhibit G as
either "not included" or "not required." Accordingly, no
opinion was expressed within TAA 99A-077 with respect to those
seven categories.

One of the categories for which no opinion was expressed
was for a water treatment system. That system was noted in
Exhibit G as not included. It is reported that it was the
original intent of Owner to utilize an existing water treatment
system adjacent to the site of the project to properly treat the
water needed to produce electrical and steam energy at the
Facility. It has subsequently become evident that the existing
water treatment system is not sufficient to support the
operation of the Facility. As a result, Owner must construct a
water treatment system to provide water for the operation of the
Facility.

It is your request that the Department amend TAA 99A-077 to
provide that the water treatment system qualifies for exemption
pursuant to Section 212.08(5)(c), Florida Statutes.

RELEVANT AUTHORITY

The following passage from the Florida Statutes (F.S.) is
pertinent to your request for an amended Technical Assistance
Advisement.

Section 212.08(5)(c), F.S. (2000), provides in part:

(c) Machinery and equipment used in production of
electrical or steam energy.-

1. The purchase of machinery and equipment for use at a
fixed location which machinery and equipment are necessary
in the production of electrical or steam energy resulting
from the burning of boiler fuels other than residual oil is
exempt from the tax imposed by this chapter....

DETERMINATION

Section 212.08(5)(c)1., F.S., provides an exemption on
machinery and equipment, which are necessary in the production
of electrical or steam energy. It is clearly evident that an
electrical and steam energy facility cannot operate without
water. Accordingly, the water treatment system, enumerated as
category 6 of Exhibit G, to be constructed by Owner qualifies
for exemption.

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 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 documents 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, which might lead to identification of the
taxpayer, must be deleted before disclosure. In an effort to
protect the confidentiality of such information, we request you
provide the undersigned with an edited copy of your request for
Technical Assistance Advisement, backup material and response
within fifteen days of the date of this advisement.

Sincerely,

Jeffery L. Soff

Tax Law Specialist
Technical Assistance and
Dispute Resolution

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