Was natural gas used to keep customers' sulfur molten at a Florida terminal exempt as boiler fuel when the terminal also removed explosive hydrogen sulfide?

Plain-English summary

Florida exempted the natural gas used to keep customers' sulfur molten because the terminal was processing the sulfur through air sparging. The terminal did not own or sell the sulfur, but ownership of the raw material was not required under the processing definition the Department applied.

The operator received molten sulfur from another state, stored and heated it at Florida terminals, and loaded it for delivery to customers. Some customers would resell the sulfur; others used it to manufacture fertilizer.

Keeping sulfur molten served the qualifying process

Sulfur normally solidifies at atmospheric temperature. The terminal used natural gas exclusively to keep it molten so it could be stored, handled, tested, and loaded into trucks.

The boiler-fuel exemption required combustible fuel used at a fixed Florida location in manufacturing, processing, compounding, or producing tangible personal property for sale. It also required the purchaser's certificate stating that the fuel was for the designated exclusive use.

Sparging changed the sulfur and removed a hazard

The operator regularly tested for ash, carbon, and hydrogen sulfide. When hydrogen sulfide was too high, it injected compressed air below the liquid surface.

This “sparging” released dissolved hydrogen sulfide from the molten sulfur into the tank vapor space for ventilation. It reduced toxic and explosive gas in the sulfur, storage tanks, and transportation vehicles.

Florida treated sparging as a continuing processing operation. Because the natural gas maintained the molten condition needed for that operation, the fuel qualified for the exemption.

Ownership of the sulfur was not required

Rule 12A-1.096 stated that the business performing a qualifying manufacturing or processing operation might or might not own the raw materials. Florida therefore rejected nonownership as a reason to deny the exemption.

The analysis still focused on the terminal's own Florida operations. The Department declined to rely on the customers' manufacturing activities or the operator's out-of-state activity.

Blending alone was not enough

The operator also pumped sulfur among tanks to distribute impurities and create a uniform product. Florida found that blending did not change the sulfur's molecular structure and was not processing on its own.

The exemption rested on sparging, not merely storage, heating, or blending.

What this means for you

Chemical and bulk-terminal operators

Document the industrial operation the fuel supports. Heating inventory for handling or storage alone may not be enough; here, the terminal proved a continuing process that changed the material by removing hydrogen sulfide.

Businesses processing customer-owned goods

You may qualify even without owning the raw material, but the goods must be for sale and your own operation must satisfy the statutory processing test.

Accountants and tax professionals

Trace fuel use exclusively to the qualifying Florida process and retain the required exemption certificate. Separate qualifying use from general heating, storage, or other terminal consumption.

Common questions

Q: Did the terminal own the sulfur?
A: No. Florida said ownership of the raw material was not required.

Q: Was simply keeping sulfur molten enough?
A: The ruling's exemption rested on the terminal's qualifying sparging process, which required the sulfur to remain molten.

Q: Did blending qualify as processing?
A: No. Florida found that transferring sulfur among tanks to distribute impurities did not change its molecular structure.

Q: What did sparging accomplish?
A: It used compressed air to remove dissolved hydrogen sulfide, reducing toxic and explosive gas risks.

Citations and references

• Fla. Stat. § 212.08(7)(b) — boiler-fuel exemption, exclusive-use certificate, and Florida fixed-location requirement
• Fla. Admin. Code r. 12A-1.043(1) — manufacturing cost and direct-material framework discussed by the Department
• Fla. Admin. Code r. 12A-1.096(1)(d) — processing definition and no raw-material ownership requirement
• Fla. Admin. Code r. 12A-1.096(1)(g) — production-process and multiple-location definition discussed in the request
• Fla. Admin. Code r. 62-296.411 — permitted sulfur forms for Florida storage, handling, and transport

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 04A-029

Original ruling text

SUMMARY

QUESTION: Is the purchase of boiler fuel, which is used to
maintain sulfur in a molten state exempt from sales tax?

ANSWER - Based on Facts Below: Yes. The taxpayer is
engaged in the business which a heated terminal where
owners of sulfur may store their sulfur in its molten
state. The taxpayer does not own any sulfur stored in the
terminal.

The boiler fuel exemption provided in s. 212.08(7)(b),
F.S., states that, "This exemption does not apply to the
use of boiler fuels that are not used in manufacturing,
processing, compounding, or producing items of tangible
personal property for sale." However, a definition of the
phrase "manufacture, process, compound, or produce for
sale," found in Rule 12A-1.096(1)(d), F.A.C., includes the
statement, "The business performing the manufacturing,
processing, compounding, or production process may or may
not own the raw materials."

The taxpayer represents, as a fact of this case, that the
operation of "sparging" sulfur occurs while the sulfur is
maintained in its molten state at the taxpayer's Florida
terminal. The term "sparging," as depicted by the
taxpayer, is the operation of injecting air into the base
of the terminal to expedite the release of hydrogen sulfide
gas (an explosive gas) from the molten sulfur, thereby
minimizing the risk of explosion at the terminal. The
taxpayer argued, and the Department agrees, that the
definition of "manufacture, process, compound, or produce
for sale", and the operation of "sparging" sulfur, act to
include the taxpayer in an industrial operation which
processes sulfur.

Jun 03, 2004

Re: Technical Assistance Advisement #04A-029
Sales Tax on Boiler Fuel
XXX (Taxpayer)

Dear :

This is in response to your letter to Glenn Bedonie dated
October 7, 2003, in which you request advice regarding the
application of sales tax on natural gas used as a boiler fuel to
maintain sulfur in a molten state.

FACTS AS STATED IN LETTER

Taxpayer provides sulfur handling and storage services to
its customers at its facilities located in Florida. The
sulfur is transported from another state to Taxpayer's
Florida facilities where it is stored and heated until such
time as it is to be transported, by truck, to its final
destination in Florida.

Taxpayer does not own the sulfur. Rather, the sulfur is at
all times owned by Taxpayers' customers. There are
generally two types of customers serviced by Taxpayer. One
type consists of persons who intend to sell the sulfur to
third persons. These customers either produced the sulfur
themselves or purchased it from a third party. The other
type of customer consists of manufacturers who purchase the
sulfur for use in their manufacturing operations. These
customers use the sulfur to manufacture fertilizer
products. [Emphasis supplied]

At normal atmospheric temperatures, sulfur is in a solid
state. In order to be stored and transported, however,
sulfur must be heated and converted to a molten state. [In
order to maintain the sulfur in this molten state, Taxpayer
must keep it continually heated.] If the sulfur cools, it
returns to a solid state and cannot be handled [in that
form at the Florida facility.] [Therefore, it is necessary
for Taxpayer to maintain the sulfur in a molten state so
that it can be stored and handled at the facility and
loaded into the trucks that are used to transport the

sulfur to its final destination.] Given the nature of
Taxpayer's facilities and operations, the sulfur is not in
a form that can be sold or used by Taxpayer's customers
unless it is in a molten state.

Taxpayer purchases and uses natural gas at its [Florida]
facilities to heat the sulfur. The gas purchased by
Taxpayer at its [Florida] facilities is used exclusively
for this purpose.

While the sulfur is in its possession, Taxpayer is also
responsible for insuring that the sulfur meets its
customers' contract specifications. As a result, it is
necessary for Taxpayer to regularly test the sulfur for
impurities such as ash, carbon and hydrogen sulfide. If
the impurities exceed contract specifications, Taxpayer
will apply methods such as blending and sparging to reduce
the impurities to acceptable levels.

TAXPAYER'S ARGUMENT

The natural gas purchased by Taxpayer is used as a
combustible fuel. Furthermore, it is used at a fixed
location - i.e., Taxpayer's [Florida] facility.

In addition, the natural gas is used in a "manufacturing,
processing, compounding or production process." Although
these terms are not defined for purposes of section
212.08(7)(b), Florida Statutes, an identical phrase used in
section 212.08(5)(b), Florida Statutes, has been defined in
a Department regulation. Rule 12A-1.096(1)(d), Florida
Administrative Code, provides as follows:

(d) "Manufacture, process, compound, or produce for
sale" means the various industrial operations of
a business where raw materials will be put
through a series of steps to make an item of
tangible personal property that will be sold. The
industrial operations must bring about a change
in the composition or physical nature of the raw
materials. Where materials are merely repackaged

or redistributed, those operations are not
manufacturing, processing, compounding, or
producing for sale. The item of tangible
personal property may be sold to another
manufacturer for further processing or for
inclusion as a part in another item of tangible
personal property that will be sold, or the item
may be sold as a finished product to a wholesaler
or an end consumer. The business performing the
manufacturing, processing, compounding, or
production process may or may not own the raw
materials. However, the phrase "manufacture,
process, compound, or produce for sale" does not
include fabrication, alteration, modification,
cleaning, or repair services performed on items
of tangible personal property belonging to others
where such items of tangible personal property
are not for sale. (emphasis added)

Taxpayer uses the natural gas to heat sulfur to maintain it
in a molten form as opposed to its normal solid state.
Therefore, Taxpayer is maintaining a change in the physical
nature of the sulfur. In addition, when it is necessary
for Taxpayer to reduce the impurities in the sulfur,
Taxpayer is altering the physical content and composition
of the sulfur. Therefore, Taxpayer is engaged in a process
that, according to the Department's rule constitutes
"manufacturing, compounding, processing or production"....

While the sulfur is in its possession, Taxpayer is also
responsible for insuring that the sulfur meets its
customers' contract specifications. As a result, it is
necessary for Taxpayer to regularly test the sulfur for
impurities such as ash, carbon and hydrogen sulfide. If
the impurities exceed contract specifications, Taxpayer
will apply methods such as blending and sparging3 to reduce
the impurities to acceptable levels....

The conclusion that the natural gas is being used in a
manner that qualifies for exemption is reinforced when
examining the issue in the context of the entire process

rather than merely focusing on Taxpayer's [Florida]
operations. Rule 12A-1.096(1)(g), Florida Administrative
Code, provides as follows:

(g) "Production process" or "production line" means those
industrial activities beginning when raw materials are
delivered to the new or expanding business' fixed location
and generally ending when the items of tangible personal
property have been packaged for sale, or are in saleable
form if packaging is not done. However, the production
process may include quality control activities after the
items have been packaged (or are in saleable form if
packaging is normally not done), if such quality control
activities are required by good manufacturing practices or
mandated by state or federal government agencies. The
production process may encompass more than one fixed
location if the business transfers work-in-process from one
fixed location to a second fixed location for further
manufacturing, processing, compounding, or production. For
example, a company purchases machinery and equipment to
produce raw orange juice at one fixed location, and this
raw orange juice is transferred as work-in-process to a
second fixed location where the company will use the raw
orange juice to make five different products.... (emphasis
added)

The emphasized language in the rule makes it clear that the
Department must consider not only Taxpayer's [Florida]
operations but also its [out of state] operations in
determining whether Taxpayer is engaged in manufacturing or
processing. At the [out of state] facility, Taxpayer not
only maintains sulfur in a molten state, it also converts
sulfur from a solid to a molten state. Thus, even if the
Department does not view maintaining sulfur in a molten
state as a manufacturing or processing activity, certainly
the conversion of the sulfur from a solid to a molten state
must be viewed as such. Even though this additional
activity takes place at another location, it must, under
the rule, be considered as part of Taxpayer's entire
operation.

Furthermore, it is important to bear in mind that this
sulfur belongs to customers who produce the sulfur, use the
sulfur to manufacture products or sell the sulfur to those
who manufacture products. If these customers themselves
engaged in the process of heating and purifying the sulfur,
this would certainly be considered to be part of their
manufacturing and production operations. The fact that
Taxpayer performs these services for them should not
operate to recharacterize the otherwise qualified nature of
these activities. Indeed, Rule 12A-1.096(1)(d) obviously
contemplates that third parties may be performing a portion
of the manufacturing or production process by stating that
"[t]he business performing the manufacturing, processing,
compounding, or production process may or may not own the
raw materials".

Therefore, even if Taxpayer's [Florida] activities were
not, standing alone, deemed sufficient to constitute
manufacturing, processing or production, these activities
viewed in concert with either its [out of state] activities
or the activities of the customers who own the sulfur would
certainly be sufficient for this purpose.

In Letter of Technical Advice 03A-648 (the "LTA"), the
Department advised that the boiler fuels exemption did not
apply to Taxpayer's purchases of natural gas. The
reasoning for this determination was stated as follows:

By your own admission, the taxpayer does not own the sulfur.' Thetaxpayer provides sulfur handling and
storage services to its customers.' It is logical to
determine that the taxpayer is then engaged in the
business of leasing or renting real property that is
equipped with boilers that use natural gas to maintain
sulfur in a state required by Rule 62-296.411, F.A.C.
Under this condition, it is also logical to determine
further that the taxpayer is not manufacturing,
processing, compounding, or producing the sulfur for
sale. The taxpayer is merely leasing real property
equipment with boilers to maintain sulfur owned by
others in a state required by the Department of

Environmental Protection.

LTA at page 3.

It appears that the LTA's conclusion is based on the fact
that Taxpayer does not own the sulfur. Clearly, though,
this cannot be the correct answer. As previously
referenced, Rule 12A-1.096(1)(d) states that "[t]he
business performing the manufacturing, processing,
compounding, or production process may or may not own the
raw materials". As a result, the fact that Taxpayer does
not own the sulfur cannot serve as the basis for the
conclusion that Taxpayer is not engaged in a manufacturing
or processing business. Further, the fact that Taxpayer
describes itself as engaged in the business of sulfur
handling and storage does not in any way alter the fact
that, as part of this business, it engages in activities
that qualify as manufacturing and/or processing. In
addition, although its relevance to the issue is unclear,
the statement in the LTA that Taxpayer is leasing the
equipment at the facility is not correct. Taxpayer has a
ground lease with the [Florida facility owner] for one of
its terminals but owns all of the equipment and
improvements at that facility while Taxpayer owns all of
the equipment, improvements and land at its other [Florida]
facility. Finally, the fact that Taxpayer is required by
the Department of Environmental Protection to maintain the
sulfur in a molten state does not call for a conclusion
that the act of maintaining the sulfur in a molten state
does not constitute manufacturing or processing. Indeed,
this requirement serves to emphasize that keeping the
sulfur in a molten form is an essential element of
Taxpayer's operations....

LAW AND DISCUSSION

Section 212.08(7)(b), Florida Statutes (F.S.), provides:

Boiler fuels. -- When purchased for use as a combustible
fuel, purchases of natural gas, residual oil, recycled oil,
waste oil, solid waste material, coal, sulfur, wood, wood

residues or wood bark used in an industrial manufacturing,
processing, compounding, or production process at a fixed
location in this state are exempt from the taxes imposed by
this chapter; however, such exemption shall not be allowed
unless the purchaser signs a certificate stating that the
fuel to be exempted is for the exclusive use designated
herein. This exemption does not apply to the use of boiler
fuels that are not used in manufacturing, processing,
compounding, or producing items of tangible personal
property for sale, or to the use of boiler fuels used by
any firm subject to regulation by the Division of Hotels
and Restaurants of the Department of Business and
Professional Regulation.

The taxpayer asserts, and the Department agrees, that s.
212.08(7)(b), F.S., provides an exemption from sales tax on
purchases of natural gas that is used at a fixed location to
manufacture, process, compound, or produce tangible personal
property for sale. Because the phrase, "manufacture, process,
compound, or produce" is not defined in Chapter 212, F.S.,
specifically for the boiler fuel exemption found in s.
212.08(7)(b), F.S., the taxpayer argues that a definition found
in Rule 12A-1.096(1)(d), F.A.C., may apply for the purpose of
determining whether the taxpayer's use of natural gas qualifies
for the boiler fuel exemption. In Rule 12A-1.096(1)(d), F.A.C.,
the phrase "manufacture, process, compound, or produce for sale"
is defined as:

(d) ... the various industrial operations of a business
where raw materials will be put through a series of steps
to make an item of tangible personal property that will be
sold. The industrial operations must bring about a change
in the composition or physical nature of the raw materials.
Where materials are merely repackaged or redistributed,
those operations are not manufacturing, processing,
compounding, or producing for sale. The item of tangible
personal property may be sold to another manufacturer for
further processing or for inclusion as a part in another
item of tangible personal property that will be sold, or
the item may be sold as a finished product to a wholesaler
or an end consumer. The business performing the

manufacturing, processing, compounding, or production
process may or may not own the raw materials. However, the
phrase "manufacture, process, compound, or produce for
sale" does not include fabrication, alteration,
modification, cleaning, or repair services performed on
items of tangible personal property belonging to others
where such items of tangible personal property are not for
sale.

The taxpayer asserts:

... There are generally two types of customers serviced by
Taxpayer. One type consists of persons who intend to sell
the sulfur to third persons for use in manufacturing
operations (primarily the manufacture of fertilizer
products). These customers either produced the sulfur
themselves or purchased it from a producer. The other type
of customer consists of manufactures who purchase the
sulfur for use in their manufacturing operations. These
customers use the sulfur to manufacture fertilizer
products....

Furthermore, it is important to bear in mind that this
sulfur belongs to customers who produce the sulfur, use the
sulfur to manufacture products or sell the sulfur to those
who manufacture products. If these customers themselves
engaged in the process of heating and purifying the sulfur,
this would certainly be considered to be part of their
manufacturing and production operations. The fact that
Taxpayer performs these services for them should not
operate to recharacterize the otherwise qualified nature of
these activities. Indeed, Rule 12A-1.096(1)(d) obviously
contemplates that third parties may be performing a portion
of the manufacturing or production process by stating that
"[t]he business performing the manufacturing, processing,
compounding, or production process may or may not own the
raw materials"

Be advised, responses given in this Technical Assistance
Advisement are given without regard to sulfur or fertilizer that
is sold by the taxpayer's customers. It is apparent that those

persons are producing tangible personal property for sale. The
responses given in this Technical Assistance Advisement are
limited solely to the "business" or "business operations" of the
taxpayer. The fact that others (taxpayer's customers) may be
involved in a manufacturing process which produces tangible
personal property for sale is not an issue for consideration in
rendering a decision on whether the taxpayer qualifies for the
exemption on purchases of natural gas. Additionally, the
taxpayer's business operations outside Florida are also not a
point of consideration, since the exemption on purchases and
uses of boiler fuel is specifically limited to "a fixed location
in this state."

The information contained in the Taxpayer's request for a
Technical Assistance Advisement is sufficiently clear to
establish that the normal Florida business operation of this
taxpayer does not result in the sale of anything. Again, as
stated by the taxpayer:

... Taxpayer provides sulfur handling and storage services
to its customers at its facilities located in [Florida],
Florida. The sulfur is transported from another state to
Taxpayer's Tampa facilities where it is stored and heated
until such time as it is transported, by truck, to its
final destination in Florida. [Emphasis supplied]

Taxpayer does not own the sulfur....

The taxpayer's statements above establish at least two facts: 1)
the normal business operations of the taxpayer is to provide the
SERVICE of storing molten sulfur for customers; 2) the taxpayer
neither owns nor sells any sulfur while providing the service.
To lawfully provide the service, the taxpayer's terminal located
in Florida must comply with the Florida Department of
Environmental Protection's Rule 62-296.411, F.A.C. That rule
specifies that:

... no person shall cause, suffer or allow elemental sulfur
to be stored, handled or transported within the state in
crushed bulk or slate form or in any form other than
standard sulfur pellets or in molten form, except that

sulfur may be transferred within the boundaries of a single
facility in other forms....

A question then arises: "Is the storage and handling of other
persons property considered a service included in the
manufacturing process?" For guidance in answering this
question, we look first to Rule 12A-1.043, F.A.C., entitled
"Manufacturing," which provides in pertinent part:

(1)(b) Elements of cost will include the following
materials, labor, service, or transportation costs that are
attributable to manufacturing, producing, compounding,
processing, or fabricating an article of tangible personal
property for one's own use and which are properly
chargeable to the cost of the product under generally
accepted cost accounting standards....

(1)(d) Persons who manufacture, produce, compound, process,
or fabricate items of tangible personal property for resale
or for their own use or consumption may purchase direct
materials tax exempt but shall include the cost of the
direct materials when computing tax on the cost of the
items so manufactured, produced, compounded, processed, or
fabricated for such persons' own use or consumption....

The portions of the rule cited above clearly provide a mechanism
for persons engaged in the manufacturing process to purchase
direct materials exempt from sales tax. The rule, however,
requires that the cost of tax-free purchases of direct materials
be included in cost of the tangible personal property sold. The
taxpayer's business operation does not fit this scheme of
taxation. Since the taxpayer's business operations do not
result in the sale of tangible personal property, the cost of
the natural gas purchased by the taxpayer cannot then be
included in the selling price of a product.

At this point, it is determined that the taxpayer is not engaged
in a business operation which manufactures sulfur. The
question, however, arises: "Is the taxpayer engaged in a
business operation which processes the molten sulfur held in
storage at the taxpayer's terminal located in Florida?" The

American Heritage Dictionary, Second College Edition, defines
the term "process" to mean:

1. A system of operations in the production of something.
2. A series of actions, changes or functions that bring
   about an end or result....

The taxpayer asserts:

... While the sulfur is in its possession, Taxpayer is also
responsible for insuring that the sulfur meets its
customers' contract specifications. As a result, it is
necessary for Taxpayer to regularly test the sulfur for
impurities such as ash, carbon and hydrogen sulfide. If
the impurities exceed contract specifications, Taxpayer
will apply methods such as blending and sparging to reduce
the impurities to acceptable levels.

Determination is made that blending molten sulfur (as
characterized in the taxpayer's letter dated December 10, 2003)
is not an act of processing the sulfur. As explained by the
taxpayer, "[b]lending of sulfur is accomplished by pumping
sulfur from one tank into another tank containing sulfur for the
purpose of creating and supplying a uniform product to the
sulfur customers." Blending is merely the transfer of molten
sulfur through a series of tanks to distribute impurities
equally among the several tanks. Blending does not change the
molecular structure of the sulfur.

Is "sparging" sulfur an act of processing the sulfur? In the
same letter received from the taxpayer dated December 10, 2003,
the Taxpayer provided:

... Sparging of liquid sulfur is done by injecting a stream
of compressed air into the sulfur below the surface. The
purpose for sparging is to reduce the dissolved hydrogen
sulfide content of the liquid sulfur stored in the tanks at
the facility. The injected air bubbles provide a means to
desorb the dissolved hydrogen sulfide from the liquid
sulfur and transfer it into the tank vapor space where it
can be removed by natural tank ventilation. Molecular

sulfur exists as an eight-membered ring of sulfur atoms at
the temperatures typically encountered in liquid sulfur
storage tanks. Hydrogen sulfide exists in liquid sulfur as
free hydrogen sulfide molecules and as molecules attached
to the sulfur rings. These two forms of hydrogen sulfide
are in chemical equilibrium in liquid sulfur such that one
form can convert into the other to maintain the natural
ratio of the two chemical forms. Air sparging removes the
free hydrogen sulfide molecules from the liquid sulfur,
thereby upsetting the chemical equilibrium ratio. As air
sparging continues, the hydrogen sulfide molecules attached
to sulfur molecules begin to detach and form free molecular
hydrogen sulfide in the liquid sulfur. With continued
sparging both forms of hydrogen sulfide can be removed from
liquid sulfur.

Air sparging serves to remove excess hydrogen sulfide in a
controlled manner to prevent the accumulation of explosive
gas levels in the vapor spaces of tanks and ultimately land
transportation vehicles that transport sulfur. Hydrogen
sulfide is toxic and its presence in liquid sulfur requires
sulfur terminal personnel and sulfur transport drivers to
observe special safety procedures when handling liquid
sulfur containing hydrogen sulfide. Thus, air sparging
also serves to minimize the risk of exposure of persons to
accidental releases and deadly concentrations of the gas by
removing it from sulfur prior to truck shipment over
Florida roadways.

Liquid sulfur received at the Florida facility meets all of
the permit requirements of the Florida Department of
Environmental Protection. Sulfur blending is performed to
provide a uniform product to the terminal's customers
according to their specifications. Air sparging is done at
the terminal to ensure safe product handling while at the
terminal and during transport over Florida highways to
fertilizer plant customers. Both blending and sparging
produce a change in the composition and physical nature of
the sulfur....

Sparging, as you have described, is the act of injecting a

stream of compressed air into the sulfur below the surface to
reduce the dissolved hydrogen sulfide content of the liquid
sulfur stored in the tanks. Sparging "[removes] excess hydrogen
sulfide in a controlled manner to prevent the accumulation of
explosive gas levels in the vapor spaces of tanks and ultimately
land transportation vehicles that transport sulfur."
Presumption is then made that hydrogen sulfide molecules
attached to the sulfur rings when the sulfur was first converted
from raw sulfur to its initial molten state in the out-of-state
facility. If this presumption is correct, then the act of
sparging occurred first in the out-of state facility, and
sparging at the Florida facility is a continuing process
necessary to expedite the removal of explosive gas from both the
sulfur, and ultimately the terminal. "Sparging" is then
interpreted as a continuing process necessary to minimize the
explosive nature of sulfur while the sulfur is being stored in
its molten state in Florida.

CONCLUSION

Since the definition of the phrase "manufacture, process,
compound, or produce for sale" includes the statement, "[t]he
business performing the manufacturing, processing, compounding,
or production process may or may not own the raw materials,"
determination is first made that the taxpayer is not required to
own the sulfur to qualify for the natural gas exemption found in
s. 212.08(7)(b), F.S. To qualify for the exemption, the
taxpayer merely needs to be engaged in an industrial operation
which produces tangible personal property for sale, and while
engaged in such operation, the taxpayer must either manufacture,
process, compound, or produce sulfur stored at the taxpayer's
Florida terminal. "Sparging" sulfur held at the Florida
terminal is determined to be a continuing process necessary for
removing explosive gas from both the sulfur and the terminal.
Since the taxpayer processes sulfur at the Florida terminal, the
purchase of natural gas used to maintain sulfur in its molten
state at that terminal qualifies for the boiler fuel exemption
found in s. 212.08(7)(b), 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, 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. 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,

Lynwood Taylor
Tax Law Specialist
Technical Assistance
and Dispute Resolution

LNT/lt
Control No. 57096