Were utility charges for a homeowners association's separately metered entryway, clubhouse, pools, and cabana exempt from Florida sales tax?

Plain-English summary

A homeowners association serving 212 single-family homes paid separately metered utility accounts for three areas: the development entryway, a clubhouse complex, and a cabana complex. The electricity and water supported landscaping, lighting, bathrooms, refrigeration, pool equipment, outdoor showers, and recreational facilities.

Florida held that all three were common areas of a residential facility and that their utility charges were exempt. The facilities were maintained through mandatory homeowner assessments, used in connection with the residential community, restricted to association members, residents, and their guests, and not held open to the public. Residents paid no rental or admission fee to use them; a clubhouse reservation required only a cleaning or damage deposit.

The Department explained that a residential common area need not be inside a home or even contiguous to every residence. Roads, parks, pools, playgrounds, and similar shared spaces can qualify when they serve the residents.

The exemption is all-or-nothing for each meter. If any electricity measured by a particular meter is used for a nonresidential or commercial purpose, the entire sale through that meter becomes taxable. Because the entryway, clubhouse, and cabana each had its own meter, each account had to be analyzed separately.

What this means for you

Residential use extends beyond the dwelling walls

Utilities can qualify when they serve shared outdoor or recreational areas that fill residents' needs, not just electricity consumed inside individual homes.

Access and charges matter

The strongest facts were that use was limited to owners, residents, and guests, the facilities were not offered to the public, and no fee was charged for access or reservations.

Separate meters contain the risk

Any nonexempt use on a mixed meter disqualifies the whole utility sale. Separately metering commercial or public-facing functions prevents that use from contaminating otherwise exempt residential accounts.

Association assessments did not become facility admission fees

Homeowners paid monthly assessments for maintenance and community welfare, but they did not pay a separate charge to enter or reserve these facilities. The ruling treated the areas as residential common amenities.

Common questions

Q: Were the entryway utilities exempt?
A: Yes. Landscape irrigation and nighttime illumination at the residential entryway qualified as common-area use.

Q: Were the clubhouse, pool, tennis, and cabana utilities exempt?
A: Yes, because the facilities were restricted to residents and guests and provided without a usage fee.

Q: Did a cleaning or damage deposit make a clubhouse reservation taxable?
A: No. The facts stated that no rental fee was charged; only a cleaning or damage deposit was required.

Q: What happens if one meter also serves a commercial use?
A: The ruling says any nonexempt use on that meter makes the entire utility sale through the meter taxable.

Citations and references

• Fla. Stat. § 212.05(1)(e)1.c. (general tax on electric power or energy)
• Fla. Stat. § 212.08(7)(j) (utilities sold for residential-household use)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)
• Fla. Admin. Code r. 12A-1.053(1)(a) (residential common-area electricity)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 09A-004

Original ruling text

SUMMARY
QUESTION: Are utility charges for an entryway, clubhouse area, and cabana area exempt from
sales tax?
ANSWER: Yes, each of the three areas is a common area of a residential facility and the utility
charges are exempt from tax.
January 16, 2009
XXX
XXX
XXX
XXX
Re:

Technical Assistance Advisement 09A-004
Common Area Utility Charges
Section 212.08(7)(j), Florida Statutes (F.S.)
Rule 12A-1.053(1), Florida Administrative Code (F.A.C.)

Dear XXX
This is a response to your letter dated November 10, 2008, in which you have requested a Technical
Assistance Advisement on whether utility charges paid by a homeowners’ association for common
areas are subject to sales tax.
Stated Facts
The Association is comprised of all the owners of 212 single-family homes. Pursuant to the
Association’s Articles of Incorporation, Article IV, Association membership is “appurtenant to and
may not be separated from ownership of any Unit which is subject to assessment by the
Association.” The Declaration of Covenants, Conditions and Restrictions [“the Declaration”],
Article II, Section 1(b), for the subdivision states the right of the Association to “charge assessments
for improvement to and maintenance of lots and the Common Area and for common facilities
situated upon any Common Area or provided by the Association as a common facility ….” The
association charges all homeowners $142.00 per month, which is “used exclusively to promote the
recreation, health, safety and welfare of the owners of the Property and for the improvement and
maintenance of the Common Area and any easement appurtenant thereto,” pursuant to the
Declaration, Article IV, Section 2. The Declaration, Article I, Section 4, defines “common area” as
“all real property … owned by the Association for the common use and enjoyment of the owners.”
The common areas that are the subject of this request are the entryway; the clubhouse, with
swimming pool, tennis courts, and shuffleboard courts; and the cabana, with swimming pool. Each
of the three areas is separately metered and has a separate utility account number. The electricity
and water are used in these areas as follows:

1. Entryway: landscape irrigation and nighttime illumination;

2. Clubhouse: landscape irrigation, nighttime illumination, utility service to the clubhouse for
   refrigeration and bathroom facilities, and utility service to the swimming pool, including
   pool equipment and outdoor shower;
3. Cabana: landscape irrigation, nighttime illumination, utility service to the cabana for lighting
   and bathroom facilities, and utility service to the swimming pool, including pool equipment
   and outdoor shower.
   Use of the clubhouse, cabana, and recreational areas is provided without charge to all Association
   members, residents and residents’ guests. Access to these areas is restricted and Association
   members are granted keys. The Association Rules & Regulations state that the “use of the
   clubhouse will be limited to the Association or resident-sponsored activities.” The clubhouse may
   be reserved by any adult resident and a cleaning and/or damage deposit is required; however, no
   rental fee is charged for the reservation or use of the facility.
   Taxpayer’s Position
   Taxpayer argues that utility charges for the common areas are exempt from sales tax pursuant to s.
   212.08(7)(j), F.S., and Rule 12A-1.053(1)(a), F.A.C., as the sale of utilities to a residential
   household.
   Applicable Authority and Discussion
   Section 212.08(7)(j), F.S., states:
   (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.
   Rule 12A-1.053(1)(a), F.A.C., states:
   (1)(a) The sale of electric power or energy by an electric utility is taxable. The sale
   of electric power or energy for use in residential households, to owners of residential
   models, or to licensed family day care homes by utilities who are required to pay the

gross receipts tax imposed by Chapter 203, F.S., is exempt. Also exempt is electric
power or energy sold by such utilities and used in the common areas of apartment
houses, cooperatives, and condominiums, in residential facilities enumerated in
Chapters 400 and 429, F.S., and in other residential facilities. However, if any part of
the electric power or energy is used for a non-exempt purpose, the entire sale is
subject to tax.
Generally, sales of electricity are taxable transactions. See Section 212.05(1)(e)1.c., F.S. However,
the sale of electricity is exempt when the electricity is 1) sold to a residential household, and 2) no
portion of the electricity is used for a nonexempt purpose. See Section 212.08(7)(j), F.S., quoted
above. In administering the exemption provided in s. 212.08(7)(j), F.S., the Department has
determined that “residential household use” does not require that the electricity be used solely inside
a residence. Rather, electricity used for residential purposes outside of the residence, or within a
common area of a residential facility, may also qualify under the residential household exemption.
See Rule 12A-1.053(1)(a), F.A.C., quoted above.
The term “common area” is not specifically defined in either the Florida Statutes or the Florida
Administrative Code relating to tax issues. However, that term is generally understood to mean any
portion of a development that is not included within the private living quarters. Therefore, in a
residential development, the common area could include roads within the development, parks, area
pools, playgrounds, and the like. The area does not have to be contiguous to each residential unit or
space to qualify as a common area.
The second requirement of s. 212.08(7)(j), F.S., is that no part of the electricity be used for a
nonexempt purpose. This requirement means that the exemption does not apply if any of the
electricity is used for a commercial purpose. In fact, the statute provides that any nonexempt use of
the electricity disqualifies the whole amount from exemption. See Section 212.08(7)(j), F.S.
Therefore, if one meter is used for multiple areas, and any of the areas is nonresidential in nature,
then the entire sale of electricity through that meter would be subject to tax. Where more than one
meter serves a residential area, the use related to each meter must be individually analyzed to
determine whether the exemption applies.
If the use of a common area is in conjunction with the operation of the residential households or fills
the needs of residents, is intended for the exclusive use of the owners, tenants, and guests, is not held
out for use by the public, and no charge is made for the use of the area, such use is covered by the
exemption provided in s. 212.08(7)(j), F.S. Any nonresidential use of electricity on the same meter
will disqualify the entire sale from exemption.
Your letter specifically seeks guidance on the utilities used for an entryway, a clubhouse area, and a
cabana area. Each of the areas qualifies as a common area of the residential facility. Each of the
three areas is separately metered. Homeowners pay a monthly charge to the association, which is
used for the improvement and maintenance of lots, the common area, and common facilities situated
on any common area. Residents may use the areas without charge and the recreational facilities are
restricted to residents and their guests. Applying the law to the specific uses provided in your letter,
utility charges for the entryway, clubhouse, and cabana areas would all qualify for exemption.

Advisement
The entryway, clubhouse, and cabana areas are all common areas of a residential facility. Utility
charges for each of those areas are exempt from tax pursuant to s. 212.08(7)(j), F.S., and Rule 12A1.053(1), F.A.C.
Closing Statement
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.
If you have any further questions with regard to this matter and wish to discuss them, you may
contact me directly at (850) 488-9669.
Sincerely,

Tammy S. Miller
Senior Attorney
Technical Assistance & Dispute Resolution
Record ID:

54555