How did Florida apply gross receipts tax and sales tax to an electric utility's net-metering bills?

Plain-English summary

An electric utility asked how Florida's utility gross receipts tax and sales tax applied when customers generated renewable electricity and used net metering. During each billing period, the utility offset the electricity delivered to the customer by the excess electricity the customer sent back to the grid and charged only for the net amount.

The Department held that the utility should calculate both taxes from the net billed charge, not the gross value of electricity moving in each direction. Its example was straightforward:

• Electricity consumed from the utility: $100
• Credit for excess customer-generated electricity: $25
• Net amount billed: $75

The distribution company owed gross receipts tax on the $75 it received for utility service. If the customer's electricity purchase was subject to sales tax, the utility also collected sales tax on the same $75 charge.

Two qualifications mattered. Electricity sold to a residential household was exempt from sales tax under section 212.08(7)(j). And the customer's excess electricity ultimately resold by the utility to other customers was treated as an exempt sale for resale under Rule 12A-1.039.

What this means for you

Net-metering credits reduce the billed tax base

Under this 2009 ruling, the utility's gross receipts were the money actually charged after the generation credit. The sales-tax base followed the same net bill when the underlying retail electricity sale was taxable.

Residential and nonresidential customers can differ

The ruling expressly notes Florida's residential-household electricity exemption. A net-metered business customer's billed electricity could still be taxable even though a residential customer's purchase was exempt.

Customer-generated power was treated as inventory for resale

The utility placed the customer's excess generation on the grid and billed other customers for it. The Department therefore treated the credit for that power as an exempt resale transaction rather than a taxable retail purchase by the utility.

The quoted rates are historical

The ruling applied a 2.5% gross receipts tax rate and a 7% sales tax rate in 2009. Verify current rates, exemptions, and net-metering rules before using the numerical example today.

Common questions

Q: Does Florida tax the electricity delivered before the net-metering credit?
A: Not under the approach stated here. The taxes were calculated on the net charge after the credit, such as $75 after offsetting a $25 credit against $100 of consumption.

Q: Is residential net-metered electricity subject to sales tax?
A: The ruling notes that sales of electricity to residential households are exempt under section 212.08(7)(j).

Q: What about the customer's excess electricity sent to the grid?
A: Because the utility resold that electricity to other customers, the credit was treated as an exempt sale for resale under Rule 12A-1.039.

Q: Are gross receipts tax and sales tax imposed on the same amount?
A: In the ruling's taxable example, yes. Both were computed on the $75 net amount billed, although the taxes have different legal bases and exemptions.

Citations and references

• Fla. Stat. § 203.01 (gross receipts tax on utility-service receipts)
• Fla. Stat. § 212.05(1)(e)1.c. (sales tax on charges for electrical power or energy)
• Fla. Stat. § 212.08(7)(j) (residential-household electricity exemption)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)
• Fla. Admin. Code r. 12A-1.039 (sales for resale)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 09A-014

Original ruling text

SUMMARY
QUESTION:
You have requested that the Department issue formal advice outlining the tax consequences of
net metering.
Net metering is a method of metering the energy consumed and produced at a home or a business
that has its own renewable energy generator. Under net metering, excess electricity produced at a
home or a business is used to offset the electricity received from a utility provider.
ANSWER:
Taxpayer should remit the gross receipt tax based on the amount of money received from its
customers for charges for utility services. This would be the net amount of electricity billed to
the customer after allowing a credit for the excess electricity generated by the customer and
returned to the utility.
The retail sale of electrical power or energy in the State of Florida is subject to sales tax. The
incidence of the tax is on “charges for electrical power or energy,” and the tax rate for such sales
is 7 percent. Therefore, if a customer is charged on the net electricity that it used during a
particular billing cycle, the utility company should collect and remit the 7 percent sales tax on
the amount billed to the customer.
March 31, 2009
XXX
Re:

Technical Assistance Advisement 09A-014
Florida Gross Receipts Tax/Florida Sales and Use Tax
Net Metering
Sections 203.01, 212.05, 212.08(7)(j), Florida Statute (F.S.)
Rule 12A-1.039, Florida Administrative Code (F.A.C.)
Petitioner: XXX (“Taxpayer”)

Dear XXX:
This letter is a response to your petition dated June 4, 2008, for the Department's issuance of a
Technical Assistance Advisement ("TAA") concerning the above referenced party and matter.
Your petition has been carefully examined and the Department finds it to be in compliance with
the requisite criteria set forth in Chapter 12-11, F.A.C. This response to your request constitutes
a TAA and is issued to you under the authority of s. 213.22, F.S.
FACTS
Some homes and businesses in Florida install equipment that produces electricity, which the
home or business uses to reduce the amount of electricity required from the local electric utility.

Technical Assistance Advisement
Page 2
When the home or business does not use the entire amount of electricity that it produces, the
excess electricity is delivered to the electric utility for resale to other consumers.
At the end of the billing period, the electric utility will offset the amount of electricity it
delivered to the home or business with the amount of electricity the home or business delivered
to the electric utility. The electric utility only charges the consumer for the “net” amount of
electricity provided to the home or business. The act of offsetting the electricity amounts is
called “net metering,” and Florida has recently required that utility providers implement net
metering systems.
REQUESTED ADVISEMENTS
You have requested that the Department issue formal advice outlining the tax consequences of
net metering.
ANALYSIS and DISCUSSION
Net metering is a method of metering the energy consumed and produced at a home or a business
that has its own renewable energy generator. Under net metering, excess electricity produced at a
home or a business is used to offset the electricity received from a utility provider.
Gross Receipts Tax
Section 203.01, F.S., imposes the gross receipts tax on the total amount of gross receipts
received by a distribution company for utility services. [Emphasis supplied] The rate applied to
utility services is 2.5 percent. Assuming the electric utility is a distribution company, it would be
required to pay gross receipts tax on its total receipts from charges for utility service sold to a
retail consumer. If the customer pays $100 on the net electricity that the consumer purchased,
the distribution company is taxed on the $100 received.
Taxpayer should remit the gross receipt tax based on the amount of money received from its
customers for charges for utility services. This would be the net amount of electricity billed to
the customer after allowing a credit for the excess electricity generated by the customer and
returned to the utility. In other words, if the bill from the utility shows electricity consumed by
the customer in the amount of $100 and a credit for excess customer-generated electricity in the
amount $25, resulting in a balance due of $75, gross receipts tax is calculated on the net amount
or $75.
Sales and Use Tax
Section 212.05, F.S., provides it is the legislative intent that every person is exercising a taxable
privilege that engages in the business of selling tangible personal property at retail in this state.
For exercising such a privilege, a tax is levied on each taxable transaction or incident. The retail
sale of electrical power or energy in the State of Florida is subject to sales tax. The incidence of
the tax is on “charges for electrical power or energy,” and the tax rate for such sales is 7 percent.
See Section 212.05(1)(e)1.c., F.S. Therefore, if a customer is charged $100 on the net electricity

Technical Assistance Advisement
Page 3
that it used during a particular billing cycle, the utility company should collect and remit the 7
percent sales tax on the $100 amount billed to the customer. Electricity that is provided to the
customer before net metering would not be taxed. Although we are sure that you are well aware
of this, we note that sales of electricity to residential households are exempt from sales tax
pursuant to Section 212.08(7)(j), F.S.
Excess customer-generated electrical power or energy put on the grid is ultimately used by and
billed to Taxpayer’s other customers. Credits allowed by Taxpayer for such excess customergenerated electrical power or energy would be treated as exempt sales for resale under the
provisions of Rule 12A-1.039, F.A.C.
Under the same scenario above, Florida sales and use tax would be calculated at the tax rate of 7
percent on the charge of $75.
CONCLUDING STATEMENT
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 backup documents are public
records under Chapter 119, F.S., and are subject to disclosure to the public under the conditions
of Section 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 10 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 850-488-8026.
Kind Regards,

Alan R. Fulton
Tax Law Specialist
Technical Assistance & Dispute Resolution
ARF\lp
Record ID:

46454