Which gas-appliance conservation incentives reduced the Florida taxable sales price: point-of-sale discounts or later credits and cash allowances?

Plain-English summary

The municipal gas utility sold appliances and offered several energy-conservation incentives to residential customers, builders and remodelers, commercial converters, and replacement-appliance customers.

Florida allowed point-of-sale incentives under the Residential Super S.A.V.E. and Home Owner Water Heater Retention programs to reduce taxable sales price. When those allowances were taken as part of the appliance sale, tax applied to the net amount.

Builder or remodeler cash allowances paid after installation verification, post-purchase commercial conversion credits, and reimbursements for a customer's most recent service-call labor were not point-of-sale discounts and did not reduce the taxable price of a new appliance.

What this means for you

Timing and transaction linkage control. A seller-funded allowance must reduce the price when the taxable property is sold; a later incentive or reimbursement generally belongs to a separate transaction.

Common questions

Which incentives reduced taxable price? The named residential appliance and water-heater allowances taken at sale.

Did later builder cash allowances reduce it? No.

Did reimbursing prior service labor reduce the new appliance price? No.

Citations and references

• Fla. Stat. §§ 212.02 and 212.05, as quoted and applied in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 10A-034

Original ruling text

SUMMARY
QUESTION : The transaction in question surrounds the applicability of the State sales
tax to the gas appliance sales payments made by customers to the City . . . when
receiving an allowance (discount). Florida statutes state that every person is exercising a
taxable privilege who engages in the business of selling tangible personal property at
retail in this state and provides guidance on the application of coupons, rebates,
discounts, etc. Based on the stated statutes, the City requests a determination on the
following issue:
To what sales price (on the appliance and equipment sales) should the sales tax be
applied? To the total sales price before allowance (discount), [Taxpayer’s] current
practice, or sales price after the allowance (discount)?
ANSWER: Incentive allowances (discounts) offered under the Taxpayer’s “Residential Super
S.A.V.E. Program,” and the “Home Owner Water Heater Retention Energy Conservation
(SAVE) Program” qualify as discounts, when taken at the time of sale, to Taxpayer’s sales of
gas appliances and equipment to its customers, with sales tax computed on the net sales price
after the deduction of the incentive allowance.
Incentive allowances (discounts) allowed on “Home Builders and Remodelers Super Energy
Conservation (SAVE) Program,” and the “Commercial Conversion Incentive Program (CCIP)”
do not qualify as a “discount” when the allowance is in the form of “cash allowance” paid to the
builder, after the installation of gas appliances has been verified, or credits given after the
purchase of energy efficient gas appliances. In addition, the reimbursement of a customer’s most
recent service call (labor only) under the “Gas Appliance Replacement Energy Conservation
(SAVE) Program” does not qualify as a discount, for sales tax purposes, on the taxable sale of a
new gas appliance.
July 2, 2010
XXX
Re: Technical Assistance Advisement 10A-034
Sales and Use Tax – Sales Price
Sections: 212.02 and 212.05, Florida Statutes (F.S.)
Petitioner: XXX (herein Taxpayer) - BP #: XXX
Dear XXX:
This letter is a response to your petition dated May 20, 2010, 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 1211, 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.

Technical Assistance Advisement
Page 2 of 7
PRESENTED FACTS
The Taxpayer is a “full service” gas utility providing gas appliance sales, service,
installation, and related construction, maintenance, and service to customers within its
330 square mile service territory. Currently, [Taxpayer] sells the following gas
appliances and items:
•
•
•
•
•
•

Pool/spa heaters
Water heaters
Ranges
Dryers
Patio Heaters
Indoor/outdoor lights

Taxpayer currently uses a Residential Energy Conservation Program and a Commercial
Conversion Incentive Program that promotes and encourages customers to convert to
new energy efficient natural gas or propane (LP) gas appliances, as described below.
Under the Taxpayer’s Residential Super S.A.V.E. Program, the Taxpayer offers current
and new customers specific allowances, at the time of purchase, to offset the cost of gas
appliances. Participation in this program is open to any current or new customer who
purchases the appliance from Taxpayer and use the Taxpayer’s System as their energy
provider.
Examples of the allowances offered to current or new customers purchasing new energy
efficient gas appliances, or customers who also convert from electricity to gas are
provided below. Also provided below are examples of allowances offered to current or
new customers who replace their existing gas appliance with the purchase of a new
energy efficient gas appliance.
Natural Gas Appliance
Tank Water Heater
Tankless Water Heater
Heating
Range
Dryer

Electric to Gas
$525
$525
$625
$100
$100

Gas to Gas
$350
$450
N/A
N/A
N/A

Under the Taxpayer’s Home Builders and Remodelers Super Energy Conservation
(SAVE) Program, the Taxpayer offers builders and remodelers allowances for the
installation of energy efficient gas appliances. This program is designed to expand the
customer’s options for energy choice in their homes under construction or being
remodeled. Participation in this program is open to any builder of new homes, general
contractor or remodeler who installs energy efficient Natural or L.P. gas appliances and
use Taxpayer as the energy provider. Examples of allowances toward the purchase of an
appliance are as follows:

Technical Assistance Advisement
Page 3 of 7

1. Gas Tank Water Heater
2. Gas Tankless Water Heater
3. Gas Heating, Minimum BTU Rating 40,000
4. Gas Clothes Dryer
5. Gas Range

$475
$450
$350
$100
$100

Any builder or remodeler of a single or multi-family residential unit who installs energy
efficient Natural or LP gas-fired appliances can participate in this program. Builders and
remodelers participating in the program will receive an incentive in the form of a credit
towards the purchase of the gas appliance(s) from Taxpayer and/or piping and venting
required for the installation of gas appliances(s) or a cash allowance. The cash allowance
will be paid to the builders after the installation of gas appliances have been verified by
Taxpayer personnel.
Under the Taxpayer’s Home Owner Water Heater Retention Energy Conservation
(SAVE) Program, the Taxpayer seeks to encourage the on-going conservation of energy.
The Taxpayer offers residential homeowners who replace gas water heaters certain
allowances, at the time of purchase, towards the purchase of energy efficient gas water
heaters. Participation in this program is open to any residential customer of Taxpayer
who replaces gas for gas water heaters. Customers participating in the program will
receive an incentive in the form of a credit towards the purchase of the gas appliance
from the Taxpayer, as follows:

1. Tank Water Heater
2. Tankless Water Heater

$ 350
$ 450

Under the Taxpayer’s Gas Appliance Replacement Energy Conservation (SAVE)
Program, the Taxpayer seeks to encourage the on-going conservation of energy through
its customers continued use of gas appliances at the time of replacement. Customers
object to paying for a service/repair call only to find out that they need to replace the gas
appliance; therefore, customers who purchase from the Taxpayer a replacement gas
appliance within thirty (30) days of the service call, the Taxpayer will reimburse the
customer for the most recent service call (Labor Only) in the form of a SAVE credit
towards the purchase of the new gas appliance from the Taxpayer.
Under the Taxpayer’s Commercial Conversion Incentive Program (CCIP), the Taxpayer
seeks to offset the cost of converting a new commercial customer to its natural or LP gas
service. The new customer will receive 50% (fifty percent) of the commercial conversion
costs when converting their appliance(s) from electricity and/or a competitor’s propane
to Taxpayer’s natural or propane gas, as a new added load to its system. This incentive
applies to construction/conversion/piping only. This incentive is NOT inclusive to any
appliance purchase. Conversion may be administered by a Taxpayer-approved outside
installation vendor or by Taxpayer’s installation crew(s).
The above programs provide allowances (discounts) to customers for participating
(purchases made) in the applicable activity. These allowances are part of the City . . .

Technical Assistance Advisement
Page 4 of 7
Energy Conservation Adjustment (ECA) rider codified in the City Code of Ordinances,
Appendix A, as follows:
(c) Energy conservation adjustment (rider ECA): A rider applicable to all firm
standard (non-contract) natural gas therm rates and non-contract propane (LP)
gallon rates to recover the cost of energy conservation programs undertaken by
the [Taxpayer] as approved by the Gas System Managing Director. The ECA will
not be applied to interruptible natural gas or other non-standard contract rates,
except for that portion of ECA, which is collected as a part of the PGA, which
may be up to one-half of the annual average ECA billing rate. The currently
calculated ECA rates are:
Natural Gas Rate Schedule ECA, per therm. . . . $X.XX
Propane (LP) Gas Rate Schedule ECA:
Per gallon . . . $X..XX
The above ECA rates are as currently approved for October 2008. These ECA
rates will normally be reviewed annually in October and may be adjusted upward
or downward from time-to-time with the approval of the City Manager or
designee based on actual and projected energy conservation program costs and
projected consumption levels in order to recover the total cost of applicable gas
system programs as approved by the City Manager since March 1, 1995,
including energy conservation incentive payments as well as the applicable labor
and other costs attributable to such energy conservation programs and other
applicable expenses. The over or under recovery of these ECA costs will be
computed and an adjustment in the ECA rate will be made at the discretion of the
City Manager or designee. . . .
The above allows for [Taxpayer] to recover the allowances for the energy
conservation methods in its existing Gas rates structure.
REQUESTED ADVISEMENT
The transactions in question surround the applicability of the State sales tax to the gas
appliance sales payments made by customers to the City . . . when receiving an
allowance (discount). Florida statutes state that every person is exercising a taxable
privilege who engages in the business of selling tangible personal property at retail in this
state and provides guidance on the application of coupons, rebates, discounts, etc. Based
on the stated statutes, the City requests a determination on the following issue:
To what sales price (on the appliance and equipment sales) should the sales tax be
applied? To the total sales price before allowance (discount), [Taxpayer’s] current
practice, or sales price after the allowance (discount)?
Currently, the Taxpayer applies sales tax to the total sales price before applying any
allowance (discount), and it makes no reference, direct or indirect, as to the applicability

Technical Assistance Advisement
Page 5 of 7
of sales tax. Taxpayer is only desirous of complying with any and all State statutes and
administrative rulings.
LAW, DISCUSSION AND CONCLUSION
Section 212.02, F.S., provides the following regarding the definition of terms used in Chapter
212, F.S.:
(12) "Person" includes any individual, firm, copartnership, joint adventure, association,
corporation, estate, trust, business trust, receiver, syndicate, or other group or
combination acting as a unit and also includes any political subdivision, municipality,
state agency, bureau, or department and includes the plural as well as the singular
number. (Emphasis supplied)
(13) "Retailer" means and includes every person engaged in the business of making sales
at retail or for distribution, or use, or consumption, or storage to be used or consumed in
this state.

(15) "Sale" means and includes:
(a) Any transfer of title or possession, or both, exchange, barter, license, lease, or rental,
conditional or otherwise, in any manner or by any means whatsoever, of tangible
personal property for a consideration. . . .
(16) "Sales price" means the total amount paid for tangible personal property, including
any services that are a part of the sale, valued in money, whether paid in money or
otherwise, and includes any amount for which credit is given to the purchaser by the
seller, without any deduction therefrom on account of the cost of the property sold, the
cost of materials used, labor or service cost, interest charged, losses, or any other expense
whatsoever. . . . Trade-ins or discounts allowed and taken at the time of sale shall not be
included within the purview of this subsection. . . .
Section 212.05, F.S., provides that every person who engages in the business of selling tangible
personal property at retail in this state is exercising a taxable privilege. Section 212.05(1)(a)1.a.,
F.S., provides that tax is due:
At the rate of 6 percent of the sales price of each item or article of tangible personal
property when sold at retail in this state, computed on each taxable sale for the purpose of
remitting the amount of tax due the state, and including each and every retail sale.
Florida's sales and use tax is levied at the rate of 6 percent of the "sales price" on the sale of
tangible personal property. The term "sales price," as defined in s. 212.02(16), F.S., means the
total amount paid for tangible personal property; however, discounts allowed and taken at the time
of sale of tangible personal property are not included in the taxable sales price.

Technical Assistance Advisement
Page 6 of 7
As a full service gas utility, the Taxpayer offers gas appliance sales, service, installation, and
maintenance to customers within its service area. Taxpayer offers various incentive programs
that reduce the cost of various gas appliances sold to its customers who also use the
Taxpayer as their energy provider. These incentives are offered in the form of a credit or
discount on the purchase price for respective gas appliances. In addition, the Taxpayer offers
incentive credits for customers converting from electricity, or a competitor’s propane gas
service, to the Taxpayer’s natural or propane gas service, as well as offering credits and cash
allowances to any home builder/remodeler who installs energy efficient natural or LP gas fired
appliances.
Therefore, the following is in response to the Taxpayer’s question: “To what sales price (on the
appliance and equipment sales) should the sales tax be applied? To the total sales price before
allowance (discount), Taxpayer’s current practice, or sales price after the allowance (discount)?”
If a customer does not purchase any tangible personal property from the Taxpayer, then any
allowance (discount) allowed and given to the customer is not a discount taken at the time of
sale, and cannot be used to reduce any taxable sales price. Where the Taxpayer is selling gas
appliances to a customer that qualifies for one of its incentive programs, and that allowance is
taken at the time of the sale, the taxable sales price does not include the allowance (discount). In
other words, sales tax is computed on the net sales price (amount after the discount). However,
when the incentive is given as a credit for the purchase and installation of energy efficient gas
appliances after the sale, such as to home builders or remodelers, or as a credit for the
conversion of a customer’s existing gas appliances to the Taxpayer’s gas services, such a credit
is not within the purview of a discount taken at the time of sale, and is, therefore, not to be
excluded from any taxable sales price. In addition, where the credit represents a credit for a
technician’s most recent service call (Service/Repair Call), the credit is not within the purview of
a discount taken at the time of sale; rather, it is the reimbursement of that charge to the customer.
Therefore, the allowance under this incentive is not allowed as a discount to the taxable sales
price.
CONCLUSION
Incentive allowances (discounts) offered under the Taxpayer’s “Residential Super S.A.V.E.
Program,” and the “Home Owner Water Heater Retention Energy Conservation (SAVE)
Program” qualify as discounts, when taken at the time of sale, to Taxpayer’s sales of gas
appliances and equipment to its customers, with sales tax computed on the net sales price after
the deduction of the incentive allowance.
Incentive allowances (discounts) allowed on “Home Builders and Remodelers Super Energy
Conservation (SAVE) Program,” and the “Commercial Conversion Incentive Program (CCIP)”
do not qualify as a “discount” when the allowance is in the form of “cash allowance” paid to the
builder, after the installation of gas appliances has been verified, or credits given after the
purchase of energy efficient gas appliances. In addition, the reimbursement of a customer’s
most recent service call (labor only) under the “Gas Appliance Replacement Energy
Conservation (SAVE) Program” does not qualify as a discount, for sales tax purposes, on the
taxable sale of a new gas appliance.

Technical Assistance Advisement
Page 7 of 7
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) 922-4727.
Sincerely,

Horace Royals
Tax Law Specialist
Technical Assistance & Dispute Resolution

HR/

Record ID:

84206