How did Florida tax a cooperative utility's fixed community-solar block charge and related solar kilowatt-hour credits?

Plain-English summary

The Florida Department of Revenue concluded that an electric cooperative's fixed charge for a community-solar “Block” was a charge for electrical power or energy. On the sample bills, it was subject to the 4.35% electricity sales-tax rate stated in the ruling rather than the general 6% rate.

The block charge was also included in gross receipts subject to Florida's utility gross receipts tax because it formed part of the utility provider's receipts for electrical power or energy.

The solar kilowatt-hour credits worked in the opposite direction. By reducing the net electricity and sales price shown on the participant's bill, the credits reduced both the sales-tax base and the gross-receipts-tax base on the sample transaction.

What this means for you

Electric cooperatives and utilities

A separately identified fixed charge can still be treated as an electricity charge when it buys a right to a share of solar generation. The label or billing frequency did not remove this block charge from the utility tax bases.

Community-solar program operators

The reviewed program credited participants for the kilowatt-hours produced by their allotted share. Those credits reduced the bill's taxable base even though the fixed block charge remained taxable.

Accountants and tax professionals

Separate the gross charge for the solar participation block from the KWH credit. The ruling applies the rates and exemptions in effect for its 2017 facts and specifically notes that residential electricity sales are exempt under section 212.08(7)(j).

Common questions

Q: Was the fixed solar-block fee taxed at the general 6% sales-tax rate?
A: No. The Department treated it as a charge for electrical power or energy and applied the 4.35% rate stated in the ruling.

Q: Was the block charge included in utility gross receipts?
A: Yes. It was part of the utility provider's receipts for electrical power or energy.

Q: Did the solar KWH credit reduce the taxable base?
A: Yes. On the sample bill, it reduced the bases for both sales tax and gross receipts tax.

Citations and references

• Fla. Stat. §§ 203.01, 203.012(1), 203.012(3), 212.02(16), 212.02(19), 212.05(1)(e)1.c., 212.08(7)(j), and 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 17A-019

Original ruling text

Executive
Director
Leon M. Biegalski

QUESTIONS/ANSWERS:

1. ARE THE BLOCK CHARGES SUBJECT TO SALES TAX, AND IF SO IS IT THE GENERAL
   SALES TAX AT A RATE OF 6% OR THE 4.35% SALES TAX ON ELECTRICITY.
   THE BLOCK CHARGE IS A PART OF A UTILITY BILL, AND IS A COMPONENT, WHICH
   REPRESENTS A CHARGE FOR ELECTRICAL POWER OR ENERGY TO A CUSTOMER.
   THE SALES TAX RATE FOR CHARGES FOR ELECTRICAL POWER OR ENERGY IS
   4.35%. FOR THE SAMPLE BILLS, PRESENTED, FLORIDA SALES AND USE TAX
   SHOULD BE CHARGED AT THE RATE OF 4.35%. SEE S. 212.05(1)(E)1.C, F.S.
2. ARE THE BLOCK CHARGES SUBJECT TO THE GROSS RECEIPTS TAXES?
   YES. THE BLOCK CHARGES ARE SUBJECT TO FLORIDA GROSS RECEIPTS TAX FOR
   UTILITY SERVICES. THE GROSS RECEIPTS TAX IS IMPOSED ON THE TOTAL
   AMOUNT OF GROSS RECEIPTS RECEIVED BY THE UTILITY PROVIDER FOR
   ELECTRICAL POWER OR ENERGY; THEREFORE, THE BLOCK CHARGE REFERENCED
   IN THE ABOVE SAMPLE BILLS IS SUBJECT TO THE GROSS RECEIPTS TAX. SEE S.
   203.01, F.S.
3. WHETHER THE KWH CREDITS FOR THE SOLAR ELECTRICITY REDUCE THE TAX
   BASE FOR PURPOSES OF THE SALES AND GROSS RECEIPTS TAXES?
   THE KWH CREDITS, FOR THE SOLAR ELECTRICITY, IDENTIFIED ON SAMPLE BILL
   DO REDUCE THE TAX BASE FOR BOTH GROSS RECEIPTS TAX AND SALES TAX.
   THE CALCULATION OF THE GROSS RECEIPTS TAX IS BASED ON THE TOTAL
   AMOUNT RECEIVED BY THE UTILITY PROVIDER FOR THE ELECTRICAL POWER OR
   ENERGY. SEE S. 203.01(1)(C)1., F.S.
   THE CALCULATION FOR SALES TAX IS BASED UPON THE SALES PRICE1 CHARGED,
   BY THE UTILITY PROVIDER TO THE CUSTOMER, FOR THE ELECTRICAL POWER OR
   ENERGY, ABSENT ANY SPECIFIC EXEMPTIONS. SEE S. 212.05, F.S.

“Sales price” means, in part, the total amount paid for tangible personal property, including any services that are a part of the
sale. See s. 212.02(16), F.S.
1

Child Support – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Dr. Maurice Gogarty, Director  Information Services – Damu Kuttikrishnan, Director

www.floridarevenue.com
Florida Department of Revenue
Tallahassee, Florida 32399-0100

TAA
Page 2

August 24, 2017

XXXXXXX
XXXXXXX
XXXXXXX
XXXXXXX
Re:

Technical Assistance Advisement 17A-019
XXXXXXX (“Taxpayer”)
Florida Sales and Use Tax - Exemptions
Sections 203.01, 212.02(16), 212.05, 212.08(7)(j), Florida Statute (F.S.)
BP#: XXXXXXXX

Dear XXXXXXX:
This letter is in response to your request dated June 20, 2017, for issuance of a Technical Assistance
Advisement (“TAA”) pursuant to Section 213.22, F.S., and Rule Chapter 12-11, F.A.C., concerning
manufacturing exemptions. An examination of your request has established you complied with the
statutory and regulatory requirements for issuance of a TAA. Therefore, the Department is hereby
granting your request for a TAA.
FACTS PRESENTED
Taxpayer is the trade association for electric cooperatives (2-wholesale and 15-distribution) that sell
energy and electricity at retail in Florida. Taxpayer members include distribution co-ops that provide
electricity at retail, and the consumers of the electricity are member-owners (“ratepayer” or “end-use
consumer”) of the distribution cooperative. Several member-owners have requested that their co-op offer
a solar power option, even if the electricity costs more than other power options. The co-ops want to
accommodate those members as long as they are willing to compensate the co-op for the more expensive
solar generated electricity. Several co-ops already offer solar power as an option, and other co-ops are
planning to add a solar option in the very near future.
The billing methods for the community solar power may vary slightly among co-ops, but the essence of
the transaction is that the member-owners who want solar power will pay the co-op a fixed fee for the
right to have a fixed percentage of the output of a solar facility, and in return the member-owner will
receive a credit on their electric bill for the number of kilowatt-hours (KWH) generated by their allotment
of the solar facility during the billing period. The fixed fee may be billed periodically (monthly, yearly, or
for longer terms) or as a single lump sum payment. The periodic fixed fee will be the same amount
regardless of how much solar power is generated in a given billing cycle. The co-ops will offer the solar
power in “Blocks.” A “Block” represents a fixed percentage of the electricity generated by the solar
generator each month. The number of kilowatt-hours (KWH) in the Block will vary each billing cycle
depending upon the amount of electricity the solar generator produces in that time period. The number of
KWHs credited to the Block during the billing cycle will be credited to the end-use consumer’s electric

TAA
Page 3

bill by deducting the number of KWH in the Block from the total number of KWH the co-op delivers to
the member-owner. If the Block produces more KWH than a consumer uses during the billing period, the
consumer will receive a credit in accordance with the co-op’s net metering rate/policy. Due to the laws of
physics and the fact that electrons follow the path of least resistance, you cannot measure whether some or
all of the power in the Block is actually included in the power that the distribution co-op delivers to the
member-owner, but it will be accounted for in the same method that is used for net metering.
The solar generator may be leased or owned by the distribution co-op or its wholesale power provider, and
the solar generator will be operated and controlled by the co-op. A participating member-owner has a right
to their percentage of the power generated by the solar generator, but does not have any other property
rights regarding the solar generator. In fact, the participating end-use consumers may never even see the
solar generator.
On behalf of the above-mentioned member-cooperatives, Taxpayer requests guidance for the hypothetical
billing scenarios listed below. For demonstration purposes and recognizing that actual bills may have
minor variations, the first hypothetical bill below shows the billing calculations for consumers that do not
participate in the voluntary community solar program, and the second hypothetical is for a consumer
participating in the community solar program, which includes a solar Block fixed charge that is assessed
each billing period and credits the solar KWH credits as an offset of the total KWH delivered by the coop. The hypothetical bills assume total electric usage of 1,000 KWH and, for program participants, a solar
credit of 180 KWH for a net sale of 820 KWH. Taxpayer has used a hypothetical charge for electric power
of $.10 per KWH.
Sample Bills Before Taxes
Bill without solar

Bill with solar and fixed fee

Fixed Charges
Customer charge:
Solar block charge:
Total fixed charges:
Variable charges2
$.10/KWH:
Total variable:

$25.00
$ 0.00
$25.00

$25.00
$30.00
$55.00

$100.00
$100.00

$82.00
$82.00

Total charges before taxes

$125.00

$137.00

APPLICABLE LAW
Sales and Use Tax
Unless a specific exemption applies3, s. 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 property4 in this
2

Variable charges are based on 1,000 KWH for non-solar and a net of 820 KWH for those with solar

TAA
Page 4

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 4.35 percent. See Section
212.05(1)(e)1.c, F.S.
It should be noted, that sales of electricity to residential customers is specifically exempt from sales and
use tax under the provisions of s. 212.08(7)(j), F.S.
Gross Receipts Tax
Section 203.01, F.S., imposes the gross receipts tax on the total amount of gross receipts received by a
distribution company5 for utility services6. The rate applied to utility services is 2.5 percent. [Emphasis
supplied]
REQUESTED ADVISEMENT & DETERMINATION

4. Are the Block charges subject to sales tax, and if so is it the general sales tax at a rate of 6% or the
   4.35% sales tax on electricity.
   The Block charge is a part of a utility bill, and is a component, which represents a charge for
   electrical power or energy to a customer. The sales tax rate for charges for electrical power or
   energy is 4.35%. For the sample bills, presented, Florida sales and use tax should be charged at
   the rate of 4.35%. See s. 212.05(1)(e)1.c, F.S.

5. Are the Block charges subject to the gross receipts taxes?
   Yes. The Block charges are subject to Florida gross receipts tax for utility services. The gross
   receipts tax is imposed on the total amount of gross receipts received by the utility provider for
   3

The Department must point out that while taxing statutes are strictly construed against the taxing authority, statutes that grant
an exemption are strictly construed against the taxpayer. See Asphalt Pavers v. Dept. of Revenue, 584 So.2d 55 (Fla. 1st DCA
1991), at 57 (citing the rule that exemptions from tax are strictly construed against the taxpayer, with any ambiguity resolved in
favor of the administrative agency); State ex rel. Szabo Food Services Inc. v. Dickinson, 286 So.2d 529 (Fla. 1973)
(“Exemptions to taxing statutes are special favors granted by the Legislature and are to be strictly construed against the
taxpayer.”). See also, United States Gypsum Co. v. Green, 110 So.2d 409 (Fla. 1959) (also stating that exemptions from tax are
strictly construed against the taxpayer) and Wanda Marine Corp. v. Dep’t of Revenue, 305 So.2d 65, 69 (Fla. 1st DCA 1975).
4
Tangible personal property means and includes personal property which may be seen, weighed, measured, or touched or is in
any manner perceptible to the senses, including electric power or energy. See s. 212.02(19), F.S.
5
“Distribution company” means “any person owning or operating local electric or natural or manufactured gas utility
distribution facilities within this state for the transmission, delivery, and sale of electricity or natural or manufactured gas. The
term does not include natural gas transmission companies that are subject to the jurisdiction of the Federal Energy Regulatory
Commission.” See s. 203.012(1), F.S.
6
“Utility service” means “electricity for light, heat, or power; and natural or manufactured gas for light, heat, or power,
including transportation, delivery, transmission, and distribution of the electricity or natural or manufactured gas. This
subsection does not broaden the definition of utility service to include separately stated charges for tangible personal property
or services which are not charges for the electricity or natural or manufactured gas or the transportation, delivery, transmission,
or distribution of electricity or natural or manufactured gas.” See s. 203.012(3), F.S.

TAA
Page 5

electrical power or energy; therefore, the Block charge referenced in the above sample bills is
subject to the gross receipts tax. See s. 203.01, F.S.

6. Whether the KWH credits for the solar electricity reduce the tax base for purposes of the sales and
   gross receipts taxes?
   The KWH credits, for the solar electricity, identified on sample bill do reduce the tax base for both
   gross receipts tax and sales tax.
   The calculation of the gross receipts tax is based on the total amount received by the utility
   provider for the electrical power or energy. See s. 203.01(1)(c)1., F.S.
   The calculation for sales tax is based upon the sales price7 charged, by the utility provider to the
   customer, for the electrical power or energy, absent any specific exemptions. See s. 212.05, F.S.
   For more information concerning all of the taxes administered by the Department of Revenue, please refer
   to the Department’s Internet site at:
   www.floridarevenue.com
   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 and 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.

“Sales price” means, in part, the total amount paid for tangible personal property, including any services that are a part of the
sale. See s. 212.02(16), F.S.
7

TAA
Page 6

Kind Regards,
Alan R. Fulton
Alan R. Fulton
Tax Law Specialist
Technical Assistance & Dispute Resolution
850-717-6735
ARF\tadrstaff
Record ID: 13751