Did a licensed special-fuel broker need a separate Part I Florida sales-tax registration to buy and resell No. 6 residual fuel?

Subject

Residual-Fuel Dealer Registration

Plain-English summary

The oil-trading firm did not need a separate Part I Chapter 212 sales-tax registration for the described No. 6 residual-fuel resales. Its Florida special-fuel dealer license was sufficient to document purchases for resale, but only when the firm purchased from and sold to other entities licensed as special-fuel dealers.

The Department classified the fuel as special fuel because it was capable of being burned in diesel engines. It concluded that Part II of Chapter 212 governed sales-tax administration for these transactions and found no Part I provision expressly requiring an additional registration for this firm's activity.

The Department also said a utility's ultimate purchase would most likely qualify for the cited exemption when the fuel was used to generate electricity for sale. Its caveat limited the ruling strictly to the firm's broker role in the chain leading to Florida utilities.

What this means for you

The ruling did not create a broad registration exemption for every fuel seller. The conclusion depended on the firm's existing special-fuel license and on every purchase and resale counterparty also being a licensed special-fuel dealer.

Common questions

Q: Was the No. 6 residual oil treated as special fuel? Yes, because the submitted facts said it could be burned in diesel engines for propulsion.

Q: Was a separate Part I sales-tax registration required? No, not for the broker-chain transactions described.

Q: Could the firm trade with an unlicensed counterparty under this ruling? The ruling did not approve that. Its conclusion required purchases from and sales to licensed special-fuel dealers.

Citations and references

• Fla. Stat. § 212.08(4)(a)2 — utility fuel used to generate electricity
• Fla. Stat. §§ 206.86(1), 212.02(18) — special-fuel definitions
• Fla. Stat. § 206.89 — special-fuel dealer license
• Fla. Stat. § 212.60(2) — Part I applicability to motor and special fuel
• Fla. Stat. § 212.61 and § 212.61(1) — definitions and licensed dealer
• Fla. Stat. § 212.64 — licensed-dealer-to-licensed-dealer sales
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93A-027

Original ruling text

Title:

Real Property Improvement/Residual Oil

May 06, 1993

Re: TAA 93A-027
Whether Out of State Oil Commodities Trading Firm Supplying
No. 6 Residual Oil to Florida Utilities Is Required to Be
Registered Under Part I, Chapter 212, F.S., in Addition to
Holding a Special Fuel License Under Part II, Chapter 206,
F.S.
Taxpayer: XXX (Herein "Company")
FEI#: XXX
Special Fuel License#: XXX

Dear :

This reply is to your April 2, 1993, petition for the
Department's issuance of a Technical Assistance Advisement
("TAA") pursuant to s. 213.22, F.S., concerning the captioned
matter and party. 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. Therefore, the
Department is herewith granting your request for the issuance of
a TAA and the ensuing discourse shall embody said ruling.

DISCUSSION OF FACTS

The facts of the matter under advisement as stated in your
petition are as follows:

"The [Company,]... an oil commodities trading firm,
participates in the world residual fuel trading market
which supplies such fuel to Florida utilities and
elsewhere. In this market, utilities contract with oil
traders like the [Company] to purchase residual fuel for a
specified term at a specified price, and notify their
contracting parties when they need the fuel to be
delivered. The residual fuel actually is purchased by the
utilities when delivered at the port where their storage

facilities are located.

"The [Company] purchases No. 6 residual fuel oil for resale
either directly to an electric utility or to other oil
trading companies for their resale to [electric] utilities.
Like other trading companies, the [Company] has often been
in the chain of parties who simultaneously purchase and
sell the fuel at the same moment that the utility takes
possession of the fuel upon discharge from the vessel into
the utilities' storage tanks. In many transactions, the
[Company] is both a purchaser and a seller in the chain
with respect to the same batch of residual fuel.

"In 1986, prior to its entry into the residual fuel market,
the [Company] obtained a license from the Florida
Department of Revenue as a special fuels dealer under
Chapter 206. Since its registration, the [Company] has
timely filed all monthly special fuels and pollutants tax
reports and complied with the record keeping requirements
of Chapter 206. Fuel consumed by an electric utility in
the generation of electricity is statutorily exempt from
the sales tax.

"The fuel at issue is not just burned in boilers but is
capable of being burned in diesel internal combustion
engines."

REQUESTED ADVISEMENT

You favor a determination from the Department affirming "that a
separate [Part I,] Chapter 212 Sales Tax Registration was not
required in order for the [Company] to purchase number 6
residual fuel exempt from sales tax [in] those situations where
the [Company] was a purchaser from another trading company [in]
the chain of parties [as is] further described [above]."

DISCUSSION AND ANALYSIS OF LAW

First, it is important to preface the following discussions with
recognition of the fact that the ultimate purchase of the number
6 residual fuel by the public or private utility companies would

most likely qualify as exempt pursuant to the provisions of s.
212.08(4)(a), F.S., which states in significant part:

"(a) Also exempt are:...
"2. All fuels used by a public or private utility,
including any municipal corporation or rural electric
cooperative association, in the generation of electric
power or energy for sale...." (Emphasis Supplied)

The term "special fuel" is defined in both ss. 206.86(1) and
212.02(18), F.S., respectively, as follows:

Section 206.86(1), F.S.: "Special fuel' means diesel fuel, alcohol, or any liquid product or combination thereof, except kerosene, used to propel any diesel engine; however, kerosene or kerosene compounded or mixed with any product suitable for use in a diesel engine is aspecial fuel.'"
(Emphasis Supplied)

Section 212.02(18), F.S.: "Special Fuel' means any liquid product, gas product, or combination thereof used in an internal combustion engine or motor to propel any form of vehicle, machine, or mechanical contrivance. This term includes, but is not limited to, all forms or fuel commonly or commercially known or sold as diesel fuel or kerosene. However, the termspecial fuel' does not include butane
gas, propane gas, or any other form of liquefied petroleum
gas or compressed natural gas." (Emphasis Supplied)

Since you have affirmed by declaration that No. 6 residual fuel,
under consideration herein, can be burned in diesel engines for
purposes of propulsion, analysis of each of the above
definitions supports the finding that said fuel falls squarely
within the scope of both definitions. Thus, there is no
argument that a special fuel dealer's license pursuant to s.
206.89, F.S., which we understand you client holds, is requisite
to the sale of No. 6 residual fuel. However, the question
remains as to whether a special fuel dealer's license suffices
under the facts of the instant case where the ultimate purchaser
is a utility which is most probably purchasing the fuel to power
generators rather than to propel a diesel engine. Resolution of

this question requires collective consideration of the ensuing
passages quoted from Part II, Chapter 212, F.S.

First, consider the following excerpt from s. 212.61, F.S.:

"The definitions contained in s. 212.02... (18)... apply to
the same terms as used in this part."

This provision sweeps the definition of special fuel in s.
212.02(18), F.S., over into Part II, Chapter 212, F.S.

Secondly, consider the following provision from s. 212.60(2),
F.S., regarding the administration of sales tax on special fuel:

"... The provisions of part I shall be applicable to the
taxation of motor fuel and special fuel only by express
reference to such fuels and this part." (Emphasis Supplied)

Part I, Chapter 212, F.S., contains no express reference to the
registration of dealers of special fuel engaging in activities
such as those of your client.

Thirdly, consider the following definition of dealer found in s.
212.61(1), F.S.:

"`Dealer' means any person who holds a valid license as a
dealer of special fuel, issued by the department pursuant
to s. 206.89...."

Your declarations affirm your client as such a duly licensed
dealer.

Lastly, consider the provision governing dealer-to-dealer sales
contained in s. 212.64, F.S., which states:

"The tax imposed in this part shall not be paid on special
fuels, otherwise taxable by this part, when sold by a
licensed dealer to a licensed dealer."

DETERMINATION
The foregoing presentation of law evidences the intent of the

legislature that the administration of sales tax on special fuel
be governed by the provisions of Part II, Chapter 212, F.S., as
opposed to the provisions of Part I, Chapter 212, F.S., except
in the instance of express reference to the contrary. Moreover,
the provisions of Part I, Chapter 212, F.S., contain no express
reference pertaining to registration of special fuel dealers
engaged in activities such as those of your client. Therefore,
we find that Company need not have held a certificate of
registration as a sales tax dealer under Part I, Chapter 212,
F.S., relative to documenting the subject transactions as exempt
purchases for resale and that Company's special fuel license was
sufficient to allow for adequate documentation of purchases for
resale provided that Company was purchasing from and selling to
only other entities licensed as special fuel dealers pursuant to
s. 212.61(1), F.S.

CAVEAT

You are alerted to the fact that the findings set forth herein
pertain strictly to Company's purchase and resale of No. 6
residual fuel as a broker in the chain of transactions leading
up to the ultimate purchase of such fuel by Florida utilities
and a broader application should not be ascribed to said
findings.

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 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.
Your name, address, and any other details which might lead to
identification of the taxpayer must be deleted by the Department

before disclosure. In an effort to protect confidential
information, we request you notify the undersigned in writing
within 15 days of any deletions you wish made to the request or
this response.

Sincerely,

Daniel M. Wagner, Jr.
Tax Law Specialist

DW/
con. #8108