Did natural gas used to control the drying rate of paint qualify for Florida's manufacturing boiler-fuel exemption?

Subject

Boiler Fuel Exemption

Plain-English summary

Natural gas used to make paint dry at a desired rate did not qualify for Florida's boiler-fuel exemption. The Department's position was that the burned fuel had to produce a change in the composition of tangible personal property manufactured, processed, compounded, or produced for sale.

Changing the rate at which paint dried did not change the product's composition. The natural-gas purchases therefore remained taxable, and the customer was not entitled to the requested $1,420.08 refund for the prior three years.

What this means for you

Use of fuel somewhere in a production process was not enough under this ruling. The fuel's combustion had to cause the qualifying compositional change in the product.

Common questions

Q: Did the lack of office or warehouse heating establish the exemption? No.

Q: Why did paint drying fail the Department's test? It changed the drying rate, not the product's composition.

Q: Was the requested refund allowed? No.

Citations and references

• Fla. Stat. § 212.08(7)(b) — boiler-fuel exemption
• Fla. Admin. Code r. 12A-1.059(10) — boiler fuels used in production
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93A-041

Original ruling text

Jul 15, 1993

Re: TAA 93A-041
Sales Tax; Boiler Fuel Exemption
Section 212.08(7)(b), F.S.
Rule 12A-1.059(10), F.A.C.

Dear :

This reply is to your letter dated May 6, 1993, in which
you requested the issuance of a Technical Assistance Advisement
("TAA") regarding the exempt status of natural gas sales made to
your customer, XXXXX (hereinafter referred to as "Customer").
Your letter provides in part:

"[Customer] is requesting that they be exempt from paying sales
tax on the natural gas we sell them. They are claiming the
exemption [based] upon the fact that the natural gas is a boiler
fuel used exclusively in their production process. For further
clarification you will find attached a copy of a letter from
[Customer's] controller concerning their use of natural gas.

"Please issue an advisement to us as to whether the natural gas
sales are exempt from sales tax and if [Customer] is entitled to
a refund of the three previous years' sales tax charges
totalling $1,420.08. A worksheet detailing the charges is
attached."

In addition to your referenced attached letter, you have
included a copy of a letter from [Customer's] representative,
XXXX, which states in part:

"As you will note the gas use which we have requested an
exemption and refund for is used for paint drying which is
dependent on ambient conditions. As stated in XXXX [Customer's
controller] letter none of the offices or warehouses are heated.
Therefore, there should be no reason why this customer is not
granted his exemption and refund under section 12A-1.059(10) of
the State of Florida Sales and Use Tax Law."

RELEVANT AUTHORITY

The statutory authority for the exemption for natural gas
purchases which [Customer] seeks is provided by Section
212.08(7)(b), F.S., and described in Rule 12A-1.059(10), F.A.C.,
which provides in part:

"`Boiler' fuels. When purchased as a combustible fuel,
purchases of natural gas, residual oil, recycled oil, waste
oil, solid waste material as defined in s. 403.703(13),
F.S., coal, sulfur, wood, wood residues or wood bark used
in an industrial manufacturing, processing, compounding, or
production process at a fixed location in this state are
exempt from the taxes imposed by this chapter; provided,
however, this exemption shall not apply to such fuels that
are not used in manufacturing, processing, compounding, or
producing items of tangible personal property for sale, or
to the use of boiler fuels used by any firm subject to
regulation by the Division of Hotels and Restaurants of the
Department of Business Regulation...." (Emphasis supplied)

DISCUSSION/RESPONSE

The exemption for boiler fuels is generally allowed for
fuels that are burned in a manufacturing, processing,
compounding, or production process. It is the Department's
position that these processes, in which the boiler fuel is
burned, must produce a change in composition within an item of
tangible personal property for sale in order to qualify for the
exemption. For example, fuel used to heat an oven, which
changes dough into bread, would be exempt.

The use of boiler fuel in paint drying apparently allows
the paint to dry at a desired rate. However, a change in the
rate at which the paint is dried would not produce a change in
the composition of the tangible personal property being
produced. Consequently, your [Customer's] purchases of natural
gas for this purpose would not be exempt pursuant to Section
212.08(7)(b), F.S., and Rule 12A-1.059(10), F.A.C. and your
[Customer] would not be entitled to the refund for the three

previous years' sales tax which they have requested.

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,

Delores Overcash
Technical Assistant

DO/
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