Was electricity for a homeowners association's common areas exempt when the utility coded it as nonresidential and kept the account in the developer's name?

Subject

Exemption on Electricity/Condominium Associations

Plain-English summary

The Department concluded that the homeowners association's entire electricity bill was taxable. The power served common-area lights, irrigation pumps, fountains, and similar services, with none used for construction, sales or administrative offices, or model homes.

The first problem was billing classification. The provider coded and billed the association as nonresidential, so the Department found no exempt sale of electricity to a residential household. Under the cited statute and rule, any nonexempt use also made the entire sale taxable unless separately metered.

The second problem was the type of community. The specific common-area language covered apartments, cooperatives, and condominiums. The Department said the homeowners association was legally different and outside that listed exemption.

Finally, even if the association had fit one of the exemptions, the utility account remained in the developer's name rather than the association's. The Department treated that fact as another reason the exemption did not apply.

What this means for you

The ruling applied the residential electricity exemption strictly. Actual common-area use was not enough when the utility classified the account as nonresidential, the entity type was not listed, and the account holder was the developer.

The advisement also could not serve as a refund claim for tax already paid. The Department directed refund requests to the separate statute and administrative procedure.

Common questions

Q: Did it matter that no power was used for construction or sales offices? That fact avoided one possible nonexempt use, but it did not overcome the other defects in the claimed exemption.

Q: Were condominium common areas covered by the rule? The cited rule included common areas of apartments, cooperatives, and condominiums when no electricity served nonexempt purposes.

Q: Did the Department treat a homeowners association as a condominium association? No. It found clear legislative intent to treat those entity types differently.

Q: Could the association obtain a refund through the TAA request? No. Refunds had to follow section 215.26 and the procedures in Chapter 12-26 of the Florida Administrative Code.

Citations and references

• Fla. Stat. § 212.08(7)(j) — household-fuels and residential-utilities exemption
• Fla. Admin. Code R. 12A-1.053(1)(a) — taxable electric-power sales and residential/common-area exemption
• Fla. Admin. Code R. 12A-1.059(1)(a) — fuel rule cited in the request but identified by the Department as inapplicable to electricity
• Fla. Stat. § 203.01 — gross receipts tax referenced in the residential exemption
• Fla. Stat. § 215.26; Fla. Admin. Code ch. 12-26 — refund procedure
• Asphalt Pavers v. Department of Revenue, 584 So. 2d 57 (Fla. 1st DCA 1991); Dade County Taxing Authority v. Cedars of Lebanon, 355 So. 2d 1205 (Fla. 1978); Williams v. Jones, 326 So. 2d 425 (Fla. 1975); Straughn v. Camp, 293 So. 2d 689 (Fla. 1974); United States Gypsum Company v. Green, 110 So. 2d 409 (Fla. 1959) — cited for strict construction of tax exemptions
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 97A-026

Original ruling text

SUMMARY

Determination was made that if the association is coded and billed by provider as nonresidential, there has been no exempt sale of electricity to a residential, and the entire amount of the nonresidential billing is taxable. Secondly, assuming that the homeowners association was covered by either of the exemptions, neither exemption would apply to the association since the utility account is in the name of the developer, and not in the association.

Apr 07, 1997

Re: Technical Assistance Advisement (97A-026) Sales and Use Tax - Exemption on Electricity/Condominium Associations Section 212.08, F.S. Rules 12A-1.059(1)(a), and 12A-1.053(1)(a), F.A.C. XXX ("Association") XXX ("Provider")

Dear :

This response is in reply to your October 2, 1996, petition for the Department's issuance of a Technical Assistance Advisement ("TAA") pursuant to s. 213.22, F.S., concerning the captioned matter and parties. 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

Your petition and supporting documents impart the following significant information regarding the issues under advisement herein:

FROM YOUR PETITION

[Association] uses electricity for the common areas of the homeowners association. Electricity is used for lights, irrigation pumps, fountains and other common area services. None of the electricity is used by the developer for construction, sales and administration offices or model homes.

Until August 1, 1996, the utility accounts were in the name of the developer.... Even though the utilities were in the name of the developer, the services was provided to the homeowners association. Rule 12A-1.059(1)(a), F.A.C., refers to the party that receives the service and not the party that pays for the service. [Provider] Electric Co., provider of electric service to CCMD, has stated that due to the fact that the account is in the developer's name, the homeowners association is not eligible for exemption from the sales tax.

In a subsequent written communication to this office, you also indicated that Association is coded and billed as nonresidential by Provider.

REQUESTED ADVISEMENT

You endeavor to elicit the following advice from the Department:

You request issuance of a technical assistance advisement finding specifically whether the homeowners association is allowed the sales tax exemption when the electric service account is in the developer's name rather than the name of the homeowners association.

DISCUSSION OF LAW

Section 212.08(7)(j), F.S., provides the following:

(j) Household fuels. Also exempt from payment of the tax imposed by this chapter are sales of utilities to residential households or owners of residential models in

this state by utility companies who pay the gross receipts tax imposed under s. 203.01, and sales of fuel to residential households or owners of residential models, including oil, kerosene, liquefied petroleum gas, coal, wood, and other fuel products used in the household or residential model for the purposes of heating, cooking, lighting, and refrigeration, regardless of whether such sales of utilities and fuels are separately metered and billed direct to the residents or are metered and billed to the landlord. If any part of the utility or fuel is used for a nonexempt purpose, the entire sale is taxable. The landlord shall provide a separate meter for nonexempt utility or fuel consumption.

Rule 12A-1.059(1)(a), F.A.C., states the following regarding fuels and lubricants (We quote this rule, though it does not apply to sales of electricity, since you cited it in your request.):

(1)(a) The sale of fuel, including crude oil, fuel oil, kerosene, sterno, diesel oil, natural and manufactured gas, coke, charcoal briquets, cord wood, and other fuel products is taxable. Natural and manufactured gas is exempt when separately metered and sold for use in residential households (including trailer lots) directly to the actual consumer by utilities who are required to pay the gross receipts tax imposed by Section 203.01, Florida Statutes. The exemption for residential households (including trailer lots) also includes L.P. gas, crude oil, fuel oil, kerosene, diesel oil, coke, charcoal briquets, cord wood, and other household fuels. Such sales of utilities and fuels are exempt regardless of whether such sales are billed to the landlord; provided, however, that if any part of the utility or fuel is used for a non-exempt purpose, the entire sale is taxable. Landlords shall provide separate meters for any non-exempt consumption of utilities or fuels. This exemption shall also apply to the sale of utilities and fuels used in residential model homes or common areas of apartments, cooperatives, and condominiums provided that none of the utilities or fuels are used in residential model homes which are used as sales offices or

for other non-exempt purposes. No exemption certificate or affidavit is required to be obtained by a dealer of special fuel or a dealer of liquefied petroleum gases when the fuel is sold and delivered into the customer's storage facility located on the customer's residential premises, when the fuel is for the purposes of home cooking or home heating. Hotels and motels cater primarily to transient guests and are not considered to be residential households. Therefore, this exemption shall not apply to utilities or fuels sold for use in hotels and motels. (Emphasis supplied)

Rule 12A-1.053(1)(a), F.A.C., states the following in regard to sales of electric power and energy:

(1)(a) The sale of electric power or energy by private or public utilities and rural electric cooperative associations is taxable. Electric power or energy is exempt when it is separately metered and sold for use in residential households (including trailer lots) direct to the actual consumer by utilities who are required to pay the gross receipts tax imposed by Section 203.01, Florida Statutes. Such electric power or energy is exempt, even though metered and billed direct to the landlord (mastermetered). However, if any part of the utility or fuel is used for non-exempt purpose, the entire sale is taxable. Landlords shall provide separate meters for non-exempt consumption of electric power and energy. This exemption shall also apply to electric power or energy sold to residents when separately metered and billed direct to them. Electric power or energy used in residential model homes or common areas of apartments, cooperatives and condominiums is exempt provided that none of the electric power or energy is used in residential model homes which are used as sales offices or for other non-exempt purposes. Hotels and motels cater primarily to transient guests and are not considered to be residential households. Therefore, this exemption shall not apply to electric power or energy sold for use in hotels and motels. (Emphasis supplied)

The Department in construing the above statutory exemptions for must adhere to, and be guided by, the long-standing and fundamental precept of statutory construction, established by the Florida Supreme Court, which mandates that exemptions from, or exceptions to, taxing statutes are special privileges granted by the legislature and must be strictly construed against the taxpayer and in favor of the administering agency. See Asphalt Pavers v. Dept. of Revenue, 584 So.2d 57 (Fla. 1 DCA 1991); Dade Cty. Taxing Auth. v. Cedars of Lebanon, 355 So.2d 1205 (Fla. 1978); Williams v. Jones, 326 So.2d 425 (Fla. 1975); Straughn v. Camp, 293 So.2d 689 (Fla. 1974); United States Gypsum Company v. Green, 110 So.2d 409 (Fla. 1959).

CONCLUSIONS OF LAW

Since Association is coded and billed by Provider as nonresidential, there has been no exempt sale of electricity to a residential household. The entire amount of the nonresidential billing is taxable.

In addition, the above mentioned exemptions apply only to the sale of utilities used in residential model homes or common areas of apartments, cooperatives, and condominiums. Association is a homeowners association. The electricity it purchases is taxable because the electricity is not used in the common areas of an apartment, cooperative, or condominium. There is clear legislative intent to treat homeowners associations differently from cooperatives and condominiums. Condominiums are regulated by chapter 718, F.S., cooperatives by chapter 721, F.S., and homeowners associations by ss. 617.301.312, F.S. Section 617.302(4), F.S., explicitly states that ss. 617.302-.312 do not apply to cooperatives or condominiums.

Moreover, even assuming that homeowners associations were covered by either of the exemptions, neither exemption would apply to Association since the utility account is in the name of a developer, not in the name of Association.

Your request for a Technical Assistance Advisement also attempts to request a refund of sales taxes already paid. A refund cannot be requested in this manner. The law and procedures

regarding refund requests are contained in s. 215.26, F.S., and Rule 12-26, F.A.C.

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,

Leola B. Carter
Senior Tax Specialist
Tax Policy and Dispute Resolution
(904) 922-4835

LBC\
Control No. 26739
Enclosure