When were wholesale electricity purchases and sales exempt from Florida sales and gross receipts taxes?
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This page answers the general question as of 1998. Ask about yours and see what current Florida tax law says, with citations.
Subject
Wholesale Electricity Resales and Interchange Agreements
Plain-English summary
The corporation's wholesale electricity purchases and sales were not subject to Florida sales or gross receipts tax when the power was bought for resale and the transactions operated under the qualifying utility interchange agreement. The corporation did not consume the electricity; it resold to utilities or wholesalers that would resell again.
The interchange agreement meant no resale certificate was required for gross receipts tax. Sales tax was different: the corporation and its purchasers still needed valid resale certificates or the prescribed nonresident-dealer documentation. Merely writing in the power agreement that the sale was for resale did not satisfy the sales-tax form requirements.
Florida location also mattered. The ruling said tax applied only to Florida transactions: title had to pass in Florida, or electricity had to be brought into Florida without sales tax paid for the historical 7% use tax to apply. Gross receipts tax applied to Florida electricity sales, not to out-of-state electricity bought and brought into Florida, although a separately charged Florida transportation or maintenance utility service could be taxable.
For electricity bought and sold entirely outside Florida, invoices and transmission records could prove that no Florida sale occurred.
What this means for you
A contract's resale language did not replace a compliant sales-tax certificate. The ruling required the purchaser's name and address, Florida registration number and effective date, resale statement, responsibility for tax on power not resold, execution by an authorized person, and—for the described forms—a perjury declaration.
Nonresident dealers that were not registered in Florida needed a statement identifying their home-state authority to do business and confirming the resale facts.
Common questions
Q: Were the corporation's wholesale purchases automatically exempt? No. Sales-tax resale treatment required valid documentation and actual resale.
Q: Did the interchange agreement eliminate every certificate? No. It eliminated the gross-receipts-tax resale-certificate requirement, but not the sales-tax requirement.
Q: Were the submitted power agreements valid sales-tax certificates? No. They lacked required registration and certificate information.
Q: When did Florida use tax apply? Under the ruling, when electricity was brought into Florida and sales tax had not been paid.
Q: How could an out-of-state transaction be proved? With evidence such as invoices and transmission information showing where the power was bought and sold.
Q: Could separately charged Florida transmission or maintenance be taxable? Yes. The ruling said a separate charge for a Florida utility service such as transportation or maintenance might be taxable.
Citations and references
- Fla. Stat. §§ 203.01(1), (3), 203.012(9) — gross receipts tax, resale, and utility service
- Fla. Stat. § 212.05(1)(e)1 — sales tax on electricity
- Fla. Admin. Code r. 12B-6.004(2) — gross-receipts resale and interchange treatment
- Fla. Admin. Code rr. 12A-1.038, 12A-1.064(2) — sales-tax resale and nonresident-dealer documentation
- Fla. Stat. § 213.22 — Technical Assistance Advisements
Source
- Landing page: Florida Tax Law Library
- Advisement: TAA 98A-003
Original ruling text
SUMMARY
Taxpayers are engaged in the business of selling and buying electricity to and from wholesale customers. The Department determined that to be taxable, title to the electricity would have to pass in Florida or the electricity would have to be brought into Florida and the sales tax not paid. Gross receipts tax is not imposed on sales of electricity sold outside of Florida when sufficient proof is given that the sale occurred outside of Florida. For Florida sales a resale certificate would be required for the Sales tax even though the agreement does not contain the information required by rule.
Jan 28, 1998
Re: Technical Assistance Advisement No. 98A-003 Gross Receipts Tax, Section 203.01, F.S. Sales Tax, Section 212.05, F.S. Wholesale Purchase and Sale of Electricity XXX (the Corporation) XXX (a Member) XXX (a Member) XXX (a Member)
Dear :
This is in response to your letter of July 14, 1997, in which you have petitioned for a Technical Assistance Advisement pursuant to s. 213.22, F.S., and Florida Administrative Code Rule 12-11.003.
ISSUES
-
Will the purchase of electricity by the corporation be
subject to the gross receipts tax or sales tax? -
Will the sale of electricity by the corporation be subject to
the gross receipts tax or sales tax?
-
How does the location of the seller of the electricity, in
Florida or out of Florida, affect the taxability of the sale for gross receipts tax or sales tax? -
How does the location of the purchaser of the electricity, in
Florida or out of Florida, affect the taxability of the sale for gross receipts tax or sales tax? -
Is the resale certificate necessary in order to exempt
purchases and sales from gross receipts tax and sales tax when the corporation has previously entered into an agreement that expressly provides that the purchases and sales are for resale? -
Is the resale certificate attached as exhibit A, executed by
the corporation, sufficient to exempt the sale to the corporation from the gross receipts tax as a sale for resale whether or not an agreement as described in 5. exists? -
Is the resale certificate attached as exhibit B, executed by
the purchaser, sufficient to exempt the sale from the corporation from the gross receipts tax as a sale for resale whether or not an agreement as described in 5. exists? -
Are resale certificates required on the described
transactions if the corporation and purchaser are parties to a purchase and sale agreement, attached as exhibit A and B, which expressly provides that a resale occurs, or does the resale form attached as exhibit D and E satisfy both gross receipts tax and sales tax?
STATEMENT OF FACTS
The Corporation is a Georgia 501(c)(3) corporation ("corporation") comprised of three members, known as the members. Each member owns and operates electricity generation and transmission facilities and is engaged in the business of selling and buying electricity to and from wholesale customers. One of the purposes of the corporation is to maximize the efficient use of energy resources.
The transactions of the corporation generally take four different forms. The corporation may purchase electricity from sources within Florida as well as sources out of Florida. The corporation may also sell electricity within Florida and outside of Florida. The purchase and sale may never involve electricity transmitted across Florida lines. All purchases and sales will be for resale to other wholesalers or utilities who will resell to others. Some of the sellers and purchasers may be registered in Florida as dealers for gross receipts tax and sales tax while others may have no contact with Florida and may not be registered in Florida.
The four transaction are as follows.
-
Corporation purchases electricity from a member and resells
to another member who resells to its end-users. -
Corporation purchases from a member and resells to a nonmember who resells to its end-users.
-
Corporation purchases from a non-member and resells to a
member who resells to its end-users. -
Corporation purchases from a non-member and resells to a nonmember who resells to its end-users.
Law and Authorities
Section 203.01(1)(a), F.S., states that every person receiving payment for any utility service shall report by the last day of each month to the Department of Revenue and shall pay the gross receipts tax. Further, Section 203.012(9), F.S., defines a utility service as electricity for light, heat, or power; natural or manufactured gas for light, heat, or power; or telecommunication services.
In addition, s. 203.01(3), F.S., specifically provides that the term gross receipts does not include receipts received from a sale for resale provided a valid resale occurs. Further, rule 12B-6.004(2), F.A.C., provides that any service taxable under
Chapter 203, F.S., that is purchased for resale, where a valid resale certificate is given, shall be exempt. The rule also provides that where a resale certificate is given and a sale does not occur in Florida, the tax is due based on the purchased price of the service not resold. Finally, the rule provides that electricity sold as part of an interchange agreement is exempt and a resale certificate is not required.
As to the Florida sales tax, s. 212.05(1)(e)1., F.S., provides that the sale of electricity is taxable at the rate of 7%. In addition, Rule 12A-1.038, F.A.C., provides that a valid resale certificate is required from every purchaser who purchases tangible personal property or service for resale. Further, the resale certificate is effective as of the date the application for registration is postmarked. Rule 12A-1.064(2), F.A.C., copy enclosed, provides that a statement must be obtained from any purchaser who is a nonresident dealer who does not hold a Florida certificate of registration. The statement must include the nonresident dealer's name, address, evidence of authority to do business in their home state such as their home state's sales tax registration number, occupational license or other type of evidence. The statement must also contain a statement that under perjury the dealer declares certain information is true and must be signed.
Discussion and Analysis
Chapter 203, F.S., imposes the gross receipts tax on services as defined and described in s. 203.012, F.S, which includes the receipts derived from business done within Florida and between points in Florida. In addition, s. 203.01(3), F.S., specifically exempts sales for resale and imposes the tax if not sold within Florida and a resale certificate has not been obtained. Further, the gross receipts tax is not imposed on sales of electricity sold outside of Florida when sufficient proof is given that the sale occurred outside of Florida. In addition, s. 203.01(3), F.S., provides that the term gross receipts as used in this chapter does not include receipts derived from the sale of electricity to a public or private utility for sale or resale, within this state or as part of an electrical interchange or contract for transporting more
economical power. As stated above, sales tax under s. 212.05(1), F.S., provides that the sale of electricity in this state is taxable, while Rule 12A-1.038, F.A.C., provides that a resale certificate must be given in cases where the tangible personal property or service is being sold for resale which meets the provisions of Rule 12A-1.064(2), F.A.C.
In this case, the corporation will be selling either for resale in this state or to an out of state customer who will resell to another entity. The statutes and rules provide that the seller must either collect tax or provide documentation that no tax was due. The gross receipts tax statutes and rules also provide that a resale certificate is not required when the sale is part of an interchange agreement or a contract between utilities for the purpose of transmitting more economically generated power. If the corporation has on file an interchange agreement or a contract, no gross receipts tax resale certificates are required. The purchase and sale agreement you provided is part of an electrical interchange agreement or a contract for transmitting more economically generated power. Therefore, resale provisions for gross receipts tax would not apply. As to the provisions of the resale certificate for sales tax, the rules provide that the certificate shall be executed by an officer or authorized representative. The resale certificate shall provide the name, address of the vendee, the sales tax registration number and effective date, and a statement that the sale is for resale and that the vendee will be responsible for any tax due as a result from the services not being resold. The rule does not state that the service has to be resold in Florida. In addition, the statement referred to in Rule 12A064(2), F.A.C., must be obtained from all nonresident dealers who are not registered in Florida.
Conclusion
Your specific questions are answered as follows:
- Will the purchase of electricity by the corporation be
subject to the gross receipts tax or sales tax?
Answer: Yes, under s. 212.05, F.S., tax is due on the sale of
electricity. However, the purchase may become exempt for resale when a valid resales certificate is extended to the vendor and the electricity is resold.
- Will the sale of electricity by the corporation be subject to
the gross receipts tax or sales tax?
Answer: No. In this case, as you have presented the facts, the sales are part of a interchange agreement or contract between utilities.
- How does the location of the seller of the electricity, in
Florida or out of Florida, affect the taxability of the sale for gross receipts tax or sales tax?
Answer: Only sales in Florida are subject to the taxes. To be taxable, title to the electricity would have to pass in Florida or the electricity would have to be brought into Florida and the sales tax not paid. In that case, the Florida use tax of 7% would apply. The gross receipts tax would apply to sales of electricity in Florida, but would not apply to electricity purchased out of Florida and brought into Florida, although the separate charge for a utility service such as transportation or maintenance in Florida may be taxable.
- How does the location of the purchaser of the electricity, in
Florida or out of Florida, affect the taxability of the sale for gross receipts tax or sales tax?
Answer: Please reference question #3 above.
- Is the resale certificate necessary in order to exempt
purchases and sale from gross receipts tax and sales tax when the corporation has previously entered into an agreement that expressly provides that the purchases and sales are for resale?
Answer: Resale certificates are required for sales tax, but not for gross receipts tax, as the agreement is considered an interchange agreement.
- Is the resale certificate attached as exhibit A, executed by
the corporation, sufficient to exempt the sale to the corporation from the gross receipts tax as a sale for resale whether or not an agreement as described in 5. exists?
Answer: Exhibit A, Electric Power Sale Agreement, does not contain the required information and would not be acceptable as a resale certificate for either sales tax or gross receipts tax; however, a resale certificate is not required for gross receipts tax, as the agreements are an interchange agreement.
- Is the resale certificate attached as exhibit B, executed by
the purchaser, sufficient to exempt the sale from the corporation from the gross receipts tax as a sale for resale whether or not an agreement as described in 5. exists?
Answer: Exhibit B, Electric Power Purchase and Sale Agreement, does not contain the required information and would not be acceptable for sales tax; however, a resale certificate is not required for gross receipts tax, as the agreements are an interchange agreement.
- Are resale certificates required on the described
transactions if the corporation and purchaser are parties to a purchase and sale agreement, attached as exhibit A and B, which expressly provides that a resale occurs or does the resale form attached as exhibit D and E satisfy both gross receipts tax and sales tax?
Answer: A resale certificate would be required for the sales tax even though the agreement provides that a sale for resale occurs as the agreement does not contain the required information. Exhibits D and E meet the requirements under s. 203.01, F.S. but do not meet the requirements for sales tax under Rule 12A-1.038, F.A.C. By adding the sales tax number and effective date to the forms, the form would meet the requirements for sales tax. Based on the fact that the agreement is considered an interchange agreement, no gross receipts tax resale certificate is required. Due to the fact that a sale for resale exists, no gross receipts tax or sales tax will be due on either the sale or purchase of any electricity by the corporation. If a gross receipts tax resale certificate were required, exhibit D form
meets the requirements under Rule 12B-6.004, F.A.C., and will be accepted for sales and purchases by the corporation. This will include sales or purchases occurring in Florida or out of Florida. As to exhibit E, for resale to entities not registered with Florida, the requirement that the Purchaser provide its home state registration number statement and that all sales are for resale is sufficient to meet the requirements under s. 203.01, F.S., if an interchange agreement does not exist. The rule requires that all sales are taxable unless they are being sold for resale. If the purchaser is not required to register in Florida, it must be registered in the state where it is doing business. As to Florida sales tax, Rule 12A-1.038, F.A.C., provides that a resale certificate will contain certain information. The required information for a sales tax certificate is similar to the information required for gross receipts tax. For exhibits D and E to be valid for sales tax, the only additional information required would be for the purchaser to provide its Florida sales tax number and its effective date and a statement that declares under perjury that they have read the foregoing and that the facts are true. The form must be executed by the purchaser. As to sales of electricity between entities out of Florida where the electricity never comes into Florida, proof of the location where the electricity was bought and sold, such as invoices and transmission information, would be sufficient to substantiate that a sale in Florida did not occur for sales tax.
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 the confidentiality of such information, we request you notify the undersigned in writing within 15 days of any deletions you wish made to the request or the response.
Sincerely,
James E. Silvey
Tax Law Specialist
Technical Assistance and
Dispute Resolution
Office of General Counsel
JES/EAM/
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