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. Ezel answers yours, under current Florida tax law, 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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