When was electricity sold to a for-profit nursing home exempt from Florida sales tax?

Subject

Residential Utility Exemption for Nursing Homes

Plain-English summary

Electricity used for nursing-home residents, their dwelling units, and resident-only common areas qualified for Florida's residential utility exemption even when the operator was for-profit. Separate meters for residential units and qualifying common areas were exempt.

A single meter could also qualify if none of the electricity served a nonexempt commercial purpose. But if that meter also served a bank, convenience store, travel office, or a commercially operated spa or gym, the entire sale through that meter became taxable.

Separate metering limited the problem. Electricity or household fuel through each commercial meter was taxable, while a separate meter serving resident care, administrative functions, cafeteria use, common kitchens, and other noncommercial nursing-home uses remained exempt under the ruling's examples.

The Department also said nursing-home dwelling and resident room rents were not taxable under the cited provisions. Either the utility or nursing home could face liability for unpaid tax, although a utility accepting a good-faith attestation of no nonexempt use received the defense described in the ruling.

What this means for you

For this exemption, meter design and actual premises use were inseparable. One small commercial operation on a shared meter could make all utility consumption on that meter taxable.

Nursing-home operators should identify commercial activities and meter them separately. Utilities should retain customer attestations and verify current Department forms and requirements.

Common questions

Q: Did for-profit status defeat the residential electricity exemption? No. The ruling focused on residential use and nonexempt commercial activity, not profit status alone.

Q: Were resident-only common areas exempt? Yes, if they were used exclusively by residents and not connected to a commercial activity.

Q: What happened if a bank shared the nursing home's only meter? The bank was a nonexempt use, making the entire utility sale through that meter taxable.

Q: Could separate commercial meters preserve the rest of the exemption? Yes. The commercial meters were taxable, while the qualifying nursing-home meter remained exempt.

Q: Could a dealer credit previously remitted tax instead of filing a refund claim? The historical rule allowed a dealer entitled to a refund to take a credit on a later report filed within 36 months of remittance.

Q: Can another utility rely on this ruling? No. The advisement binds the Department only for the requester and the facts described.

Citations and references

• Fla. Stat. § 212.08(7)(j), (l), (m) — residential utilities, resident room rent, and nonprofit nursing-home provisions
• Fla. Stat. § 212.031(1)(a)2 — dwelling units and real-property rent
• Fla. Stat. §§ 212.05, 212.07(9) — potential seller and purchaser liability
• Fla. Stat. § 215.26 — refund claims
• Fla. Admin. Code rr. 12A-1.053, 12A-1.014(4)(b), (7) — residential utility and refund procedures
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98A-004

Original ruling text

Feb 12, 1998

Re: Technical Assistance Advisement 98A-004
Electricity Sold to For-Profit Operators of Nursing Homes
XXXX, Inc. (herein Utility)
Sections 212.031(1)(a)2., 212.08(7)(j),(7)(I), (7)(m),
215.26, F.S.
Rules 12A-1.014(4)(b), 12A-1.053, F.A.C.

Dear :

This is a response, styled a Technical Assistance Advisement, to
your letter dated July 18, 1997, wherein you asked the
Department several questions involving the sale of electricity
by Utility to for-profit nursing homes.

Your questions will be paraphrased, after each of which the
Department's response will appear.

Question 1. Whether the sale of electricity to a nursing home is
exempt when the electricity serving the common areas, and the
dwelling units within the nursing home, are separately metered?
Also, you ask, would such electricity be exempt if the entire
premises were served by one meter?

Department Response:

As you state, s. 212.08(7)(j), F.S., provides that sales tax is
not applicable to utilities, including electricity, when sold
to:

... residential households... by utility companies who pay
the gross receipts tax imposed under s. 203.01,...
regardless of whether such sales of utilities... are
separately metered and billed direct to the residents or
are metered and billed to the landlord. If any part of the
utility... is used for a nonexempt purpose, the entire sale
is taxable. The landlord shall provide a separate meter for
nonexempt utility... consumption....

As to the applicability of s. 212.08(7)(j), F.S., which is
interpreted by Rule 12A-1.053, F.A.C., to electricity sold to
nursing homes, the following characteristics must exist if the
nursing home is to be qualified to receive such an exemption:

The electricity, if served through a single meter, must not
be used for a nonexempt purpose. A "nonexempt purpose" is
the consumption of electricity in a part of the nursing
home premises which is used for conducting activities of a
commercial nature not directly related to the care and
living needs of the residents. Such "nonexempt purpose"
includes, for example, a portion of the nursing home
premises used as a bank, or travel office.

Thus, if electricity sold to a nursing home is serviced through
a single meter and none of the electricity is used for a
nonexempt purpose, as defined above, such electricity is not
subject to sales tax.

In a direct response to your question, the electricity serving
the common areas, when separately metered, would not be subject
to sales tax if such common areas were used exclusively by the
residents of the nursing home, and such use was not in
connection with a commercial activity operated on the premises
such as a bank or travel office. The electricity, separately
metered, which serves the residential units, would not be
subject to tax as provided in s. 212.08(7)(j), Florida Statutes.

Question 2. Whether in any of the following instances the sale
of household fuels to a nursing home would be subject to sales
tax if the fuel is consumed in an administrative office, a
cafeteria, a convenience store, a common use kitchen, a spa or
gym, or a bank?

Department Response:

As noted in the explanation given above, the premises must not
be the site of a commercial activity if the exemption granted in
s. 212.08(7)(j), F.S., is to be applicable. Thus, if all the
fuel, such as natural gas, delivered to the nursing home

premises was served through a single meter and if all of the
activities enumerated above were to occur on such premises, the
fuel used in the bank or convenience store would be uses
characterized as "nonexempt." Such usage would deny the
exemption granted by s. 212.08(7)(j), F.S., with the result that
sales tax would be imposed on all the fuel served through the
single meter.

If the commercial uses, which are the convenience store and the
bank, (and the gym or spa if operated as a commercial activity)
were each individually metered, the fuel through each such meter
would be subject to sales tax. The fuel used, served through a
single meter, in the nursing home, and in all the enumerated
uses other than at the convenience store and bank ( and the gym
or spa operated as a commercial activity), would be exempt from
the tax.

Question 3. Whether there are any other types of nursing homes
specifically exempt from sales tax in Chapter 212, F.S., other
than the specific exemption granted to nonprofit nursing homes
as expressed in s. 212.08(7)(m), Florida Statutes?

Department Response

Nursing homes that are designed and operated for the care of the
aged are comprised of dwelling units. Thus, by operation of s.
212.031(1)(a)2., F.S., which removes "dwelling unit" from the
classification of "real property," the payment given for lease
or license to use a nursing home is free of the tax imposed by
s. 212.031, Florida Statutes. The room rent paid by an
individual resident to the nursing home is also not taxable as
expressed in s. 212.08(7)(I), Florida Statutes. There are no
other specific exemptions granted "nursing homes" other than the
statute you cited, which is s. 212.08(7)(m), Florida Statutes.

Question 4.

Whether in determining the taxability of electricity sold to a
nursing home such determination is a burden upon the nursing
home or the utility?

Department Response

Sales tax may be imposed on either the utility or the nursing
home. Section 212.07(9), F.S., provides that any person which
purchases tangible personal property, such as electricity, and
cannot prove that it paid the tax to its dealer or seller "...
is directly liable to the state for any tax, interest, or
penalty due on any such taxable transaction." Section 212.05,
F.S. mandates that every person "... who engages in the business
of selling tangible personal property at retail in this
state..." is exercising a taxable privilege.

However, if the Utility is tendered, and accepts in good faith,
an attestation from the nursing home operator that none of the
electricity is, or has been, used for a nonexempt purpose, the
Department will recognize such statement as constituting a good
faith defense in the event of a finding that absent such
attestation the Utility would have incurred use tax on such
electricity. The Department has under review a proposed
Department form which will be available in the near future for
use by a utility in instances when the Utility sells electricity
to a nursing home.

Question 5.

"If it determined that a refund is necessary from the utility to
the customer, can utility imply deducted refund amount from the
next sales tax form filed with DOR, or must it be directly
refunded?"

Department Response

Rule 12A-1.014(7), F.A.C., provides that when sales tax is paid
when no tax is due, the taxpayer "... must secure a refund of
the tax from the dealer and not from the Department of Revenue."
Section 215.26(2), F.S., which governs the issuance of refunds,
provides that an application must be filed "... within 3 years
after the right to the refund has accrued or else the right is
barred." The statute also states that an application for a
refund of a tax "... paid after September 30, 1994, must be
filed... within 5 years after the date the tax is paid."

In a direct response to your question, Rule 12A-1.014(4)(b),
F.A.C., states, in part, that: "Any dealer who is entitled to a
refund of taxes paid to the Department of Revenue may, in lieu
of applying to the Department for a refund, take a credit for
such amount on any subsequent report filed within 36 months of
the date on which the dealer remitted the tax to the state."

The 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,

Robert G. Parsons
Tax Law Specialist
Technical Assistance and Dispute
Resolution

Ctrl. No. 31117