Under the original TAA 98A-068, when was electricity used at residential or transient-rental property exempt from Florida sales tax?

Subject

Sales of Utilities and Certain Fuels to Residential Households

Plain-English summary

In this original ruling, Florida treated electricity as exempt only when every use measured through the meter was for a residential household; transient rental or another commercial activity made the electricity taxable. A single transiently rented unit could make all electricity serving a condominium, time-share, or apartment complex through one meter taxable. For an individually metered unit, transient rental made that unit's electricity taxable for the entire billing cycle in which taxable use occurred.

The Department rejected the utility's proposed reliance on account coding, apparent use, or an owner's written statement as a complete defense. If electricity was actually taxable and the utility did not collect the tax, the original ruling said the utility could be assessed tax and interest. A customer statement could be considered when deciding whether reasonable cause supported compromising a penalty, but it did not erase tax or interest.

Owner-occupied homes and time-share intervals could qualify when no commercial activity occurred. A bona fide written lease for more than six months of continuous residence could also create a residential household, while a month-to-month tenancy did not qualify merely because it continued for six months.

The Department later revised and superseded this advisement through TAA 98A-068R. The original PDF itself directs readers to that revision, so this page is historical context rather than the Department's final treatment of the request.

What this means for you

Do not rely on the original ruling's utility-liability and certification analysis without checking revised TAA 98A-068R and current law. The original remains useful for understanding how Florida analyzed transient occupancy, commercial use, shared meters, and long-term written leases before issuing the revision.

Common questions

Q: Did a residential account code guarantee exemption? No. The original ruling said actual facts and use controlled and the Department could assess the utility when taxable electricity had not been taxed.

Q: What happened if one unit on a shared meter was rented transiently? The original ruling treated all electricity measured through that meter as taxable.

Q: Did six consecutive month-to-month renewals become a qualifying long-term lease? No. The initial and later written agreements had to provide terms longer than six months of continuous residence.

Q: Is this still the controlling advisement for the request? No. Revised TAA 98A-068R superseded it.

Citations and references

• Fla. Stat. §§ 212.05(1)(e)1.d., 212.08(7)(j) — utility tax and residential-household exemption
• Fla. Stat. §§ 212.03, 212.06 — transient rentals and dealer collection duties
• Fla. Admin. Code rr. 12A-1.053, 12A-1.059, 12A-1.061 — electricity, fuel, and transient-rental rules
• Gaulden v. Kirk, 47 So. 2d 567 (Fla. 1950)
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98A-068

Original ruling text

SUMMARY

A Florida public utility selling electricity to locations which provide living accommodations may not be immunized from tax or interest liability by the use of a form completed by the operator of the location who proclaims that the use at such location is exempt from tax because the electricity is consumed in a household residence. The Department has no authority to issue such absolution based on a good faith defense.

Such utility is obligated to collect the tax on sales to locations which provide transient living accommodations. The utility may be liable for sales or use tax notwithstanding that utility coded the service as "residential". The utility may not employ an "apparent use" standard in determining the taxability of the electricity. The sale of electricity to a condominium, time share, apartment house, or hunting lodge is taxable when one or more units is rented on a transient basis, notwithstanding that all other unites in such complex or development may be occupied under bona fide written leases of more than 6 months or are occupied by the owners.

Refer to 98A-068R

Aug 28, 1998

Technical Assistance Advisement - TAA-98A-068 Sales of Utilities and Certain Fuels to Residential Households Sections 212.05(1)(e)1.d., 212.08(7)(j), F.S. Rules 12A-1.053, 12A-1.059, F.A.C.

Dear :

This is a response, styled a Technical Assistance Advisement, to your letter dated XXX, in which your firm, representing the Utility, a Florida utility which pays the gross receipts tax levied by s. 203.01, F.S., poses 5 questions in connection with the imposition of sales tax on electricity sold by the Utility

to customers who then consume the electricity in the operation of real property which is rented for living quarters. At issue is the implementation of s. 212.08(7)(j), F.S., which exempts from sales or use tax the sales of utilities and certain fuels to residential households, when no part of such electricity or fuels measured through a single meter is used for nonexempt purposes.

You state, on the first page of your letter, that a recent audit of the utility, "... has raised questions about premises that appear to be rental units or rental property, where sales tax on utility sales has not been collected". You request guidance from the Department so as "... to assist [Utility] in its efforts to ensure compliance with its sales tax collection obligations".

Each of your questions will be replicated, followed by an abbreviated restatement of your arguments in support of your position, after which the Department's determination will appear.

Question 1: "Is the sales tax exemption stated in Section 212.08(7)(j) based on the type of use to which the utility service is put, that is, residential rather than a commercial use, or is the exemption based on the characterization of the owner/user as a resident or a transient?"

You argue that the grant of the exemption provided by s. 212.08(7)(j), F.S., turns on the characterization of the use of the electricity. The exemption, you assert, is applicable if the use is for the provision of the care and daily living needs of the residents even though the residents may be characterized as transient. You seek to establish a standard whereby the use or the purpose of the consumption of the electricity determines the exemption. Thus, you argue that the exemption in s. 212.08(7)(j), F.S., applies to the sale when the electricity is used in the provision of the care and daily living needs of the residents.

Department Response

Before responding to your specific question, two points should be made: First, electricity is made generally subject to tax by s. 212.05(1)(e)1.d., Florida Statutes. Secondly, whenever in the following discussion a determination is made that sales tax is imposed, a timing procedure applies whereby the liability for the tax is recognized for the entire monthly billing cycle, or any subsequent cycle, if the taxable use occurs for any one day in any such billing cycle.

In implementing the exemption of electricity and fuel, as provided in s. 212.08(7)(j), F.S., which is interpreted by Rule 12A-1.053, F.A.C., and Rule 12A-1.059, F.A.C., it must be determined if any portion of the electricity is used for a "nonexempt purpose." A "nonexempt purpose" is the consumption of electricity in the premises or part thereof, for carrying on activities of a commercial nature.

You suggest that living quarters which are rented on a transient basis do not force a conclusion that such rental is a priori a commercial transaction or commercial use. The Department cannot agree.

The rental, on a transient basis, is clearly an act of a commercial nature. The Florida Supreme Court has held that sales tax may be validly imposed on the privilege of engaging in the business of renting such transient accommodations. Gaulden v. Kirk, 47 So.2d 567, 576 (Fla. 1950). In fact, the lessor of such accommodations or person acting in behalf of the lessor must register as a dealer as required in s. 212.06, F.S., and collect and remit the tax levied by s. 212.03, Florida Statutes. However, a lessor who leases living quarters for a period longer than 6 months of continuous residency, is not in the business of renting transient quarters and is not required to register as a dealer, nor to collect or remit any tax.

The term "commercial use" also includes, for example, the operation on the premises of any other activity of a commercial nature such as a bank or travel office; coin-operated laundry machines owned or operated by either the landlord or a third party contractor; or a hair styling salon or beauty parlor for which a charge is made on the customers.

Question 2. "Who is responsible for determining whether the use of electricity at a particular location is exempt from sales tax? The utility provider or the owner/user at the location?"

In supporting your position that the responsibility rests with the "owner/user", you state on pages 3. and 4, that the "... owner/user of electricity at a particular location is the responsible party for declaring whether the use is exempt or non-exempt, and in the absence of a declaration, [Utility] may rely on the apparent use based on the circumstances (e.g., the location is a single or multi-family dwelling, apartment, condominium, or time share unit)." You cite a Department communication which stated that the Department is guided by the coding given the service by a utility, unless there is independent knowledge possessed by the Department that such electricity is used for a nonexempt purpose. In interpreting that statement you appear to create a single standard that the "apparent use" of the premises will decide the taxability and should the apparent use be contrary to the operation of a "residential household", the Utility is absolved of the use tax on such nonexempt use.

Department Response

The Department is charged with the obvious duty of implementing the statutes. In implementing s. 212.08(7)(j), F.S., a law which grants an exemption to the sale of utilities and certain enumerated fuels for exclusive "residential household" use, when none of the utility or fuel, measured through a single meter, is used for a "nonexempt purpose", the Department looks to all the surrounding facts and circumstances. The Department does not have the resources to investigate all individual sales of electricity. Thus, it is reasonable to consider the utility's coding designation.

It is also reasonable to consider any independent knowledge held by the Department as to that or any other location at which electricity is consumed. There is no statutory authority granted to the Department to absolve a utility from the liability for sales tax or use tax when a location served by

utility service is "apparently" the site of a "residential household" and yet is actually a location in which commercial activities are being conducted. Neither may the Department ignore a taxable use which may be contrary to a nontaxable coding designation assigned by such utility.

All such taxable sales of utilities to operators of premises used as living quarters will create in the Utility, a tax liability, as exists with any other dealer not a utility company, when the sale is determined to be subject to tax, and such tax was not collected by the utility.

Question 3. "If [Utility] has coded an electric service as residential and exempt from sales tax, and it is subsequently determined by the Department that the use was non-exempt, who is responsible for any assessment that may be due?"

In support of your position that the owner/user, rather that the Utility, is responsible for the tax, you create a standard which posits a "patently obvious non-exempt use" test, which when perceived, absolves the Utility of the tax. In the absence of such a test, you opine Utility "... would be wise to code all accounts as non-exempt until the account owner obtained a written determination from the DOR that his use was exempt".

You add that "[w]ith the proliferation of home based businesses and the intermingling of commercial and residential uses in areas of changing land use and rezoning, it is virtually impossible for an electric utility to make exempt versus nonexempt determinations". You urge that "... when an electric utility has coded an electric service as residential, and exempt from sales tax, [and the Department then finds the service taxable,] the electric account owner [be held] responsible for the sales tax... together with any interest and penalties."

Department Response

Neither the standard suggested by you in Question 2. of determining a "nonexempt purpose" from the "apparent use of the premises," or the standard you advance in Question 3. of a "patently obvious non-exempt use," validly nullify the

requirement in s. 212.06(1)(a), and (3), F.S., that the dealer collect the tax. Thus, when the Department finds that a sale of electricity by a utility is subject to tax when no tax was collected by the utility, the utility must be assessed the tax it should have collected.

Question 4. "If [Utility] has coded an electric service as residential and exempt from sales tax in reliance on a written statement, agreement or affidavit from the account holder (the customer) that the electricity will be or is being used solely for exempt residential purposes, will the Department of Revenue relieve [Utility] of liability for sales tax, interest and penalties if the DOR subsequently determines that the use was or is non-exempt?"

You advocate the nullification of tax liability for the Utility when reliance is on the statement or agreement described in your question. You state that this question is a "refinement" of Question 3.

Department Response

If the statement from the purchaser contains an attestation that the use is for residential purposes, the Department will consider such statement at least for the purposes of determining the existence of "reasonable cause" with respect to the compromise of penalty. However, the Department does not have the statutory authority to absolve the utility from liability for tax and interest, based solely on the existence of such a statement.

Question 5. "Which of the following electric use locations qualify for non-exempt status for purposes of section 212.08(7)(j)?"

"a. A residential single family dwelling or separately metered unit of a multi-family dwelling owned and occupied by the owner who conducts no business activity from the building."

Department Response

The sale of electricity to such a building under the conditions you describe would be exempt if there were no commercial activities conducted on the premises.

"b. A residential single family dwelling or a separately metered unit of a multi-family dwelling owned and occupied by the owner who also conducts a home based business from the dwelling, whether allowed by current zoning regulations or not."

Department Response

The Department cannot reply to this question because you have failed to define the term "home based" business. This term can embrace activities which are patently commercial as when significant business signage is present, including marked parking places, as well as the mere storage of a de minimis amount of business inventory within the premises but conducting no other business activities on such premises. In the absence of a particular definition or set of facts provided by you, a response is offered that in the former instance all electricity would be taxable, while in the latter instance, none of the electricity would be taxable because there would be no "nonexempt purpose" in the residential use of the building.

"c. A residential single family dwelling or a separately metered unit of a multi-family dwelling, where the owner has rented the unit to tenants for six months or more under a written lease."

Department Response

A bona fide written lease for a rental term of more than 6 months of continuous residency, as mandated in s. 212.03, F.S., and as this statute is interpreted in Rule 12A-1.061, F.A.C., creates no tax liability as to the parties to the agreement.

Such a term of occupancy creates, for purposes of s. 212.08(7)(j), F.S., a "residential household." Thus, within such a building, as described in this question, if all the electricity consumed was measured through a single meter and there were no nonexempt purposes served by such electricity,

sales tax would not be imposed on any of such electricity.

"d. A residential single family dwelling or a separately metered unit of a multi-family dwelling, where the owner has rented the unit to tenants on a month to month basis."

Department Response

For purposes of the exemption provided in s. 212.08(7)(j), F.S., a month to month tenancy pursuant to an agreement, written or otherwise, does not create a residential household as that term appears in the statute: nor does the renewal of such a tenancy for 6 consecutive terms create a residential household. If the exemption is to be applicable, the initial written agreement and all subsequent contracts for occupancy must be of terms for more than 6 months of continuous residency.

"e. A residential condominium unit owned and occupied by the owner who conducts a home-based business from the unit?"

Department Response

Again, in order for the exemption to apply, no part of the electricity may be used for a "nonexempt purpose." Such a purpose is defined as a commercial activity, for example, the operation of a bank or travel office or the transient rental of living quarters. As expressed in the response to Question 5.b, it is not possible to reply with any certitude absent a definition of the term " home based business."

"f. A residential condominium unit where the owner rents out the unit to others for all or a part of each year under rental agreements that may be on a daily, weekly, or monthly basis?"

Department Response

Note is made that, within Question 5.f., you include 4 numbered factual patterns, each of which poses a separate subpart question. The response which follows applies to all factual patterns, which obviates the need to provide individual

responses.

The electricity, if measured through a single meter, which serves a condominium complex, comes within the exemption provided in s. 212.08(7)(j), F.S., provided that all the units are occupied solely by their owners, or if rented, the written agreements are bona fide rental contracts with terms longer than 6 months of continuous residency, and that no nonexempt purpose is served by the electricity. You are alerted that electricity, for illustrative purposes, measured through a single meter serving a condominium complex containing 100 units would all be taxable if only one unit were rented on a transient basis.

As previously expressed, the renting of living quarters on a transient basis creates a nonexempt purpose in the use of the electricity because such usage serves a commercial purpose. Similarly, as you ask in all the factual patterns within Question 5.f., electricity metered and billed to the individual condominium unit owner would not enjoy the exemption granted in s. 212.08(7)(j), F.S., should such unit be rented under any of the terms of occupancy as expressed in the question or in any subpart, because all the tenancies you describe are transient.

"g. A time share dwelling unit (interval ownership) where the owner occupies the unit during his interval of ownership."

Department Response

The occupancy of a time share unit solely by its owner is a residential household regardless of the duration of such interval ownership. For illustrative purposes, electricity serving a time-share complex, measured through a single meter, in the instance where each of the time share units is occupied solely by owners for a period of one week and the ownership of each such unit is shared by 52 owners would be exempt under s. 212.08(7)(j), F.S., provided that there were no nonexempt purposes served by the electricity. Thus, the classification of the living quarters as a "time share" does not negate the exemption provided by s. 212.08(7)(j), Florida Statutes.

"h. A time share dwelling unit where the owner rents out

the unit to other[s] during his interval of ownership."

Department Response

The rental of living quarters on a transient basis creates a commercial usage which is a nonexempt purpose as that term appears in s. 212.08(7)(j), Florida Statutes. Thus, if a time share complex is served by a single meter and one or more of the units is rented by their owners on a transient basis, all of the electricity consumed by the complex would be subject to tax because the rental of living quarters on such a basis is a nonexempt purpose.

Similarly, all of the electricity would be taxable if a time share unit, served by an individual meter, were rented on a transient basis. The taxability of the electricity in such an instance would be for the entire billing cycle of the Utility in which at least one day the unit was occupied on a transient basis.

You are alerted that electricity would not be taxable if the occupancy of one or more of the units in a time share complex served by a single meter were to be traded by their owners to other one or more owners of time share units at the same or other location(s) provided that no consideration was exchanged by any of the parties. The comparative appointments, location, vista, or climatological elements, for example, between the time share units shall not constitute consideration paid or received of any of the parties to such a trade of occupancies.

"i. An apartment complex of multiple units where the owners of the complex rent dwelling units containing the usual amenities of a home (e.g., sleeping quarters, bathroom, kitchen facilities, heating, refrigeration and air conditioning) for periods of more than six months."

Department Response

As indicated in the response to Question 5.c. the lease pursuant to a bona fide written agreement for a term of more than 6 months of continuous residency would not create a tax liability

with respect to electricity consumed at such location if the electricity is measured through a single meter, provided that no other use at the location was for a nonexempt purpose.

"j. An apartment complex of multiple units where the owners of the complex rent dwelling units containing the usual amenities of a home (e.g., sleeping quarters, bathroom, kitchen facilities, heating, refrigeration and air conditioning) for periods of less than six months, that is, on a daily weekly, or monthly basis."

Department Response

As indicated above in the response to Question 1., the transient rental of living quarters is a commercial use which creates a nonexempt purpose. Thus, as previously explained, all the electricity serving such an individual unit or the electricity serving the entire complex measured through a single meter would be taxable.

"k. A hunting lodge or cabin that has the rustic amenities of a home (e.g., sleeping quarters, bathroom, kitchen facilities, heating and refrigeration) that is occasionally used by the owner and occasionally rented to hunters for a fee on a daily basis."

Department Response

As explained in the responses to Question 2, and to other questions, the rental of living quarters on a transient basis creates a commercial use which constitutes a nonexempt usage of the utility. Thus, the electricity billed to the owner would be subject to sales tax for each billing period of the Utility in which at least one day the quarters were rented on a transient basis.

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,

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

Ctrl. No. 31123