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The Department later revised and superseded this advisement through TAA 98A-068R.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