Sales and Use Tax TAA 17A-022 Residential Fuel Exemption

December 7, 2017  

TAX: Sales and Use Tax  

TAA NUMBER: 17A-022  

ISSUE: Residential Fuel Exemption  

STATUE CITE(S): 212.02(19), 212.05, 212.08(7)(j), Florida Statutes (F.S.)  

QUESTION/ANSWER:  

Is the propane gas purchased exclusively to heat a swimming pool located in the common area of a residential condominium, and owned by the unit owners of the condominium, exempt from sales tax under the residential fuel exemption in s. 212.08(7)(j), F.S.?  

The condominium residents’ use of the swimming pool is a residential activity occurring in a common area. Because the swimming pool area is commonly owned by the residents and used exclusively for residential purposes, then the fuel used to heat the swimming pool qualifies for the residential utility and fuel exemption. Accordingly, all utility usage through the meter that is used to heat the swimming pool is exempt from sales tax.  

RE: Technical Assistance Advisement – TAA 17A-022

_____________________________ [“Taxpayer”]

FEIN ____________________  Florida Sales and Use Tax – Residential Fuel Exemption

Sections 212.02, 212.03, 212.05, and 212.08, Florida Statutes (“F.S.”)

Rules 12A-1.053 and 12A-1.059, Florida Administrative Code (“F.A.C.”)

Dear ____________:

This letter is a response to your petition dated October 12, 2017, for the Florida Department of Revenue's ("Department") issuance of a Technical Assistance Advisement concerning the above referenced party and matter. Your petition has been carefully examined and the Department finds it to be in compliance with the requisite criteria set forth in Chapter 12-11, Florida Administrative Code. This response to your request constitutes a TAA and is issued to you under the authority of s. 213.22, F.S.  

Stated Facts and Requested Advisement  

Your letter received on October 12, 2017, states, in pertinent part:  

The Taxpayer is a Florida not for profit corporation which is responsible for the operation of a residential condominium located in _____________. The condominium, including its Common Elements[,] are exclusively used by residents of the condominium and their guests…. One of the Common Elements of the Taxpayer is a swimming pool, which is heated with gas stored in a propane tank. The propane tank, which is filled using a single meter, exclusively serves the swimming pool. Both the swimming pool and the propane tank are appurtenances to the residential condominium units and[,] therefore[,] owned in common by the unit owners. The Taxpayer purchases propane from ____________. Gas company charges the Taxpayer a sales tax for the gas it receives. Gas company has informed the Taxpayer that it will continue to charge the sales tax unless the Taxpayer obtains a document from the Florida Department of Revenue stating that the sales tax is not due.  

You ask us to provide a binding tax advisement on the above issue. You provided copies of the Declaration of Condominium of Taxpayer and an affidavit affirming the facts set forth in your letter. 

Law and Response  

Section 212.05, Florida Statutes (“F.S.”), provides every person is engaged in a taxable privilege when engaging in the business of selling, at retail, tangible personal property. In order to exercise such a privilege, tax is levied at a rate of 6%. See s. 212.05(l)(a)l.a., F.S. Tangible personal property is defined as “personal property which may be seen, weighed, measured, or touched, or is in any manner perceptible to the senses, including electric power or energy ….” See s. 212.02(19), F.S. Therefore, the sale of energy in Florida is subject to tax, unless an exemption applies.  

Florida sales or use tax is not due if the item is specifically exempt by Chapter 212, F.S. The Department must point out that while taxing statutes are strictly construed against the taxing authority, statutes that grant an exemption are strictly construed against the taxpayer. See Asphalt Pavers v. Dept. of Revenue, 584 So.2d 57 (Fla. 1st DCA 1991)(citing the rule that exemptions from tax are strictly construed against the taxpayer, with any ambiguity resolved in favor of the administrative agency); State ex rel. Szabo Food Service. Inc. v. Dickinson, 286 So.2d 529 (Fla. 1973)(noting that although taxing statutes are strictly construed against a taxing authority, under Florida law exemptions are strictly construed against the taxpayer); and, United States Gypsum Co. v. Green, 110 So.2d 409 (Fla. 1959)(also stating that exemptions from tax are strictly construed against the taxpayer).  

One such exemption from the tax imposed in s. 212.05, F.S., is found in s. 212.08(7)(j), F.S., which specifically provides an exemption for the sale of utilities and fuel, used for residential purposes, to “residential households.” This provision states that if any part of the utility or fuel is used for a nonexempt purpose, the entire sale is taxable. Thus, the statute contains two requirements: (1) the sale must be to a residential household, and (2) there can be no use for a nonexempt purpose (i.e., the use must be exclusively for residential purposes). As the statute provides an exemption to residential households that are using utilities for residential purposes, the use of the household by the occupant is critical. The occupant must use the household exclusively for residential purposes. In other words, the occupant must make the household his or her residence and engage in no other use than residential.  

In line with the direct residential use exemption, the Department has held certain uses of utilities and fuels for residential purposes in common areas, though the common area is not directly within or contiguous with the residential household, will qualify for the household fuels exemption. “Common area” is a term used by the Department but defined neither in the Florida Statutes nor in Rules 12A-1.053 and 12A-1.059, F.A.C., which state that an exemption applies to the sales of utilities or fuels used in the common areas of condominiums as long as none of the utilities are used for other non-exempt purposes. Where a word is not defined by statute or the intent of the word is unclear, a court will resort to statutory construction and may determine the plain and ordinary meaning of the word from a dictionary. See Nehme v. Smithkline Beecham Clinical Labs., Inc., 863 So. 2d 201, 204-05 (Fla. 2003) (quoting Seagrave v. State, 802 So.2d 281, 286 (Fla. 2001)).  

The phrase, “common area,” is known to mean an area, which, e.g., is used by residents of a condominium, which maintains a common ownership and use. See BLACK'S LAW DICTIONARY 275 (6th ed. 1990). Thus, a "common area" is generally not included within the private, individual living quarters. Therefore, in a residential development, the common area could include roads within the development, parks, area pools, playgrounds, etc. Clearly then, the “common area,” as found within Rules 12A-1.053 and 12A-1.059, F.A.C, does not have to be contiguous to each residential unit or space to qualify as a common area. Therefore, if the use of a common area is in conjunction with the operation of the residential households or fills the needs of residents; is intended for the exclusive use of the owners, tenants, and guests; is not held out for use by the public; and no charge is made for the use of the area; such use is considered to be residential use and is covered by the exemption provided in s. 212.08(7)(j), F.S. 

Based on the above definition, one can conclude the exemption, found in s. 212.08(7)(j), F.S., is for a residence and/or an area shared by residents, even if that area is not within the private residence. Furthermore, no part of the utility usage, through one meter, may be used for anything but residential purposes. See s. 212.08(7)(j), F.S. The same cited statute provides if any part of the utilities used through the same meter are used for nonresidential purposes, e.g., a commercial activity, then all of the utilities are taxable.  

The determination must first be made whether the swimming pool is located in a common area. With the definition of “common area” in mind, the Department has found, within certain limitations, various types of common areas to be for residential purposes and, thus, qualify for the household fuel exemption for utilities and fuel to power the common areas. Common areas do not have to be within or contiguous with the physical living quarters. A determination must also be made regarding the exclusive use of the pool area for residential purposes. Accordingly, if the common areas are used exclusively for residential purposes, i.e., not commercial purposes, then the fuel used in the common areas will be exempt from tax as a household fuel.  

With regard to Taxpayer, the Department finds the condominium residents’ use of the swimming pool to be a residential activity occurring in a common area. Because the swimming pool area is commonly owned by the residents and used exclusively for residential purposes, then the fuel used to heat the swimming pool qualifies for the residential utility and fuel exemption. Accordingly, all utility usage through the meter that is used to heat the swimming pool is exempt from sales tax.  

CONCLUSION  

Based on the facts presented, the propane gas provided by gas company to Taxpayer, for use in the heating of the swimming pool, which is solely used by the residents for residential purposes, is exempt from sales tax under s. 212.08(7)(j), F.S.  

This response constitutes a Technical Assistance Advisement under section 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 section 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 that expressed in this response. You are further advised that this response, your request and related backup documents are public records under Chapter 119, F.S., and are subject to disclosure to the public under the conditions of section 213.22, F.S. Confidential information must be deleted before public disclosure. In an effort to protect confidentiality, we request you provide the undersigned with an edited copy of your request for Technical Assistance Advisement, the backup material, and this response, deleting names, addresses, and any other details which might lead to identification of the taxpayer. Your response should be received by the Department within 15 days of the date of this letter. 

Sincerely,

/s/Felicia S.W. Thomas

Felicia S.W. Thomas, Esq.

Senior Attorney

Technical Assistance & Dispute Resolution  

Record ID: 25066