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Sales and Use Tax – TAA 14A-030 – Exemption – Voluntary Solar Contribution

QUESTION: WHETHER CONTRIBUTIONS TO A VOLUNTARY SOLAR PARTNERSHIP PILOT PROGRAM ARE SUBJECT TO GROSS RECEIPTS TAX AND/OR SALES TAX.

ANSWER: NO, THE VOLUNTARY CONTRIBUTIONS – WHICH ARE COMPLETELY VOLUNTARY, UNRELATED TO A CUSTOMER’S ACTUAL ELECTRICITY USAGE, CANCELABLE AT ANY TIME, SEPARATELY STATED ON THE CUSTOMER’S BILL, AND NOT SUBJECT TO ANY LATE PAYMENT CHARGES OR COLLECTION ACTIONS – ARE NEITHER “CHARGES FOR ELECTRICAL POWER OR ENERGY” NOR “GROSS RECEIPTS FROM UTILITY SERVICES.” THEREFORE, THE VOLUNTARY CONTRIBUTIONS ARE NOT SUBJECT TO SALES TAX OR GROSS RECEIPTS TAX.

December 3, 2014

RE: Technical Assistance Advisement – TAA 14A-030 Sales and Use Tax and Gross Receipts Tax Voluntary Solar Partnership Pilot Program Chapters 203 and 212, Florida Statutes (“F.S.”)

XXXX (the “Taxpayer”) FEI #: XXXX

Dear XXXX:

This is in response to your letter, dated XXXX, requesting this Department’s issuance of a Technical Assistance Advisement (“TAA”) pursuant to Section 213.22, F.S., and Rule Chapter 12-11, F.A.C., regarding the application of Florida sales tax and gross receipts tax to certain voluntary contributions received by an electric utility. An examination of your letter has established that you have complied with the statutory and regulatory requirements for issuance of a TAA. Therefore, the Department is hereby granting your request for a TAA.

ISSUE

The issue involves whether contributions to a voluntary solar partnership pilot program are subject to gross receipts tax and/or sales tax.

FACTS AS PRESENTED

The following presented facts are taken from your letter, dated XXXX, as well as your follow-up correspondence of September 25, 2014. Taxpayer is an investor-owned electric utility. Beginning XXXX, Taxpayer will offer a time limited Voluntary Solar Partnership Pilot Program (the “Program”) to its customers in all territory served by Taxpayer. Pursuant to the tariff approved by the Public Service Commission, Taxpayer’s customers can voluntarily contribute to the Program, which is designed to construct and operate commercial scale-scale, supply-side solar photovoltaic facilities.1 Beginning in XXXX, Taxpayer anticipates constructing two to five individual solar projects ranging from XXXXkW to XXXXkW in size. Taxpayer will operate and own the ground mounted systems or rooftop installations on structures such as commercial parking canopies in communities throughout Taxpayer’s service territory. Taxpayer will size the solar projects based on the level of participation, so that voluntary contributions will approximate the project revenue net of estimated avoided fuel and emission costs.

Participation in the Program is completely voluntary. Residential, commercial, and industrial customers who choose to enter the Program will contribute $XXXX monthly, in addition to any charges for electric service applied under their otherwise applicable metered rate schedule. This contribution is unrelated to a customer’s actual electricity usage each month. Additionally, contributions may be utilized in any part of Taxpayer’s service territory in the State of Florida and need not bear any relationship to the location of the contributing customer. The only prerequisite to entering the Program is that the customer does not have a delinquent balance. Customers may enroll or cancel their enrollment at any time, and the Program will be offered on a month-to-month basis. The voluntary contribution will be a separate line item on the customer’s bill and will not be subject to any late payment charges or collection actions. If a customer opts into the Program and fails to pay the voluntary contribution, the customer’s electric service will not be disconnected. Customers enrolled in the Program do not directly receive energy from the solar facilities constructed or operated.

The construction and operation of solar facilities under the Program will not be funded by the general body of ratepayers. Participants will be able to go to the Program website to see how much electricity is being produced from the solar facilities and the corresponding fuel and environmental benefits. Taxpayer also will provide quarterly reports with this information. At the end of XXXX, Taxpayer will report to the Public Service Commission on the data gathered, and the Commission will determine whether to terminate or continue the Program. Should the Program be terminated without adequate participant contributions to cover the remaining revenue requirements for the facilities, Taxpayer’s shareholders, and not its ratepayers, will absorb the difference.

Your request confirmation that the voluntary contributions to the Program are not subject to either the gross receipts tax or the sales tax.

LAW AND DISCUSSION

Sales Tax

The general rule is that the sale of tangible personal property at retail in this state is considered a taxable privilege. See s. 212.05, F.S. The tax is imposed on the sales price of each item or article of tangible personal property when sold at retail, unless specifically exempt. See ss. 212.05(1)(a)1.a. and 212.21(2), F.S. The term “tangible personal property” is defined, in part, to include “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. The tax rate for charges for electrical power or energy is 4.35 percent. See s. 212.05(1)(e)1.c., F.S.

Gross Receipts

Florida imposes a gross receipts tax on, among other things, utility services. The gross receipts tax is imposed – at the rate of 2.5 percent – on “gross receipts from utility services that are delivered to a retail consumer in this state.”2 See s. 203.01(1)(a)1.,(b)1., F.S. The term “utility service” is defined in s. 203.012(3), F.S., as follows:

(3) “Utility service” means electricity for light, heat, or power; and natural or manufactured gas for light, heat, or power, including transportation, delivery, transmission, and distribution of the electricity or natural or manufactured gas. This subsection does not broaden the definition of utility service to include separately stated charges for tangible personal property or services which are not charges for the electricity or natural or manufactured gas or the transportation, delivery, transmission, or distribution of electricity or natural or manufactured gas. (emphasis added).

Florida also imposes an additional gross receipts tax – at the rate of 2.6 percent – “on charges for, or the use of, electrical power or energy that is subject to the tax levied pursuant to s. 212.05(1)(e)1.c. or s. 212.06(1). The tax shall be applied to the same transactions or uses as are subject to taxation under s. 212.05(1)(e)1.c. or s. 212.06(1).” See s. 203.01(1)(a)3., (b)4., F.S.

After reviewing the information provided, the Department agrees that the voluntary contributions to the Program – which are completely voluntary, unrelated to a customer’s actual electricity usage, cancelable at any time, separately stated on the customer’s bill, and not subject to any late payment charges or collection actions – are neither “charges for electrical power or energy” nor “gross receipts from utility services.” Therefore, the voluntary contributions to the Program are not subject to sales tax or gross receipts tax.

CONCLUSION

Taxpayer’s customers’ voluntary contributions to the Program are not subject to gross receipts tax or sales tax.

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 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 10 days of the date of this letter.

Sincerely,

Thomas A. Kovacik
Senior Attorney
Technical Assistance and Dispute Resolution (850) 717-7756

Record ID: 176351

End Notes:

1 You provided, among other things, a copy of a Memorandum issued by the Public Service Commission, as well as a copy of the tariff.

2 Gross receipts subject to the gross receipts tax for the provision of electricity include “receipts from monthly customer charges or monthly facility charges.” See s. 203.01(7), F.S.

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