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Sales and Use Tax – TAA 14A-032 – Residential Exemption on Fuels

QUESTION: WHETHER PROPANE GAS AND/OR ELECTRICITY USED IN THE OPERATION OF THE COIN-OPERATED LAUNDRY, WHICH IS SOLELY USED BY THE TENANTS, IS EXEMPT FROM SALES TAX UNDER S. 212.08(7)(J), F.S.?

ANSWER: TAX IS NOT DUE, BECAUSE THE COIN-OPERATED LAUNDRY IS NOT A COMMERCIAL ACTIVITY, BUT RATHER IT IS A RESIDENTIAL HOUSEHOLD ACTIVITY USED EXCLUSIVELY BY THE RESIDENTS.

December 30, 2014

Re: Technical Assistance Advisement 14A-032 Florida Sales and Use Tax

Residential Exemption on Fuels
Section 212.08, Florida Statutes (“F.S.”) Petitioner: XXXX (“Taxpayer”)

Dear XXXX:

This letter is a response to your petition received on XXXX, for the Department's issuance of a Technical Assistance Advisement ("TAA") concerning the above-referenced petitioner 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 (“F.A.C.”). This response to your request constitutes a TAA and is issued to you under the authority of section (“s.”) 213.22, F.S.

FACTS PRESENTED

The following facts are based on documents and statements provided by Taxpayer.

Taxpayer, a Florida corporation, operates an RV park located in XXXX, Florida. This RV park, which is mostly in an isolated area, caters exclusively to singles, fifty-five (55) years or older. The park and common areas are limited solely to the registered park residents and their guests. Residents stay anywhere from overnight to long term.

Part of the operations of the park involves Taxpayer owning two propane gas tanks. One propane tank exclusively services Taxpayer’s office, and the other tank exclusively services the coin-operated laundry. Thus, the coin-operated laundry is separately metered. Taxpayer purchases the propane from XXXX (“Company”). Taxpayer is considering using electricity to power the coin-operated laundry.

REQUESTED ADVISEMENTS

Taxpayer requests whether propane gas and/or electricity used in the operation of the coin- operated laundry, which is solely used by the residents, is exempt from sales tax under s. 212.08(7)(j), F.S.

LAW & DISCUSSION

Section 212.05, F.S., generally provides every person is engaged in a taxable privilege when engaging in the business of selling, at retail, tangible personal property, in the state. In order to exercise such a privilege, tax is levied at a rate of six percent (6%). See s. 212.05(1)(a)1.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 general rule of taxability applies, unless Taxpayer can show it is entitled to an exemption.

Florida sales or use tax is not due if the item is specifically exempt by Chapter 212, F.S. It is well-settled law exemptions are strictly construed against the taxpayer, causing the burden of proof for the exemption to be on the taxpayer. See Szabo Food Servs., Inc. of N.C. v. Dickinson, 286 So. 2d 529, 530-32 (Fla. 1973); Green v. City of Pensacola, 126 So. 2d 566, 569 (Fla. 1961); State v. Thompson, 101 So. 2d 381, 386 (Fla. 1958). Any doubt as to an exemption is resolved favorably towards the State. See Szabo Food Servs., 286 So. 2d at 531; United States Gypsum Co. v. Green, 110 So. 2d 409, 413 (Fla. 1959).

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 not defined in the Florida Statutes nor in Rules 12A-1.053 and 12A-1.059, F.A.C. 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 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 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 laundry facilities are 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. 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. On first impression, the laundry facilities held out strictly to the residents might qualify as a common area, even though the facilities are not within or contiguous with the residential household. If the laundry facilities are a common area strictly for residential household use, then fuel used to power the common area would be exempt from tax.

With regards to Taxpayer, the Department finds the resident’s use of the coin-operated laundry facility to be a residential activity. Though payment is made by the residents for the use of the laundry machines, the laundry facilities are strictly for residential household use. Further, since the RV park is mostly isolated from other residential areas, it is unlikely individuals would drive to the RV park solely to use the coin-operated laundry, as one would at a laundry mat.

CONCLUSION

Propane gas and/or electricity used in the operation of the coin-operated laundry, 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 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, 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 s. 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,

Ann Rix
Revenue Program Administrator I Technical Assistance & Dispute Resolution

Record ID: 173722

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