TAA 25A-002 Renewable Natural Gas
QUESTIONS:
1. Whether Taxpayer, contractor and subcontractors, will be able to purchase the equipment and integral building materials to construct the Renewable Natural Gas (“RNG”) plant exempt from Florida sales and use tax.
2. Whether Taxpayer, contractor or subcontractor, may issue tax exemption certificates certifying that such items being purchased are eligible for the RNG equipment exemption in order to purchase such items exempt from Florida sales and use tax.
3. Whether Taxpayer, contractor and subcontractors may rely on the advice given by the Department pursuant to the Technical Assistance Advisement.
ANSWERS:
1. Taxpayer, contractor, and subcontractors will be able to purchase the machinery and equipment and integral building materials, items 1, 3-15, and 17-18, listed and described above, to construct the RNG plant exempt from Florida sales and use tax under s. 212.08(5)(v), F.S.
2. Taxpayer, contractor, or subcontractor may issue a tax exemption affidavit certifying that such items being purchased are eligible for the RNG equipment exemption under s. 212.08(5)(v), F.S., in order to purchase such items, exempt from Florida sales and use tax.
3. This response constitutes a TAA 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.
February 5, 2025
Re: Technical Assistance Advisement – TAA #: 25A-002
___________ (“Taxpayer”)
Sales and Use Tax – Renewable Natural Gas (“RNG”)
Sections 212.02, 212.05, 212.055, 212.08(5)(v), Florida Statutes - (“F.S.”)
Rule 12A-1.096, Florida Administrative Code - (“F.A.C.”)
BP #: ___________
Dear ______________________
This is in response to your letter received in this office on ___________, requesting this Department’s issuance of a Technical Assistance Advisement (“TAA”) pursuant to Section(s.) 213.22, F.S., and Rule Chapter 12-11 F.A.C, Florida Administrative Code, regarding the matter discussed below. Your request has been carefully examined, and the Department finds it to be in compliance with the requisite criteria set forth in Chapter 12-11, F.A.C. This response to your request constitutes a TAA and is issued to you under the authority of s. 213.22, F.S.
REQUESTED ADVISEMENTS
1. Whether Taxpayer, contractor, and subcontractors, will be able to purchase the equipment and integral building materials to construct the RNG plant exempt from Florida sales and use tax.
2. Whether Taxpayer, contractor, or subcontractor, may issue tax exemption certificates certifying that such items being purchased are eligible for the RNG equipment exemption in order to purchase such items exempt from Florida sales and use tax.
3. Whether Taxpayer, contractor and subcontractors may rely on the advice given by the Department pursuant to the Technical Assistance Advisement.
FACTS
You state in your letter:
Taxpayer is a gas producer that will be engaged in the business of manufacturing RNG from landfill gas for sale at wholesale by developing a plant in ______________________ (the “RNG Plant”). Taxpayer will sell its productive output of RNG to ______________________ (“Gas Utility Company”) for resale to the public.
Taxpayer has entered into an engineering, procurement and construction contract with ______________________ (“Contractor”) to design and construct the RNG Plant1. The equipment to operate the RNG Plant (“Equipment”) will in large part be purchased by Contractor, and subcontractors engaged by Contractor (“Subcontractors”). In addition, Contractor and Subcontractors will purchase certain building materials to make improvements to real property which will shelter and protect the equipment from the elements, or which are integral parts of the manufacturing process (“Integral Building Materials”).
The RNG Plant will upgrade gas that has been captured and collected form the landfill into RNG that will be injected into the Gas Utility’s pipeline. This technology captures carbon that would be emitted by the landfill gas escaping into the atmosphere and repurposes the methane for beneficial use which would otherwise be destroyed by the landfill’s flare.
The RNG Plant will have a nameplate inlet capacity of 2,000 standard cubic feet per minute (scfm) of raw landfill gas that can generate up to 1,002 scfm of RNG meeting pipeline specifications. The forecasted gross annual production is 277,472 million British thermal units (MMBtu) starting in 2025 and increasing to a peak of 473,477 MMBtu in 2040. The RNG will be injected into the Gas Utility’s distribution system for transport to the Gas Utility’s customers.
The necessary major Equipment and components (including improvements to real property that will shelter and protect the Equipment from the elements or are an integral part of the RNG manufacturing process) to construct the RNG Plant are listed below.
1. Machinery and Equipment Foundations and Platforms: Machinery and equipment foundations and platforms include support structure and foundations for the machinery and equipment in the RNG plant. These include, but are not limited to, steel and concrete pilings, platforms and the superstructure required to hold and support the primary equipment, ductworks and systems that comprise the RNG Plant’s systems. These components will be improvements to real property which are integral to the RNG manufacturing, storage and transportation process, and will be constructed with Integral Building Materials.
2. Equipment Canopy required to protect the machinery and equipment from weather, heat, and sun exposure as required to operations and equipment reliability. The equipment canopy structure will provide support for electrical and mechanical runs integral to the process. The Equipment Canopy will be an improvement to real property that is integral to the RNG manufacturing, storage and transportation process, and will be constructed with Integral Building Materials.
3. 150,000-pound (lb) Carbon Vessel media-based Hydrogen Sulfide Removal System.
4. Landfill Gas Booster Blower required to transfer the landfill gas (“LFG”) from the landfill to the TNG plant.
5. Feed Compressor and moisture removal system comprised of chiller and dryer, to compress, dewater, and precondition the gas for treatment.
6. Pressure Swing Adsorption (PSA) Skid to remove volatile organic compounds and siloxanes from the gas.
7. Membrane Skid to remove carbon dioxide and oxygen from the gas.
8. Vacuum compressors to regenerate the adsorbent beds in the PSA skid and send the lowpressure tail gas to the flare for destruction.
9. Nitrogen Rejection Unit (NRU), including vacuum and recycle compressors, to remove excess nitrogen and oxygen that was not removed by the Membrane Skid from the gas.
10. Gas Dryer to remove excess moisture from the gas following treatment.
11. Product Gas Compressor to compress gas to the pressure required by the interconnection point to allow entry into the pipeline distribution system.
12. Thermal Oxidizer to destroy tail gas produced by the PSA, Membrane Skid, and NRU. Technical Assistance Advisement February 5, 2025 Page 4
13. Emergency Flare to safely destroy gas in event of plant shutdown.
14. Compressed Air System to provide activation of plant’s instrumentation and controls essential for safe and controlled operation.
15. Condensate storage and removal systems, including oil-gas separators, knockout tanks, sumps, pumps, and associated piping to remove water produced during the upgrading process for treatment and disposal.
16. Electrical Building and Control Room: The electrical building and control room contain necessary generator switchgear, electrical equipment, and the controls for all of the machinery and equipment in the RNG plant. All references in this Request to “Electrical Building and Control Room” shall include the equipment contained therein. The TNG cannot function without the electrical building, control room, and related equipment, and therefore will be improvements to real property which will be integral to the RNG manufacturing, storage and transportation integral to the RNG manufacturing process, and will be constructed with Integral Building Materials.
17. Natural Gas Lines: The natural gas lines deliver TNG produced from the Plant to the. In addition, a separate natural gas delivery point to the thermal oxidizer’s supplemental burner to maintain destruction temperature of the tail gas. The TNG plant cannot function without both lines. These lines will be improvements to real property which will be integral to the RNG manufacturing, storage and transportation process, and will be constructed with Integral Building Materials.
18. Electrical Transformers with associated structure and foundations: The transformers step down the voltage from the utility, 23,000V to 4160V and 480V.
19. Miscellaneous Equipment and Machinery:
- Electrical equipment including equipment wiring and conduit, controls, drives, panels, switches, transmitters, instrumentation, and metering;
- Equipment pump, motors and drives;
- Equipment tanks, piping, and pressure reduction valves and other control valves; and
- Ancillary electrical and mechanical components associated with major equipment that support the RNG systems.
LAW AND DISCUSSION
Unless a specific exemption applies, s. 212.05, F.S., provides it is the legislative intent that every person is exercising a taxable privilege that engages in the business of selling tangible personal property2 in this state. For exercising such a privilege, a tax is levied on each taxable transaction or incident. The tax is due and payable at the rate of 6 percent, plus any applicable surtaxes imposed under s. 212.055, F.S., on the total consideration received for each item or article of tangible personal property when sold at retail in this state.
Section 212.08(5)(v), F.S., provides that the purchase of machinery and equipment that is primarily used in the production, storage, transportation, compression, or blending of renewable natural gas3 and that is used at a fixed location is exempt from the tax imposed by this chapter. Purchasers of machinery and equipment qualifying for the exemption provided in this paragraph must furnish the vendor with an affidavit stating that the item or items to be exempted are for the use designated herein. See s.212.08(5)(v)3., F.S.4
The exemption from Florida sales and use tax provided under s. 212.08(5)(v), F.S., applies to machinery and equipment that is primarily used in the production, storage, transportation, compression, or blending of renewable natural gas and that is used at a fixed location. As it pertains to this exemption, a definition for machinery and equipment is not provided in paragraph (v) of subsection (5) of s. 212.08, F.S. In general, “machinery and equipment" refers to a collective term encompassing large, complex machines used in a production process (machinery) alongside smaller tools and devices that facilitate the operation of those machines or perform specific tasks within a business (equipment). Typically, machinery and equipment are tangible personal property and are not real property.
Contractors performing real property improvements are subject to the provisions of Rule 12A1.051, F.A.C. Generally, contractors will be subject to tax on all materials consumed in the real property improvement activities.
Only purchases of machinery and equipment that Taxpayer uses primarily in the production, storage, transportation, compression, or blending of renewable natural gas would be exempt from Florida sales and use tax under s. 212.08(5)(v), F.S. Based on a review of the machinery and equipment and the building materials used to perform real property improvements to the facility that are listed and described above, to construct the RNG plant, it is determined that only machinery and equipment and specific foundations and platforms to support such machinery and equipment that are integral and provide a significant function within the production process of RNG would be eligible and qualify for the exemption provided under s. 212.08(5)(v), F.S. Items 1, 3-15, and 17-18, would be eligible and qualify for the exemption. Materials used to construct item 2, Equipment Canopy and item 16 Electrical Building and Control Room would not be eligible and qualify for the exemption provided.
To obtain the exemption from tax, Taxpayer would provide the suggested affidavit provided in Tax Information Publication No: 23A01-11, Sales and Use Tax Exemption for Renewable Natural Gas Machinery and Equipment.
It should be noted that any dealer that takes an exemption document or an exemption permit in good faith would be relieved of the liability to collect tax and the Department would look solely to the purchaser for any tax that may be subsequently determined to be due. A selling dealer accepting the permit in good faith, will not be held liable for any potential tax due; liability will rest with the purchaser/holder of the permit.
As to your contention regarding a previously issued TAA, it is important to note that a TAA has no precedential value except to the taxpayer who requests the advisement. See s. 213.22, F.S.
CONCLUSIONS
1. Taxpayer, contractor, and subcontractors will be able to purchase the machinery and equipment and integral building materials, items 1, 3-15, and 17-18, listed and described above, to construct the RNG plant exempt from Florida sales and use tax under s. 212.08(5)(v), F.S.
2. Taxpayer, contractor, or subcontractor may issue a tax exemption affidavit certifying that such items being purchased are eligible for the RNG equipment exemption under s. 212.08(5)(v), F.S., in order to purchase such items, exempt from Florida sales and use tax.
3. This response constitutes a TAA 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 TAA, 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 ten (10) days of the date of this letter.
Xiaoxi Miao
Tax Law Specialist
Office of Technical Assistance
1) A copy of the contract between Taxpayer and Contractor was provided for review.
2) Tangible personal property means and includes personal property which may be seen, weighed, measured, or touched or is in any manner perceptible to the senses. See s. 212.02(19), F.S.
3) The term “renewable natural gas” means anaerobically generated biogas, landfill gas, or wastewater treatment gas refined to a methane content of 90 percent or greater, which may be used as transportation fuel or for electric generation or is of a quality capable of being injected into a natural gas pipeline. For purposes of this paragraph, any reference to natural gas includes renewable natural gas. See s.212.08(5)(v)1., F.S.
4) See: Tax Information Publication No. 23A01-11, dated June 12, 2023, for a suggested affidavit.
