Sales Use and Tax TAA NUMBER: 19A‐002
TAX: Sales and Use Tax
TAA NUMBER: 19A‐002
ISSUE: Multiuse real property rentals.
STATUTE CITE(S): Section(s) 212.031, and 212.03(6), F.S.
RULE CITE(S): Rule 12A‐1.070, F.A.C.
QUESTIONS: Is Taxpayer’s method to allocate multiuse property reasonable?
ANSWER: Yes. Section 212.031(1)(b), F.S., requires an apportionment when certain property of a lease is subject to an exemption for parking. Taxpayer proposes to apportion the portions of the lease involving different uses by using square footage information. Rule 12A‐ 1.070(1)(a)6., F.A.C., provides an example of a lease using square footage information. Areas required to be used exclusively in a certain manner may not be used occasionally for other purposes.
January 25, 2019
XXXXXXXXXXXXX XXXXXXXXXXXXX XXXXXXXXXXXXX XXXXXXXXXXXXX
Subject: Technical Assistance Advisement (“TAA”) TAA 19A‐002
AMS#: 7000137607
Sales and Use Tax‐XXXXXXXX
Section(s) 212.03(6) and 212.031, Florida Statutes (“F.S.”) Rule(s) 12A‐1.070, Florida Administrative Code (“F.A.C.”)
XXXXXXXXXXXXXXX (“Petitioner”)(“Taxpayer”) Business Partner Number: XXXXXXX
FEIN: XX‐XXXXXXX
XXXXXXXXXXXXXX (“Landlord”) Dear XXXXXXXXX:
This letter is a response to your petition dated November 26, 2018, for the Department’s issuance of a Technical Assistance Advisement (“TAA”) to Petitioner, regarding real property rentals at Taxpayer’s location. Your petition has been carefully examined, and the Department finds it to be in compliance with the requisite criteria set forth in Rule Chapter 12‐11, F.A.C. This response to your request constitutes a TAA and is issued to you under the authority of section 213.22, F.S.
Facts
Landlord leases commercial real property at an XXXXXXX to several tenants. The property has multiple uses. Landlord has several types of leases, described by Landlord as Office Leases, Land Leases, XXXXXXX Leases, XXXXXXXXX Leases, XXXXXXX Leases, XXXXXXX Leases, and XXX XXXXX XXXXXX Leases. Office Leases provide tenants with office space in the commercial XXXXXXXXX or XXXXXX office buildings for various commercial purposes. Land Leases allow tenants to construct improvements for storage and XXXXXXX of XXXXXX. XXXXX Leases allow tenants to rent XXXXX space for storage of XXXXXX. XXXXX Leases allow tenants to rent XXXXXXXXXXX space for storage of XXXXXX. XXXXXXXX Leases allow tenants to use space for storage of XXXXXXX and XXXXXX related property, or storage of non‐XXXXXXX related property. XXXXXXXXX Leases allow tenants to store XXXXXX and XXXXXXX related property. The XXXXXXXXXX Lease also allows use of the leased property for commercial office purposes, XXXXXXXXX, and parking vehicles. The XXX XXXXX XXXXXX Leases allow tenants to rent office space for commercial purposes, and to use designated areas for parking XXXXXX vehicles.
Taxpayer Position
Taxpayer maintains that different tax rates apply for the different leases, and different spaces used in the leases.
Office Leases: The total rent charged under the Office Leases is subject to Florida sales tax at the rate of 5.8% through December 31, 2018 (and 5.7% on and after January 1, 2019).
Land Leases: The total rent charged under the Land Leases, regardless of how any improvements constructed on the leased land are used, is subject to Florida sales tax at the rate of 5.8% through December 31, 2018 (and 5.7% on and after January l, 2019).
XXXXXX: The total rent charged under the XXXXXXX Leases is subject to Florida sales tax at the rate of 6.0% from the date hereof (both before and after January l, 2019).
XXXXXXX: The total rent charged under the XXXXX Leases is subject to Florida sales tax at the rate of 6.0% (both before and after January l, 2019).
XXXXXXX Leases: The Florida sales tax rate applicable to the XXXXXX Leases depends on the actual use of the leased space.
If the leased space is used solely for the storage of XXXXX and XXXXXX related property, then the total rent charged under such XXXXXXXX Leases is subject to Florida sales tax at the rate of 6.0% (both before and after January l, 2019). If the leased space is used solely for the storage of non‐XXXXXXX related property, then the total rent charged under such XXXX Leases is subject to Florida sales tax at the rate of 5.8% through December 31, 2018 (and 5.7% on and after January 1, 2019).
If the leased space has multiple uses for both the storage of XXXXXX and XXXXXXX related property, and the storage of non‐XXXXXXX related property, then such XXXXXXXXX Leases are subject to Florida sales tax at two different rates. The rate is 6.0% (both before and after January 1, 2019) on the pro rata portion of the total rent charged for the storage of XXXXXXX and XXXXX related property calculated by dividing the square footage used for the storage of XXXXXXXX and XXXXXXX related property by the total square footage of the entire leased space. The rate is 5.8% through December 31, 2018 (and 5.7% on and after January 1, 2019) on the pro rata portion of the total rent charged for the storage of non‐XXXXXXXX related property calculated by dividing the square footage used for the storage of non‐XXXXXX related property by the total square footage of the entire leased space.
For example, a tenant under such a hybrid XXXXXXXX Lease pays total monthly rent of
$1,000.00 on December 1, 2018 for 1,000 total square feet of leased space. 700 square feet (i.e., 70%) of such leased space is used to store XXXXXX and XXXXXXXX related property, and the remaining 300 square feet (i.e., 30%) of such leased space is used to store non‐XXXXX related property. The sales tax due on the monthly rent would be $59.40. Sales tax due on the area to store XXXXXXXX would be $42 tax, and the storage areas of non‐XXXXXXXXX property is $17.40.
XXXXXXXXXX Leases: The Florida sales tax rate applicable to the XXXXXXXXXXXXXX Leases depends on the actual use of the leased space.
If the leased space is used solely for the storage of XXXXXX and XXXXXXXX related property, then the total rent charged under such XXXXXXXXXXXX Leases is subject to Florida sales tax at the rate of 6.0% (both before and after January 1, 2019).
If the leased space is used solely for either the storage of non‐XXXXXXXX related property or commercial office purposes (or both), then the total rent charged under such XXXXXXXXXX Leases is subject to Florida sales tax at the rate of 5.8% through December 31, 2018 (and 5.7% on and after January 1, 2019).
If the leased space is used solely for XXXXXXX of XXXXXX, then the total rent charged under such XXXXXXXX XXXXXX Leases is exempt from Florida sales tax (both before and after January 1, 2019).
If the leased space is used solely for parking vehicles, then the total rent charged under such XXXXXXXXXXX Leases is subject to Florida sales tax at the rate of 6.0% (both before and after January 1, 2019).
If the leased space has multiple uses for storage of XXXXXXXX and XXXXXXX related property, commercial office purposes, XXXXXX of XXXXXXX and parking vehicles, then such hybrid XXXXXXXXX Leases are subject to Florida sales tax at three rates. The rate is 6.0% (both before and after January 1, 2019) on the pro rata portion of the total rent charged for the storage of XXXXXXX and XXXXXX related property, and for parking vehicles. The calculation is made by dividing the square footage used for the storage of XXXXXXX and XXXXXXX related property, and for parking vehicles by the total square footage of the entire leased space.
The rate is 5.8% through December 31, 2018 (and 5.7% on and after January 1, 2019) on the pro rata portion of the total rent charged for the storage of non‐XXXXXXX related property and commercial office purposes. The calculation is made by dividing the square footage used for the storage of non‐XXXXXXX related property and commercial office purposes by the total square footage of the entire leased space. The rate is 0.0% (both before and after January 1, 2019) on the pro rata portion of the total rent charged for the XXXXXXX of XXXXXXX calculated by dividing the square footage used for the XXXXXXXX of XXXXXXXXX by the total square footage of the entire leased space.
For example, if a tenant under such a hybrid XXXXXXXX XXXXXXX Lease pays total monthly rent of $1,000.00 on December 1, 2018 for 1,000 total square of leased space. 650 square feet (i.e., 65%) of such leased space is used to store an XXXXXXXX and XXXXXXXX related property. 200 square feet (i.e., 20%) of such leased space is used for commercial office purposes. 100 square feet (i.e., 10%) of such leased space is used for XXXXXXXX of XXXXXXX and the remaining 50 square feet (i.e., 5%) of such leased space is for parking vehicles, then the sales tax due on the monthly rent would be $53.60. The sales tax is $39.00 on the space used for storing XXXXXXX and XXXXXXXXX related property. The sales tax is $3.00 for parking vehicles. The sales tax is $11.60 for the office space.
XXX XXXXXX XXXXXXX Leases: The Florida sales tax rate applicable to the XXX XXXXX XXXXXX Leases depends on the actual use of the leased space.
If the leased space is used solely for commercial office purposes, then the total rent charged under such XXX XXXXX XXXXXX Leases is subject to Florida sales tax at the rate of 5.8% through December 31, 2018 (and 5.7% on and after January 1, 2019).
If the leased space is designated areas used solely for parking XXXXX vehicles, then the total rent charged under such XXX XXXXX XXXXXX Leases is subject to Florida sales tax at the rate of 6.0% (both before and after January 1, 2019).
If the leased space has multiple uses for commercial office purposes and parking XXXXX vehicles, then such hybrid XXX XXXXX XXXXXX Leases are subject to two different Florida sales tax rates. The rate is 5.8% through December 31, 2018 (and 5.7% on and after January 1, 2019) on the pro rata portion of the total rent charged for commercial office purposes. The calculation is made by dividing the square footage used for commercial office purposes by the total square footage of the entire leased space. The rate is 6.0% (both before and after January 1, 2019) on the pro rata portion of the total rent charged for parking XXXXX vehicles. The calculation is made by dividing the square footage used for parking XXXXX vehicles by the total square footage of the entire leased space.
For example, if a tenant under such a hybrid XXX XXXXX XXXXXX Lease pays total monthly rent of $1,000.00 on December 1, 2018 for 1,000 total square of leased space, and 250 square feet (i.e., 25%) of such leased space is used for commercial office purposes and the remaining 750 square feet (i.e., 75%) of such leased space is for parking XXXXX vehicles, then the sales tax due on the monthly rent is $59.50. The sales tax due on the space used for commercial office purposes is $14.50. The sales tax due for parking vehicles is $45.00.
Taxpayer Questions
You would like to know if Taxpayer’s characterization of computing the tax regarding the tax rates and the method for proration is reasonable. Also, for XXXXXX areas, Taxpayer would like to know the Department’s position as to whether the XXXXXXXX areas used occasionally for XXXXXX parking is considered as exclusively used for XXXXXXX.
Law and Discussion
Section 212.031(1), Florida Statutes (“F.S.”), requires landlords to collect sales tax on real property rentals. The sales tax rate for rentals due after January 1, 2019 is 5.7%. Section 212.031(1)(a)3., F.S., provides an exemption from the tax imposed by s. 212.031, F.S., for property subject to tax on parking, docking, or storage spaces under s. 212.03(6), F.S. XXXXXXX XXXXXXXXXXXXXXX, XXXXXXXX XX XXXXXXXXX XXX “XXXXXXXX XXXX XX XX XXXXXXX XXXXXXXXXXX XXX XXX XXXXXXXX XX XXXXXXX XXXXXXX XX XXXXXXX XXXXXXX XX XXXXXXXX XXXX XX XX XXXXXXX XXX XXX XXXXXXX XX XXXXXXX XX XXXXXXXXX XXXXXXXXXX XX XXXXXXXX XXXX XX XXXX XXXXXXX XX XXX XXXXXXX XXXXXXX.”
Section 212.031(1), F.S., provides for proration of rentals involving multiple use property as with certain XXXXXX property, including here. The statute section provides, in part, the following:
(b) When a lease involves multiple use of real property wherein a part of the real property is subject to the tax herein, and a part of the property would be excluded from the tax under subparagraph (a)1., subparagraph (a)2., subparagraph (a)3., or subparagraph (a)5., the department shall determine, from the lease or license and such other information as may be available, that portion of the total rental charge which is exempt from the tax imposed by this section….
Section 212.03(6), F.S., provides, in part, the following:
- The Legislature finds that every person who leases or rents parking or storage spaces for motor vehicles in parking lots or garages, including storage facilities for towed vehicles, who leases or rents docking or storage spaces for boats in boat docks or marinas, or who leases or rents tie‐down or storage space for aircraft at airports is engaging in a taxable privilege.
- For the exercise of this privilege, a tax is hereby levied at the rate of 6 percent on the total rental charged.
Section 212.031(1)(b), F.S., provides that for leases involving multiuse property, a determination of the portion subject to sales tax is to be made. Rule 12A‐1.070(1)(a)6., Florida Administrative Code (“F.A.C.”), provides an example regarding XXXXXXX multiuse property.
Taxpayer will use a method using square footage information. Presuming that the property value throughout the XXXXXXXX is the similar, then this method is reasonable. However, for example, if XXX XXXXX XXXXXXXX areas have a higher market value than parking, then Taxpayer will be required to modify its method of allocation to determine the taxable rental portion.
XXX XXXXXXX XXXXX, XXX XXXXXXXXX XXXXXXXX XX XXXXXXXXXXXXXXXXXXXXX, only applies to
areas used exclusively for XXXXXXX. It does not apply to areas of which XXXXXXX movement is restricted for the use of parking, or otherwise. The XXXXXXX areas that Taxpayer’s tenants use for parking does not qualify for the exemption. Taxpayer may determine the rental portion exempt from the tax by using an apportionment based on square footage information regarding the manner of use of the XXXXXXX areas.
Response
Based on the facts provided, and assuming that all areas of the XXXXXX have similar rental value, the tax rates and apportionment methods proposed by Taxpayer are reasonable. For the XXXXXX areas in which Taxpayer uses for parking, Taxpayer may apportion the XXXXXXX area solely used for XXXXXXX compared to the total area that the lease allows for XXXXXXX to determine the taxable rental amount.
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.
Respectfully,
Chuck Wallace
Chuck Wallace
Technical Assistance & Dispute Resolution (850) 717‐7541
AMS #: 70001376007
