Sales and Use Tax TAA 19A-024 Rentals, Leases - Real Property

QUESTION: Whether 1,244,921 sq. ft. of “Ramp Transient Space” leased by the Taxpayer from

the XX is subject to sales tax

ANSWER: The charges for the use of hanger space and aircraft parking are subject to the tax

imposed by 212.03(6), F.S., therefore, the Taxpayer’s payments to the lessor, the XX are not

subject to the tax imposed by s. 212.031, F.S.

QUESTION: Whether the 735,034 sq. ft. of property leased from XX designated for storing and

parking aircraft within hangars and on designated ramp space by the Taxpayer that is subleased

to tenants for the parking and storage of aircraft is subject to sales tax by XX, the prime lessor

ANSWER: The payments received from the tenants are subject to the tax imposed by 212.03(6),

F.S. Therefore, the Taxpayer’s payment to the XX is not subject to the tax imposed by s.

212.031, F.S. However, based on the square footage amounts listed in the Facility/Land Use

Schedule. the Taxpayer is leasing 715,416 sq. ft., not 735,034 sq. ft. of property that is from the

XX designated for storing and parking aircraft within hangars and on designated ramp space by

the Taxpayer that is subleased to tenants for the parking and storage of aircraft. The

Taxpayer’s payments to the lessor for the use of the 715,416 sq. ft. is not subject to the tax

imposed by s. 212.031, F.S.

QUESTION: Whether the 27,839 sq. ft. of property leased by [the Parent] from [the Unrelated

LLC] that is used for storing and parking aircraft both within hangars and on designated ramp

space is subject to sales tax.

ANSWER: You provide that the 27,839 sq. ft. of “parking and tiedown area for aircraft is

subleased [by the Parent] from [the Unrelated LLC]” is not subleased by the Parent to third

parties. As previously stated, Fixed Base Operators are liable for sales tax on payments made

for the right to use real property for the purposes of providing its services. Since the 27,839 sq.

ft. is not subleased by the Parent to others, and is not subject to the exemption provided in s.

212.031(1)(a)7., F.S., the Parent should pay the tax imposed by s. 212.03(6), F.S., to the

Unrelated LLC for the use of this space.

QUESTION: Whether the Taxpayer is entitled to a credit for sales tax paid to the Airport

Authority for the 3,404 sq. ft., of office space that the Taxpayer is subleasing and charging sales

tax to tenants

ANSWER: You confirmed that all of the 3,404 sq. ft. of office space is currently subleased, and

the remaining 16,947 sq. ft. is used by the Taxpayer as “lobby and facilities space.” The

Taxpayer is due a credit for the tax paid to the Airport Authority for sublease of the 3,404 sq. ft.

of office space pursuant to Rule 12A-1.070(8), F.A.C.

December 17, 2019

Technical Assistance Advisement 19A-024

Sales & Use Tax – License to Use Real Property

Sections 212.031 and 212.03, Florida Statutes (Fla. Stat.)

Rules 12A-1.014 and 12A-1.070, Florida Administrative Code (Fla. Admin. Code)

FEI#: XX

BP# XX

Dear XX,

This is in response to your letters dated January 30, March 20, April 18, and July 30, 2019,

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. An examination of your letter and

submitted supporting documentation has established 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.

Facts

The Taxpayer’s letter dated, April 18, 2019, provides the following in part:

[The Taxpayer] is a fixed-base operator (FBO) providing fueling, aircraft storage, catering

and other accommodations to private and commercial customers. The facility consists of

2,027,695 square feet, including 264,522 square feet of hangars/ buildings, and

1,767,850 square feet of mixed used space to include paved areas used for parking and

pulling aircraft out of hangars and to facilitate the movement of aircraft from one part

of the airport to another.

[Unrelated LLC] entered into a 55-year lease with a 17 1/2-year extension with the [XX

effective March 22, 2007]. On July 31, 2017, [the Parent of the Taxpayer] purchased the

assets of . . . an affiliate [the Affiliate] of [the Unrelated LLC]. In Jan of 2018, [the

Parent] converted [from a Corporation] into an LLC. . . .

On September 27, 2017, an Assignment of Lease and Sublease Assignment Agreement

was entered between [the Unrelated LLC] and [the Taxpayer]. . . . Under the terms of

this agreement, 1,999,856 sq. ft. of property was assigned to [the Taxpayer] of which is

leased directly from [XX], lessor. The lease entitles [the Taxpayer] to construct,

maintain, and operate fixed-base services owned by [XX]. The lease requires building

and land lease payments plus sales tax. We are currently self-assessing sales tax on

ground rent, hangars and buildings from the XX. [The Unrelated LLC] retained 27,839

sq. ft. of real property of which [the Parent] sub leases from [Unrelated LLC]. . . .

Along with the request for Advisement the Taxpayer provided, among other things, copies of the

following for review:

• A Site Map of the Facility;

• A Facility/Land Schedule detailing square footage of the lease and use of property;

• The 2007 Master Development Lease between the and the Unrelated LLC;

• The 2007 Master Lease 1st Amended Resolution allowing FBO services;

• The 2017 Amended Restated Development Lease Partial Assignment and Assumption

and Sublease Assignment and Assumption Agreement between the Unrelated LLC, as

Assignor, and the Taxpayer, as Assignee;

• The 2017 Ramp Parking License Agreement between the Unrelated LLC, as Licensor and

the Taxpayer, as Licensee;

• The 2017 Asset Purchase Agreement between the Affiliate and the Unrelated LLC,

together as Sellers, and the Parent, as the Buyer; and,

• A Resolution of the Board of Directors of the Parent restructuring the Parent from a

Corporation to an LLC.

The Facility/Land Use Schedule provides that the following property is comprised of “hangar[s]

that [are] used for storing aircraft.” You confirmed that all the listed space is subleased to third

parties for storing aircraft:

• Building 40 - Bay 2; 10,732 sq. ft.

• Building 40 - Bay 3; 13,364 sq. ft.

• Building 41 32,196 sq. ft.

• Building 42 35,324 sq. ft.

• Building 102 54,300 sq. ft.

• Building 104 49,105 sq. ft.

• Building 106 38,395 sq. ft.

The Facility/Land Use Schedule provides that the “GA Pavement Aircraft Space” of 482,000 sq.

ft. is a “[p]aved area used for parking aircraft.” You confirmed that the entire area is subleased

to third parties for storing aircraft.

The Facility/Land Use Schedule provides that of the 19,901 sq. ft. of Building 105 that is leased

by the Taxpayer includes 3,404 sq. ft. of rentable office space. You confirmed that all of the

available office space is currently subleased, and the remaining 16,947 sq. ft. is used by the

Taxpayer as lobby and facilities space.

The Facility/Land Use Schedule provides that of the 1,999,856 sq. ft. listed as being leased by

the Taxpayer directly from the XX, 19,618 sq. ft. is leased to the XX. You confirmed that the

agreement is between the XX and the XX but that the Taxpayer “bill[s the XX] for the rent.” It is

unclear why you have included this area as being leased by both the Taxpayer and the XX, when

the Lessor has entered into a lease agreement for this space directly with the XX.

The Facility/Land Use Schedule provides that the 1,244,921 sq. ft. of “Misc. Pavement Space in

front of buildings” is “Ramp Transient space [that] can be used to park aircraft, pulling aircraft

out of the hangars, and to facilitate the movement of aircraft from one part of the airport to

another.” You provide, regarding this area, that the Taxpayer does not charge tenants that

lease hanger space for the use of this area, “because they are paying for hangar space.

However, if the customer is a transient then they will be charged [for the aircraft parking that

occurs in this area].”

The Facility/Land Use Schedule provides that the 27,839 sq. ft. of “[p]arking and tiedown area

for aircraft - Sub Leased from [the Unrelated LLC]” is not subleased by the Parent to third

parties.

Requested Advisement:

You request an advisement that addresses “specific exemptions relating to the Taxpayer’s lease

of property at the airport.” You also request “guidance on the procedure for requesting a

refund for taxes already paid . . . .”

Law and Discussion

Section 212.031(1)(a), F.S., imposes sales tax on the privilege of engaging in the leasing of, or

the granting of a license to use, real property for any purpose, unless specifically exempt.

Section 212.031(1)(c), F.S., provides that "[f]or the exercise of such privilege, a tax is levied . . .

on the total rent or license fee charged for such real property by the person charging or

collecting the rental or license fee." The "total rent or license fee charged" is defined to include

"payments for the granting of a privilege to use or occupy real property for any purpose, and

shall include base rent, percentage rents, or similar charges."

Section 212.031(1)(a)7., F.S., excludes from sales tax real property that is "used at an airport

exclusively for the purpose of aircraft landing or aircraft taxiing or property used by an airline

for the purpose of loading or unloading passengers or property onto or from aircraft or for

fueling aircraft." 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 claiming the exemption.

See State ex rel. 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).

Rule 12A-1.070(1)(a)6.d., F.A.C., provides that real property used for fueling aircraft is taxable

when the fueling activities are conducted by a lessee or licensee who is not an airline. Property

used by a tenant other than an airline does not qualify for the exemption. Generally, a Fixed

Base Operator is liable for the tax on payments made for the right to use real property for the

purpose of providing its services.

Section 212.031(1)(a)3., F.S., provides that the lease of real property is not subject to the tax

imposed under section 212.031(1)(a), F.S., when such property is subject to tax under s.

212.03(6), F.S., for tie-down or storage space for aircraft at airports. In order for the exemption

to apply, the property must be subleased to an entity that pays the tax imposed under s.

212.03(6), F.S., for the rental of tie-down or storage space for aircraft at airports.

Section 212.031(2)(b), F.S., prohibits both pyramiding and inverse pyramiding of the tax by

providing the "intent of this Legislature that only one tax be collected on the rental or license

fee payable for the occupancy or use of any such property, that the tax so collected shall not be

pyramided by a progression of transactions, and that the amount of tax due the state shall not

be decreased by any such progression of transactions." In light of the Legislative intent that

prohibits the pyramiding of sales tax, Rule 12A-1.070(8) and (9), F.A.C., provide measures that

eliminate the pyramiding of sales tax in cases where commercial real property is subleased.

Rule 12A-1.070(8), F.A.C., provides that when a lessee sublets a portion of the leased property,

the lessee is authorized to take a proportional credit for the tax paid to the prime lessor on tax

collected for the space that the lessee subleases. Rule 12A-1.070(9), F.A.C., provides that when

a lessee sublets or assigns all, or substantially all, of his or her interest in the premises, or

retains only an "incidental portion" of the premises, the lessee may register as a dealer and

issue a resale certificate to the landlord in lieu of paying the tax, collect and remit sales tax on

the portion subleased, and remit use tax on that portion of the premises retained.

Conclusion

1. Whether 1,244,921 sq. ft. of “Ramp Transient Space” leased by the Taxpayer from

the XX is subject to sales tax.

Response:

Section 212.031(1)(a)3., F.S., provides that the lease of real property is not subject to the tax

imposed under section 212.031(1)(a), F.S., when such property is subject to tax under s.

212.03(6), F.S., for tie-down or storage space for aircraft at airports. You provide that this area

is used by either tenants that pay for the lease of hanger space or by transient customers that

are charged for aircraft parking. The charges for the use of hanger space and aircraft parking

are subject to the tax imposed by 212.03(6), F.S., therefore, the Taxpayer’s payments to the

lessor, the XX are not subject to the tax imposed by s. 212.031, F.S.

2. Whether the 735,034 sq. ft. of property leased from XX designated for storing and

parking aircraft within hangars and on designated ramp space by the Taxpayer that

is subleased to tenants for the parking and storage of aircraft is subject to sales tax

by XX, the prime lessor.

Response:

You have indicated that this area is subleased to tenants for the parking and storage of aircraft.

The payments received from the tenants are subject to the tax imposed by 212.03(6), F.S.

Therefore, the Taxpayer’s payment to the XX is not subject to the tax imposed by s. 212.031,

F.S. However, based on the square footage amounts listed in the Facility/Land Use Schedule.

the Taxpayer is leasing 715,416 sq. ft., not 735,034 sq. ft. of property that is from the XX

designated for storing and parking aircraft within hangars and on designated ramp space by the

Taxpayer that is subleased to tenants for the parking and storage of aircraft. The Taxpayer’s

payments to the lessor for the use of the 715,416 sq. ft. is not subject to the tax imposed by s.

212.031, F.S.

3. Whether the 27,839 sq. ft. of property leased by [the Parent] from [the Unrelated

LLC] that is used for storing and parking aircraft both within hangars and on

designated ramp space is subject to sales tax.

Response:

You provide that the 27,839 sq. ft. of “parking and tiedown area for aircraft is subleased [by the

Parent] from [the Unrelated LLC]” is not subleased by the Parent to third parties. As previously

stated, Fixed Base Operators are liable for sales tax on payments made for the right to use real

property for the purposes of providing its services. Since the 27,839 sq. ft. is not subleased by

the Parent to others, and is not subject to the exemption provided in s. 212.031(1)(a)7., F.S.,

the Parent should pay the tax imposed by s. 212.03(6), F.S., to the Unrelated LLC for the use of

this space.

4. Whether the Taxpayer is entitled to a credit for sales tax paid to the XX for the 3,404

sq. ft., of office space that the Taxpayer is subleasing and charging sales tax to

tenants.

Response:

You confirmed that all of the 3,404 sq. ft. of office space is currently subleased, and the

remaining 16,947 sq. ft. is used by the Taxpayer as “lobby and facilities space.” The Taxpayer is

due a credit for the tax paid to the XX for sublease of the 3,404 sq. ft. of office space pursuant

to Rule 12A-1.070(8), F.A.C.

Regarding your request for “guidance on the procedure for requesting a refund for taxes

already paid.” Rule 12A-1.014(4), F.A.C., provides that a taxpayer who has paid tax to a dealer

when no tax is due, must secure a refund from the dealer. Section 215.26(1), F.S., requires the

Department to refund taxes paid in error to the person who has remitted the tax to the state or

the person's assigns. You provide that the Taxpayer is “currently self-assessing sales tax on the

ground rent, hangars and buildings from the XX.” Therefore, you can apply for a refund for tax

paid in error directly from the Department.

Rule 12A-1.014(5)(b), F.A.C., provides that a dealer may take a credit for a refund to which the

dealer is entitled in lieu of completing an application for refund. In order to take the tax credit,

the dealer must have documentation of its internal records to support why the credit is being

claimed and enter the credit amount on the "less lawful deductions" line on the dealer's sales

tax return. The credit of tax will be offset by the amount of tax due with the return. The

amount of credit claimed cannot exceed the amount of tax due with the return. Rule

12A-1.014(6), F.A.C., provides that a dealer who takes a credit for tax paid to the state is

"required to keep and preserve all information and documentation necessary to substantiate

the dealer's entitlement to [the credit] until tax imposed under Chapter 212, F.S., may no

longer be determined and assessed under Section 95.091, F.S."

This response constitutes a Technical Assistance Advisement under Section 213.22, Fla. Stat.,

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, Fla. Stat. 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, Fla. Stat., and are subject to disclosure to the public under

the conditions of Section 213.22, Fla. Stat. 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,

Brinton Hevey

Brinton Hevey

Tax Law Specialist

Technical Assistance and Dispute Resolution

Record ID: #200519