TAA 21A-001 Lease of Communication Tower

QUESTION: Whether Taxpayer’s lease qualified for an exemption for radio broadcasters provided for by s. 212.031(1)(a), F.S.? 

ANSWER: Yes. The leased premises were on a private street or right-of-way and used for the required equipment for broadcasting communications purposes by a radio broadcaster.

January 8, 2021

Technical Assistance Advisement No. 21A-001

Sales and Use Tax – Lease of Communication Tower Space

XXXXXX (“Taxpayer”)

FEI No. XX-XXXXXXX

Sections 177.031, 212.031, 403.503, and 610.103, Florida Statutes (F.S.);

Rule 12A-1.070, Florida Administrative Code (F.A.C.)

XXXXXXX (“Tower Licensor”)

XXXXXXX (“Prior Broadcast Company”)

XXXXXXX (“Ground Lessee”)

XXXXXXX (“Tower Site”)

XXXXXXX (“Landowner”)

Dear XXX XXXXXXXXXX: 

This letter is a response to your petition on behalf of XXXXXX (“Taxpayer”), dated March 11, 2020 (received March 16, 2020), for the Florida Department of Revenue’s (the “Department’s”) issuance of a Technical Assistance Advisement ("TAA") with regards to the sales tax implications on the lease of space on a communications tower. 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. This response to your request constitutes a TAA and is issued to you under the authority of s. 213.22, F.S. The response to Taxpayer on July 10, 2020 is fully incorporated by reference.

Requested Advisement 

Whether Taxpayer’s lease of tower space and fixtures for the transmission of radio signal qualifies for the sales tax exemption provided in section 212.031(1)(a)5., F.S. 

Facts

Taxpayer, a radio broadcaster, has use rights to a tower provided by Tower Lessor for the purpose of radio transmission. Taxpayer acquired use rights of Tower Site from Prior Broadcast Company. Tower Site is built on a portion of property subject to ground lease from Landowner to Ground Lessee. Ground Lessee assigned a portion of the land to Tower Licensor who provided Tower Site use rights to Prior Broadcast Company pursuant to the Site License Agreement. Taxpayer obtained its use rights pursuant to an Asset Purchase Agreement with Prior Broadcast Company. 

Taxpayer provided copies of the Asset Purchase Agreement, the Site License Agreement, the Consent to Assignment from Ground Lessor, copies of the original Memorandum of Lease between Landowner and Ground Lessee, and the Assignment and Assumption of Ground Lease between Prior Broadcast Company and Ground Lessee.

The parcel involving the ground lease is XXXXXX acres, and the Site License Agreement is for XX square feet. In addition to the Tower Site rental location, there are other tenants located on the parcel. The parcel includes a dirt track access road not part of the County road system. 

Since the previous response was issued, the Department was able to identify additional facts not previously submitted. The property tax appraiser identifies several structures on the parcel owned by Landowner that were on the parcel prior to the construction of the Tower Site. These include an office building, storage facilities, and other structures. The parcel’s dirt track access road provides access to the structures and to accommodate heavy duty trucks, other off-road vehicles, and various other equipment and vehicles for other operations conducted by landowner on the parcel. The operations include storage of boats and equipment for others, cutting of wood chips, fill dirt operations, and other types of operations related to licensed general construction operations by Landowner. 

Based on the permit activity, Tower Site was constructed on the dirt access road privately owned by Landowner. The road was widened at the Tower Site to accommodate traffic on the parcel to its current dimensions.

Taxpayer Argument 

Taxpayer argues that section 212.031(1)(a)5., F.S., applies because the tower is built on a right-of-way.

Applicable Law and Discussion 

Section 212.031(1)(a)5, F.S., provides:

(1)(a) It is declared to be the legislative intent that every person is exercising a taxable privilege who engages in the business of renting, leasing, letting, or granting a license for the use of any real property unless such property is: 

5. A public or private street or right-of-way and poles, conduits, fixtures, and similar improvements located on such streets or rights-of-way, occupied or used by a utility or provider of communications services, as defined by s. 202.11, for utility or communications or television purposes. For purposes of this subparagraph, the term “utility” means any person providing utility services as defined in s. 203.012. This exception also applies to property, wherever located, on which the following are placed: towers, antennas, cables, accessory structures, or equipment, not including switching equipment, used in the provision of mobile communications services as defined in s. 202.11. For purposes of this chapter, towers used in the provision of mobile communications services, as defined in s. 202.11, are considered to be fixtures.

Two separate exemptions from taxation on the rental, lease, or license to use real property are contained within s. 212.031(1)(a)5, F.S. One exemption applies to property that constitutes a public or private street or right-of-way, on which certain improvements or fixtures are located, while the other applies to property used for mobile communication services. Since Taxpayer is not a mobile communication provider, it is only pertinent to discuss the exemption given to property located on a right-of-way. 

To qualify for the exemption for the property that constitutes a public or private street or right-of-way, on which certain improvements or fixtures are located, the following elements1 must be satisfied:

1) The property is a public or private street or right-of-way; 

2) Poles, conduits, fixtures, and similar improvements are located on such street or right-of-way; 

3) The property is occupied or used by a utility or provider of communications services as defined by s. 202.11; and 

4) The property is used for utility, communications, or television purposes.

Taxpayer asserts that it leases tower space and fixtures on a communications tower located on a private “right-of-way.” As provided in the previous letter to Taxpayer dated July 10, 2020, the location is not a “right-of-way.” Therefore, the Tower Site is not built on a right-of- way.

In regard as to whether the access road is a “private street”, the legislature did not define the word “street” for purposes of the exemption contained in section 212.031(1)(a)5., F.S. Streets are typically considered a type of a road and are located in a town or city. While the words “road” and “way” are frequently used interchangeably, the word “way” is more generic, including many things besides roads. Section 177.031(17), F.S., defines the word “Street” to include “[A]ny access way such as a street, road ….” The word road can include dirt track roads as the one here. Since Taxpayer is a communication services provider and is using the tower for communication purposes, the exemption applies.

Concluding Statement 

Based on the information obtained after the response issued July 10, 2020, Taxpayer’s lease of space on the Tower Site qualifies for the exemption provided by s. 212.031(1)(a)5., F.S.

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 that 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 15 days of the date of this letter.

Chuck Wallace

Technical Assistance & Dispute Resolution 

Florida Department of Revenue

(1) See Cox Radio, Inc., Case Number DOR-07-2-DS