TAA 22A-013 Admissions
QUESTION: Does Taxpayer, as a homeowner’s association, need to charge sales tax for a fee to cover upkeep costs for common areas?
RESPONSE: No. Taxpayer, as a homeowner’s association, has an exception for mandatory fees charged to its members that go towards upkeep costs of common areas.
June 20, 2022
Technical Assistance Advisement – TAA #: 22A-013
Sales and Use Tax – Admissions
Section 212.02(1) and 212.04(1)(a), Florida Statutes (“F.S.”)
Rule 12A-1.005(4)(d)3., Florida Administrative Code (“F.A.C.”)
BP No.: XXXX
FEI No.: XXXX
XXXX (“Taxpayer”)
Dear XXXX,
This is in response to your letter dated April 07, 2021, requesting this Department’s issuance of a TAA pursuant to Section 213.22, F.S., and Chapter 12-11, Florida Administrative Code, regarding Association Membership. 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.
Stated Facts
XXXX (“Taxpayer) is organized and licensed as a homeowner's association. Pursuant to Taxpayer’s Articles of Incorporation, Taxpayer does not contemplate pecuniary gain or profit. The general purpose of this association is to promote the common interest of the property owners by performing functions such as:
1. fixing, levying, collecting and enforcing payment, by any lawful means, of all charges or assessments pursuant to the terms of the Master Declaration XXXX ("Master Declaration"), and
2. maintaining, repairing and replacing common properties as contemplated by such Declaration. Taxpayer categorizes owners as “Class A” for Residential Owners, and "Class C" for Marina Owners. Both classes of owners are required to be members of the association.
Taxpayer owns facilities ("Recreational Facilities") that consist of a clubhouse, pool, restaurant, and fitness center. According to the Master Declaration, Taxpayer judges the use of the Recreational Facilities as an easement. Taxpayer charges its members an assessment fee ("Recreational Facility Assessment") to cover the capital and operations costs of running the Recreational Facilities which are located in common areas available to Association Members. A member's nonpayment will result in a lien being placed on the member's property. This lien policy is stated in the Amenities Declaration.
Taxpayer provided a copy of the following documentation for the Department’s review:
1. Articles of Incorporation of XXXX
2. Master Declaration for XXXX
3. By-Laws of XXXX (A Corporation Not for Profit)
4. Amenities Declaration for XXXX
Requested Advisement
Is the Recreational Facility Assessment for the two classes taxable?
Taxpayer Position
The Taxpayer concludes that the Recreational Facility Assessment is not taxable. Taxpayer cites Rule 12A-1.005(4)(d)3., F.A.C., as the reasoning.
Law and Discussion
Section 212.04(1)(a), F.S., indicates. “. . . [it is] the legislative intent that every person is exercising a taxable privilege who sells or receives anything of value by way of admissions.”
Section 212.02(1), F.S., defines the term “admissions” as “. . . the net sum of money after deduction of any federal taxes for admitting a person or vehicle or persons to any place of amusement, sport, or recreation . . . and all dues and fees paid to private clubs and membership clubs providing recreational or physical fitness facilities, including, but not limited to, golf, tennis, swimming, yachting, boating, athletic, exercise, and fitness facilities, . . .”
Rule 12A-1.005(4)(d)3., F.A.C., provides the following:
Fees paid to private clubs or membership clubs that do not entitle the payor to the use of the club's recreational or physical fitness facilities are not subject to tax. Examples of such fees are:
[ . . . ]
3. Mandatory dues and fees paid to a condominium association, homeowners' association, or cooperative association when they are required to be paid as a condition of ownership or occupancy of real property and the club facilities are part of the common elements or common areas of the real property. (Emphasis added.)
As required by the Rule, and based on the facts and documentation provided:
1. Taxpayer is licensed by the Florida Department of Business and Professional Regulation (“DBPR”) as a homeowners’ association.
2. The Recreational Facility Assessment is to cover the Recreational Facilities which are described by the Taxpayer to be common elements and/or common areas.
3. Joining the Association and paying the Recreational Facility Fee is mandatory for the Residential Owners and Marina Owners.
As provided by the Rule 12A-1.005(4)(d)3., F.A.C., and based on the facts and documentation provided, the above-described mandatory Recreational Facility Fee paid by homeowners’ association Class A and Class B members, to Taxpayer for maintaining the common elements or common areas of the community—i.e., Recreational Facilities—are not subject to sales tax.
Conclusion
Taxpayer's Recreational Facility Assessment will not be subject to sales tax so long as the criteria provided by Rule 12A-1.005{4)(d)3., F.A.C., are satisfied.
The fee must only be used to pay for Taxpayer’s costs for common areas maintenance and cannot entitle the members to use the areas. The Class A and Class C memberships meet the criteria for the exception. Other fees associated with access to the area itself would not qualify.
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 ten (10) days of the date of this letter.
Adam Duh
Tax Law Specialist Technical Assistance & Dispute Resolution