How much of a mobile-home park ground lease was subject to Florida sales tax when most pads were long-term dwelling units?

Plain-English summary

Florida taxed only the portion of the ground-lease payments attributable to office, storage, and other non-dwelling or lessee-exclusive space. The mobile-home pads used as dwelling units under bona fide written leases longer than six months were exempt.

The 99-year triple-net lease required base rent plus additional rent, including monthly amounts and operating costs such as taxes, insurance, utilities, maintenance, and repairs. Because all were required for possession, both base and additional rent entered the “total rent or license fee” before allocation.

The taxable fraction used non-dwelling and lessee-exclusive square footage in the numerator and the entire leased premises in the denominator. Tenant common areas—such as walkways, parking lots, and swimming pools available without a separate charge—were not included in the taxable numerator.

What this means for you

Calling a payment an operating expense or “additional rent” did not remove it from the rent tax base. The exemption was applied afterward through a supported square-foot allocation between dwelling and non-dwelling use.

Common questions

Q: Were the long-term mobile-home pads taxable? No, when used as dwellings under bona fide written agreements longer than six months.

Q: Were base rent and additional rent both included? Yes.

Q: What entered the taxable numerator? Office, storage, operating, parking, undeveloped, or other areas reserved for the lessee rather than residents, as applicable to the facts.

Q: What was the denominator? The entire square footage covered by the ground lease.

Citations and references

• Fla. Stat. §§ 212.02(10)(f) and 212.03(1) — trailer camps and long-term occupancy
• Fla. Stat. § 212.031(1)(a)–(c) and (3) — real-property rental tax, dwelling exclusion, allocation, and timing
• Fla. Admin. Code rr. 12A-1.061 and 12A-1.070 — transient accommodations and real-property rentals
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00A-004

Original ruling text

SUMMARY

QUESTION: Is sales tax due on the lease payments made by
the lessee of a mobile home park only to the extent of such
payments which are attributable to the office area and that
portion of the land used for non-dwelling purposes when the
remaining land is leased for terms of 1 year or longer for
mobile home pads?

ANSWER - Based on Facts Below: Yes. The mobile home pads
are dwelling units which when leased for a term longer than
6 months are not subject to sales or use tax. To determine
the taxability of the non-dwelling unit spaces a fraction
may be used the numerator of which is the total square
footage used for office and other non-dwelling uses and the
denominator of which is the entire square footage subject
to the lease.

Title:

Mobile Home Park/Rent or Additional Rent

Jan 26, 2000

Re: Technical Assistance Advisement Number 00A-004
XXX (herein Lessor)
XXX (herein Lessee)
Sections 212.03(1), 212.031(1)(a), (1)(a)2., and (1)(c),
F.S.
Rules 12A-1.061, 12A-1.070, F.A.C.

Dear :

This is a response, styled a Technical Assistance Advisement, to
your letter dated XX, in which you asked whether a planned
ground lease by Lessor to Lessee of premises on which a mobile
home park (herein Park) is located would be subject to sales or
use tax when the consideration to be paid by Lessee is
designated as "Rent" or "Additional Rent." You note that as of

this date the parties have executed two contracts: One bears the
legend, Agreement To Enter Into Ground Lease And Option
Agreement (herein Agreement), and the other is styled by you as
a Letter of Intent. You have provided the Department with a
copy of the Agreement.

Also attached to the Agreement are two unexecuted documents
which are labeled, Ground Lease (herein Lease), and Option
Agreement (herein Option).

You describe the Park as follows:

The mobile home park consists of approximately 202 rentable
mobile home pads and one pad for storage. There is a small
office building and a recreation area.

You further state that Lessor:

"... does not have a sales tax number because all of the
mobile home pads, other than one used for storage, are
leased, pursuant to bona fide leases of one (1) year or
more. Each of the spaces are used exclusively as dwelling
units."

The Agreement was executed on XX. It is a contract whereby the
Lessee has agreed to pay all real property ad valorem taxes,
insurance premiums and operating expenses of the Park. This
category of a lease is commonly known as a "triple net lease."

It is your contention that, as to the above-described
transaction, the tax is imposed on the payments made by Lessee
to Lessor only as to the portion "... of the rental attributable
to the office of the Lessor or that portion of the land, which
is used, for non-dwelling purposes." You cite as support for
your opinion the provisions of s. 212.031(1)(a), F.S., which you
state "... excludes from the imposition of sales tax the
privilege of leasing or granting a license to use real property
when the real property is used exclusively as dwelling units."

Further, such terms of occupancy will be preserved by the
Lessee, who, as you state, "... will be responsible for the

daily management of the mobile home park and will continue to
lease the mobile home park spaces to the public to be used
exclusively as dwelling units under leases which have a duration
of no less than one (1) year." You note also that the subleases
of the Park pads are not subject to sales tax because of s.
212.03(1), F.S. which excludes from the tax "... a bona fide
lease or license of a trailer camp space longer than six (6)
months in duration."

Department Response

Since the question you pose is whether the "rent" and the
"additional rent" are subject to sales or use tax and to what
extent such payments are taxable, it is useful to review
applicable provisions of the Agreement, the Lease and the
Option, and then apply the law to these provisions.

The Agreement, in Article 1(a), specifies that the term of the
lease is for 99 years (comprised of an Initial Term, and a
Remaining Term). In 1(b) of the Agreement, the Lessee is given
the right to purchase the real property of the Park for a stated
sum. Both of these provisions are detailed in the Lease.

In Lease Article 3, the rent required to be paid by Lessee is
denominated as Base Rent, and Additional Rent. For the Initial
Term, which ends in 2008, the Base Rent is a specific dollar
amount which is to be paid monthly for the duration of the
Initial Term. The other element of rent during the Initial Term
is Additional Rent, which is, as provided in Lease Article
3.1.(b), comprised of two parts: a monthly payment, and the
payment of certain costs.

These costs are enumerated as follows:

... maintenance and operation of the [Park] and any and all
parts thereof, including without limitation, any and all
taxes, assessments, general or special, water rates,
license fees, insurance premiums, public utility bills,
costs or repair and maintenance (structural or otherwise).

During the Remaining Term, which ends in 2098, Base Rent is also

a specified monthly sum. Additional Rent during the Remaining
Term does not include a monthly payment, as is to be required
during the Initial Term, but the Lessee is to continue the
payment of all operating costs of the Park as enumerated above.

Section 212.031(1)(a), F.S., imposes sales tax on the privilege
of engaging in the business of leasing or the granting of a
license to use real property. Section 212.031(1)(c), F.S.,
mandates that the 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." Rule 12A1.070, F.A.C., interprets the statute.

Section 212.031(1)(a)2., F.S., excludes real property which is
taxed under the statute when such property is "... used
exclusively as dwelling units." As mandated in s.
212.031(1)(b), F.S., when a lease of real property, there is
multiple use of such property such that a portion of the
property is subject to the tax and a portion is not subject to
the tax because of, for example, the applicability of s.
212.031(1)(a)2., F.S., the Department is authorized to determine
the taxable portion.

In this instance, it is clear there is a lease of real property
that is subject to the provisions of section 212.031, F.S. In
calculating the amount of the tax due, it is first necessary to
determine the "total rent or license fee" charged for such
property. The Base Rent required to be paid during both the
Initial Term and the Remaining Term is consideration that is
paid specifically for the right to use the property and, thus,
is part of the total rent or license fee. The charges imposed
as "Additional Rent" also are paid for the right to use the
property.

Thus, mandated by s. 212.031(1)(c), F.S., the "total rent or
license fee" includes the Base Rent and the Additional Rent as
described above. Since a portion of the property is used
"exclusively as dwelling units," that portion of the property
will not be subject to tax. It is necessary to determine what
portion of the total rent or license fee is subject to tax, as
required under s. 212.031(1)(b), F.S.

A useful method for calculating the "taxable portion" of the
rental consideration in this instance is to multiply the total
rent to be paid by the Lessee by a fraction, the numerator of
which is the space used by the Lessee for its own purposes, and
the denominator of which is the entire square footage of the
premises as described in the Lease. The calculation is
described in detail in the following paragraphs.

Computing the Numerator

The numerator is comprised of the total square footage of the
leased Park which is used by the Lessee for its own purposes
(e.g., offices, maintenance areas or operating areas, designated
parking spaces for the use of the Lessee, or employees or
permitees of the Lessee), plus any other square footage consumed
by the Lessee which the guests would not have a nonexclusive
license to enter or to use. This portion of the leased premises
would include, for example, any undeveloped land, which is not
part of the premises used in the operation of the Park, but
nevertheless subject to the Lease.

In the instant situation, the only areas you enumerate that are
spaces consumed or used by the Lessee and that are not part of
the area used exclusively as dwelling units are the storage and
office spaces. Considering the information provided to the
Department, these areas would be the only ones included in the
numerator.

The numerator may not include any areas that can be considered
as being used by the tenants: areas exclusively leased by the
tenants (such as the Park pad(s)); or areas for which the
tenants have nonexclusive license to use for which payment is
not required (such as the common walkways, parking lots, and
swimming pools).

Computing the Denominator

The denominator is the entire square footage subject to the
Lease.

Computation of Taxable Portion of Rent Payments

The resultant fraction, comprised of the numerator and
denominator as calculated above, is multiplied by the total rent
or license fee, which is required to be paid by Lessee if Lessee
is to gain or remain in possession. The product is the portion
of the total rental charge which is subject to tax. The tax is
due and payable at the time the Lessor receives such rental or
license fee from the Lessee, as mandated by s. 212.031(3),
Florida Statutes.

Thus, in direct answer to your question, the total rent made
subject to the tax by s. 212.031(1)(c), F.S., is the amount that
results when the fraction, as calculated above, is multiplied by
the Base Rent and the Additional Rent as such rents and fees are
received by the Lessor.

The Base Rent, and the Additional Rent, are taxable because, as
required by s. 212.031(1)(c), F.S., the tax is imposed on the
"total rent or license fee." The Base Rent and the Additional
Rent are all required to be paid to the Lessor by the Lessee as
a condition of the Lessee coming into and remaining in
possession of the property. Section 212.031(1)(c), F.S., states
that:

The total rent or license fee charged such real property
shall include payments for the granting of the privilege to
use or occupy real property for any purpose and shall
include base rent, percentage rents, or similar charges.

As to the payments received by the Lessee from the sublessee for
the use of the mobile home pads, s. 212.03(1), F.S., levies
sales tax on the privilege of engaging in the lease or the grant
of a license to "... use any living quarters or sleeping or
housekeeping accommodations in [a] ... trailer camp." Rule 12A1.061, F.A.C., interprets the statute. Section 212.02(10)(f),
F.S., defines the term "trailer camp" as that place where "...
two or more automobile trailers, mobile homes, or recreational
vehicles... are used for lodging...." Thus, the facts provided
to the Department describe the operation of a trailer camp.

However, s. 212.03(1), F.S., provides that the taxable privilege
does not extend to any person who, with respect to a trailer
camp, "... exclusively enters into a bona fide written agreement
for continuous residence for longer than 6 months in duration
.... Rule 12A-1.061, F.A.C., interprets the statute. Further, as
to such trailer camp spaces, s. 212.031(1)(a)2., F.S., excludes
from the imposition of sales tax the privilege of leasing or the
granting a license to use real property when the real property
is "[u]sed exclusively as dwelling units."

Thus, there is no sales tax imposed on the payment made pursuant
to a bona fide written lease or license of longer than 6 months
in duration of a trailer camp space under either s. 212.0, F.S.,
or s. 212.031, Florida Statutes.

This response constitutes a Technical Assistance Advisement
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 and your request and
related backup documents are public records under Chapter 119,
F.S., which 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 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.

Sincerely,

Robert G. Parsons

Tax Law Specialist
Technical Assistance and Dispute
Resolution

Ctrl. No. 39212