Were the city's park, beach, and convention-center concession rents exempt from sales tax?

Subject

Concessionaire Exemption

Plain-English summary

The city's rents and license fees for all three food-and-drink concession properties were exempt from sales tax. The beachfront park qualified as a recreational facility because it included walkways, playground equipment, entertainment space, concessions, and restrooms. The beach also qualified because the city provided parking, restrooms, maintenance, and patrols. The convention and exhibition center was expressly listed in the statute.

The exemption covered the total consideration for the concession property. It was not lost because an operator also sold beach merchandise, rented equipment, or paid rent based partly on those revenues.

What this means for you

The property had to be leased or licensed to a person providing food-and-drink concessionaire services within a qualifying facility. The ruling analyzed the physical setting and public services, not merely the label in the agreement.

Common questions

Q: Did the park concession qualify? Yes.

Q: Could an undeveloped beach be a recreational facility? Yes, on these facts, because the city provided adjacent facilities, maintenance, and patrols.

Q: Did sales of sundries or beach-equipment rentals make part of the rent taxable? No. The total consideration for the concession property remained exempt.

Citations and references

• Fla. Stat. § 212.031(1)(a)10. — food-and-drink concessionaire property exemption
• Fla. Stat. § 212.02 — sales and use tax definitions
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00A-017

Original ruling text

SUMMARY

QUESTION 1: Are the license fees received by a city from a
licensee of a concession in a beachfront park to sell food,
drinks, and beach-related products, and to rent beach
equipment, exempt from tax pursuant to section
212.031(1)(a)10., F.S.?

ANSWER 1 - Based on Facts Below: Yes. The beachfront park
is a recreational facility within the meaning of section
212.031(1)(a)10., F.S., which provides an exemption for
property leased or licensed to a person providing food and
drink concessionaire services within the premises of, among
other things, a recreational facility. The total amount of
license fees received under the license agreement is
exempt.

QUESTION 2: Are the license fees received by a city from a
licensee of a concession on a beach to sell food, drinks,
and beach-related products, and to rent beach equipment,
exempt from tax pursuant to section 212.031(1)(a)10., F.S.?

ANSWER 2 - Based on Facts Below: Yes. Because the city has
constructed adjacent parking and public restroom facilities
and provides beach maintenance and beach patrols, the beach
is also a recreational facility within the meaning of
section 212.031(1)(a)10., F.S. The total amount of license
fees received under the license agreement is exempt.

QUESTION 3: Are the license fees received by a city from a
delicatessen/restaurant in a convention and exhibition hall
structure exempt from tax pursuant to section
212.031(1)(a)10., F.S.?

ANSWER 3 - Based on Facts Below: Yes. A convention hall
and exhibition hall are specifically listed in section
212.031(1)(a)10., F.S. Accordingly, the license or rental
fees received for property leased or licensed to a person
providing food and drink concessionaire services within the
premises of a convention hall or exhibition hall are
exempt.

***********

Apr 04, 2000

Re: Technical Assistance Advisement 00A-017
Sales & Use Tax - Concessionaire Exemption
Sections 212.02; 212.031, F.S.
XXX ("City")
Sales Tax # XX

Dear :

This is in response to your letter dated XX, for the
Department's issuance of a Technical Assistance Advisement
("TAA") concerning the above referenced party and matter. Your
letter 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 section
213.22, F.S.

Facts

In your letter you present three factual situations, each of
which involves an interpretation of section 212.031(1)(a)10.,
F.S. Those situations are described as follows:

XXX: The City owns and operates a park, bordered on one side by
a beach and the entrance to a 1,080-foot public fishing and
walking pier, and bordered on the opposite side by a public
street. A parking lot is located at the south side of the park,
and another public street forms the northern border of the park.
In the park are walkways, playground equipment, a staging area
for musical entertainment, and a concession complex with
restroom facilities. No admission is charged to enter the park
or to use the park facilities.

The City has granted a license to a licensee, giving the
licensee the exclusive right to sell the following merchandise

at the concession complex:

1. Hot dogs, hamburgers, french fries, pizza, sandwiches,
   and other like hot food.

2. Any cold or hot non-alcoholic beverage.

3. Ice cream, frozen yogurt, popcorn, pretzels, candy, gum,
   cookies, cold sandwiches, chips, and other like cold food.

4. Postcards, sunglasses, suntan lotion, beach towels,
   beach chairs, water and sand toys, floats, bathing suits,
   sandals, health products, and any other like sundry items.

In addition, the licensee has the exclusive right to rent beach
cabanas, umbrellas, floats, and similar beach equipment for
public use at the part of the City-owned beach adjoining the
park.

In exchange for the license to sell concessions, sundries, and
beachwear, the licensee pays a guaranteed minimum "rental" and a
percentage of gross sales. In exchange for the license to rent
beach equipment, the licensee pays a percentage of rental
income. One agreement covers both the license to sell
concessions, sundries, and beachwear and to rent beach
equipment.

Beach Lease. The City owns extensive beach property. A food
concession complex is located on a portion of the beach.
Adjoining the beach is a City-owned parking lot, and parking
fees are charged. No admission is charged to enter the beach or
to reach the concession complex.

The lease agreement for the beach concession complex is similar
to the agreement with respect to the license of the beachfront
park concession complex in that the same types of food and drink
are authorized to be sold, and the lessee may sell "[s]undry
items and other personal beach recreational and clothing items."
The lessee may also rent beach chairs, cabanas, umbrellas, and
rubber or canvas floats.

The lease agreement is also similar to the beachfront park
license agreement in that the lessee pays a minimum guaranteed
rental and a percentage rental on sales of concessions,
sundries, and beachwear, and the lessee also pays a minimum and
percentage rental on "beach rentals."

Delicatessen/restaurant. The City owns a convention and
exhibition hall (the "Center") managed by a private company.
The Center is a venue for trade shows, conventions, and
conferences with extensive exhibition space on one level and
meeting, ballroom, and public space on a second level.

The City leased a "retail sales area" within the Center to a
lessee "for the maintenance and operation of a
delicatessen/restaurant to sell and deliver food and beverages."
The lessee may also serve beer and wine, and all food items may
be sold for on-site or off-site consumption. There are other
retail stores within the Center.

The lessee pays both a fixed minimum monthly rental and a rental
based on a percentage of its annual gross receipts.

Requested Advisement

Whether the lease and license fees received by the City are
exempt from tax pursuant to section 212.031(1)(a)10., F.S.

Applicable Law and Discussion

Section 212.031(1)(a), F.S., sets forth the general rule that
the renting, leasing, or licensing the use of, real property is
subject to sales tax unless the property is exempt under one of
a number of specified exemptions. One of those exemptions is
contained in section 212.031(1)(a)10., F.S., which was amended
effective July 1, 1999, and provides an exemption for property:

Leased, subleased, licensed, or rented to a person
providing food and drink concessionaire services within the
premises of a convention hall, exhibition hall, auditorium,
stadium, theater, arena, civic center, performing arts
center, recreational facility, or any business operated

under a permit issued pursuant to chapter 550....

Prior to the amendment, the facilities named in the statute had
to be publicly-owned, and the exemption did not apply to
licenses.

The statute must be applied to the three situations that you
have presented.

Beachfront Park. The first question that must be answered is
whether the park is a "recreational facility" as that term is
used in section 212.031(1)(a)10., F.S. No definition of
"recreational facility" is provided by statute. Thus, it is
necessary to look to principles of statutory construction.

Words of common usage, when used in a statute, should be
construed in their plain and ordinary sense. Pederson v. Green,
105 So.2d 1 (Fla. 1958). The word "recreation" is defined in
Webster's New Twentieth Century Dictionary, Unabridged, Second
Edition, 1968, as follows:

1. refreshment in body or mind, as after work, by some form
   of play, amusement, or relaxation.

2. any form of play, amusement or relaxation used for this
   purpose, as games, sports, hobbies, reading, walking, etc.

The word "facility" is defined in The Random House Dictionary of
the English Language, The Unabridged Edition, as "something
designed, built, installed, etc., to serve a specific function
affording a convenience or service...."

It thus appears that the City's park, containing walkways,
playground equipment, a staging area for music, and the
concessions complex with restrooms, would be considered to be a
"recreational facility" as defined in section 212.031, F.S.

It is specifically stated in section 212.031(1)(a)10., F.S.,
that the exemption applies to property leased or licensed "to a
person providing food and drink concessionaire services within
the premises of a... recreational facility...." That language

presupposes the existence of a recreational facility and exempts
only that portion of the premises within such facility that is
leased or licensed to a person providing food and drink
concessionaire services.

The term "concessionaire" generally refers to one holding a
concession, and the term "concession" is defined in Webster's
New International Dictionary as:

5. A grant or lease of a portion of premises for some
   specific use, or of a right to enter upon premises for some
   specific purpose; as, a concession at a fair for a lunch
   counter.

Accordingly, the lease or license referred to in section
212.031(1)(a)10., F.S., is a lease of a portion of the premises
of a facility, or in the case of a license, a grant of the right
to provide services within the facility. The City's license of
the concessions complex to a licensee for the provision of food
and drink concessionaire services would, therefore, be exempt
under the statute. The statute does not require, in order for
the exemption to apply, that the food and drink concessionaire
services be the only services provided, and therefore, the fact
that the licensee sells sundry beach merchandise does not render
the exemption inapplicable.

The precise language of the exemption is that "property" leased
or licensed to a person providing food and drink concessionaire
services is exempt. This means that the total consideration
paid by the lessee or licensee for the property on which the
food and drink services are being provided is exempt, even if a
part of that consideration is paid for something other than the
provision of food and drink concessionaire services. It thus
makes no difference that the licensee of the City's park is
paying the City a percentage of its gross rentals of beach
equipment. Because the licensee is providing food and drink
concessionaire services, the property that it is licensing is
exempt, no matter how the consideration paid for that property
is determined.

Beach Lease. The same rationale applies to the lease of the

beach concession complex that applied to the beachfront park
complex. The only arguable difference between the two is that
the beach property, except for the concession complex, is
undeveloped, raising the question whether a beach can be a
recreational "facility" within the meaning of the statute. As
noted, the dictionary definition of "facility" suggests, in the
use of the words "designed," "built," and "installed," something
that is man-made. The beachfront park contains walkways and
playground equipment, but the beach itself is left relatively
pristine. Nonetheless, the Department does consider the beach to
be a recreational facility. The City has constructed adjacent
parking and public restroom facilities, and the City provides
beach maintenance and beach patrols, all designed to facilitate
the use of the beach by the public. For this reason, all
payments received by the City under the beach lease are received
for property that is leased to a person providing food and drink
concessionaire services.

Delicatessen/restaurant. Section 212.031(1)(a)10., F.S.,
specifically includes convention halls and exhibition halls as
facilities in which the lease or license to a person providing
food and drink concessionaire services can be exempt. The fact
that there may be other retail stores within the Center does not
detract from the fact that the Center is a convention and
exhibition hall. The lease by the City of space in the Center to
be used as a restaurant is therefore exempt.

Accordingly, all payments received by the City for the lease to
the lessee of the space in the Center for the operation of a
delicatessen/restaurant are exempt.

It should be noted that, as a lease of publicly-owned property,
the lease payments received by the City for both the beach lease
and the delicatessen/restaurant lease would also have been
exempt under section 212.031(1)(a)10., F.S., as it read prior to
its amendment effective July 1, 1999.

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 upon 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 from that which is 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 that 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 that 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 D. Heyde
Senior Attorney
Control # 40083