Were city and county impact fees passed through by a manufactured-home park developer included in the homes' taxable sales price?

Subject

Taxation of Impact Fees

Plain-English summary

The impact-fee amounts remained part of the manufactured homes' taxable sales price. The city and county imposed the fees on the developer as the permit applicant improving its own leased lots and increasing demands on public services.

The home buyer received title to the manufactured home but no ownership interest in the land. Because the fees were the seller's cost rather than a tax or fee imposed on the home transfer, section 212.02(16) did not allow the developer to deduct them from the tax base.

Separate itemization did not change the result. Tax applied whether the developer embedded the fees in a lump sum or showed them as a separate contract charge.

What this means for you

Breaking a seller expense out on an invoice does not remove it from taxable consideration when the seller—not the buyer—is legally liable for that expense.

Common questions

Q: Were bundled impact fees taxable? Yes.

Q: Were separately stated impact fees taxable? Yes.

Q: Why? The fees were imposed on the developer's land improvements and remained a seller cost.

Citations and references

• Fla. Stat. § 212.02(16) — sales price and seller expenses
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01A-029

Original ruling text

SUMMARY

QUESTION: Are impacts fees imposed on a developer to
improve lots that are rented to individuals who also
purchase manufactured homes from the developer included in
the taxable sales price of the homes when the developer
passes the cost through to the purchasers as either part of
a lump sum price or as a separately itemized item?

ANSWER - Based on Facts Below: Based on review of the
local ordinances, the fees are imposed on the developer as
an owner that improves land in such way as to increase the
burden on local government services. Because the fees are
a cost of the seller and are not imposed on the transfer of
the manufactured home to the purchaser, the taxable sales
price of that tangible personal property cannot be reduced
by the amount of the fees paid by the developer. It is
immaterial whether the fees are included in a lump sum sales
price or are separately itemized.

Jun 11, 2001

Re: Technical Assistance Advisement 01A-029
Sales and Use Tax -- Taxation of Impact Fees
Section 212.02(16), F.S.

Dear :

This is in response to your letter to the Florida Department of
Revenue dated December 20, 2000, in which you asked for a
technical assistance advisement concerning the taxation of the
price paid by purchasers of manufactured homes from XXX
("Taxpayer").

Facts

Taxpayer is the developer of a manufactured home park. Taxpayer
sells manufactured homes and leases the lots in the park where

those homes are situated. The buyer selects a home model and
lot and decides on the lot configuration. Taxpayer draws
permits, excavates, and makes certain improvements, including
paving, curbing, foundations, and landscaping. Taxpayer then
installs the home on the lot, obtains a certificate of
occupancy, and handles registration and titling of the home. At
closing, the buyer receives a certificate of title issued by the
Florida Department of Motor Vehicles for the manufactured home
and leases the lot from Taxpayer. No fee interest in the land
is conveyed to the buyer. Taxpayer and the Department are in
agreement that the manufactured homes remain tangible personal
property at the time of, and after, the sale.

XXX ("County") and the XXX ("City") impose impact fees on those
who develop real property. The fees are imposed on those who
apply for permits to improve property and must be paid before
the applicant is issued a certificate of occupancy. As the
applicant for the permit for improvements and the certificate of
occupancy, Taxpayer incurs a liability for such fees whenever a
lot is improved. Taxpayer pays those fees directly to County and
City. Taxpayer often pays the fees for several lots in a single
check. These impact fees are imposed on Taxpayer as the
developer/contractor.

Taxpayer uses a standard form contract. Taxpayer has always
included the impact fees in the pricing when it sells a
manufactured home, but has not always itemized those fees in its
contract. From the time it began business in late 1998 through
August 17, 1999, Taxpayer's contract contained the following
provision in regard to pricing:

II. PURCHASE PRICE AND PAYMENT
(a) Cost of home

$_

(b) Sales Tax to be paid on
$ __ by Buyer

$_

(c) Deposit to be held in escrow by...

$_

(d) Closing fees to be paid by Buyer

$ 200.00

(e) Cash on closing and delivery of title... $_
TOTAL:

$_

The amount on which sales tax was collected in line (b) was the

same as the lump sum cost of the home in line (a). (The $200.00
closing fee was for services in obtaining title and registration
documentation and tag. Taxpayer did not break down the fee in
any way and acknowledges that sales tax should have been
collected on that fee for documentation services provided as
part of the sale. Taxpayer is in the process of calculating the
amount of taxes owed in regard to such fees collected.)
Taxpayer's Closing Statement used the same breakdown, with
additional entries for any change orders and to reflect payments
made at closing by the buyer and any lender providing purchase
money financing.

Beginning in August 1999, Taxpayer amended the purchase price
provision in its contract to read as follows:

II. PURCHASE PRICE AND PAYMENT
(a) COST OF HOME

$_

(b) Sales Tax to be paid on
$_ by Buyer(s)

$_

(c) Impact Fees: [City]

$_

(d) Impact Fees: [County]

$_

(e) Closing fees to be paid by Buyer(s)
(f) Deposit to be paid to [Taxpayer]

$ 200.00
$_

(g) Additional downpayment (sic)
due / /

$

(h) Cash on closing and delivery of title... $_
TOTAL:

$_

Finance __ Cash _____

The amount on which sales tax was collected in line (b) was the
same as the cost of the home in line (a). No tax was collected
on the impact fees, which were entered at the same amounts
actually paid to City and County by Taxpayer, with no markup.
The decision that separately stated impact fees would not be
subject tax was based on advice from a Department representative
in Taxpayer's local service center. That representative later
informed Taxpayer that she believed her conclusion was incorrect
and that sales tax should be collected on impact fees charged to
the buyer regardless of whether they were separately itemized.

A buyer who purchased a home from Taxpayer in 1998 applied to

the Department for a refund of the sales tax paid on impact fees
included in the lump sum price of his home. The Department
initially denied the request for failure to establish that the
fees were included in the full purchase price and to provide
copies of an itemized bill of sale and the check for payment of
the fees. The buyer requested Taxpayer to provide the necessary
documentation. Taxpayer;s written response was that Taxpayer
did not provide itemized bills of sale and did not separately
charge for the impact fees. The letter stated, "In your
particular sale, the city impact fee of $2,805 and the county
impact fee of $1,818.19 were included in the total sales price
of your home". The letter concluded that sales tax was charged
and that the tax on the fees would have been $277.39. Taxpayer
did not provide any proof of payment of the sales tax to the
state and did not assign any right it might have to a refund to
the buyer. Based on Taxpayer's letter, the Department refunded
$277.39 to the buyer. That buyer has informed other buyers of
his refund, and those other buyers have asked Taxpayer to refund
sales taxes paid on the impact fees included in the sales prices
of their homes. Taxpayer believes the refund that was made was
erroneous and has refused to make any additional refunds. If
the Department advises Taxpayer that refunds are available,
Taxpayer will furnish necessary documentation to other buyers so
they can file refund applications with the Department.

Requested Advisements

1. Was Taxpayer required to collect and remit sales taxes
   on the portion of the lump sum purchase price of
   manufactured homes attributable to impact fees prior
   to August 17, 1999?

2. Was Taxpayer required to collect and remit sales taxes
   on the separately stated impact fees for sales of
   manufactured homes after August 17, 1999?

Applicable Law, Discussion, and Analysis

Pursuant to section 212.05(1)(a), F.S., sales tax is imposed on
the "sales price" of tangible personal property. Section
212.06(1), F.S., provides that the tax is to be collected from

the buyer and remitted to the state by the seller. Taxpayer is
therefore required to collect and remit tax on the full sales
price when it sells a manufactured home as tangible personal
property. Section 212.02(16), F.S., defines "sales price" as
follows:

(16) "Sales price" means the total amount paid for tangible
personal property, including any services that are a part
of the sale,... without any deduction therefrom on account
of the cost of the property sold, the cost of materials
used, labor or service cost, interest charged, losses, or
any other expense whatsoever....

Under this definition, tax is imposed on the total consideration
passing from buyer to seller in respect to the tangible personal
property being transferred. The statute specifically provides
that the taxable amount is not to be reduced in respect to any
cost or expense incurred by the seller in providing the tangible
personal property.

Under the applicable County and City ordinances, impact fees are
imposed on those who apply for permits to improve real property.
The impact fees must be paid prior to issuance of a certificate
of occupancy. For example, Taxpayer paid thoroughfare road
impact fees to County in the amount of $407.05 for each of four
sales in 2000 for which documentation was provided. That fee is
imposed for each mobile home set up within a park by section 7075 of the County Code of Ordinances (the "County Code").
Section 70-76 of the County Code provides that the fee must be
paid by the "person applying for issuance of a building
permit... prior to issuance of a certificate of occupancy, or
the occupancy of the building". Chapter 22 of the County Code
governs construction and construction trades. Permits are
required before any person undertakes any construction,
electrical, plumbing, swimming pool, or other type of real
property improvement. Permits will only be issued to licensed
contractors who meet established criteria or to owners for the
purpose of improving their own residential or commercial
property.

City imposed $3,093 in fees for each of the sales made in 2000,

comprised of three impact fees ($1,094 water impact fee, $1,051
sewer impact fee, $388 recreation/parks impact fee) and water
and sewer connection fees. Chapter 7 of the City Land
Development Code (the "City Code") provides that permits are
required for constructing new buildings, expanding existing
buildings, performing building trade work regulated by code
(e.g., electrical or plumbing work), swimming pool construction,
or mobile home setups. Like the County Code, the City Code
provides that permits will be issued only to licensed
contractors or to owner-builders.

Taxpayer, as the contractor/developer, applied for the necessary
permits to improve the real property and install the
manufactured homes. Taxpayer was legally obligated to pay any
impact fees required as a condition of those permits. At the
time Taxpayer was doing the work, the buyers had no title to
either the real property or the manufactured home being placed
on that real property. Taxpayer was required to deliver the
homes at closing ready for occupancy. The impact fees had to be
paid prior to issuance of a certificate of occupancy. Those
fees were a cost incurred by Taxpayer in order to fulfill its
contractual obligations to make lot improvements to a buyer's
specifications and install a manufactured home for sale to that
buyer. The buyers had no legal obligation to pay the impact
fees to County or City. Unless a buyer happened to be a
licensed contractor in County, a buyer would not have been
issued the necessary permits to improve Taxpayer's land and
therefore could not become legally obligated to pay the fees.
The buyers never acquired any interest as owners of the land,
and they acquired an interest as owners of the manufactured
homes only after all permit-related fees had been paid by
Taxpayer.

The impact fees, as a cost Taxpayer incurred in order to deliver
the tangible personal property that was the subject of the sale
to the buyers, were and are part of the taxable "sales price".
Section 212.02(16), F.S., clearly provides that the
consideration subject to tax may not be reduced by any cost the
seller incurs in producing or delivering the tangible personal
property or performing services that are part of the
transaction. Separately stating those fees has no effect on

their inclusion in the taxable sales price. A seller is always
free to itemize the costs that make up the total consideration
to be paid by a buyer, but such itemization does not have the
effect of removing the itemized costs from the tax base.
Taxpayer was correct to collect and remit sales tax on the
entire lump sum price of homes sold prior to August 7, 1999,
without reduction for any impact fees reflected in that price.
In addition, Taxpayer should have continued to collect and remit
sales tax on the separately stated impact fees after August 17,
1999.

Advisements

1. Taxpayer was required to collect and remit sales taxes on
   the portion of the lump sum purchase price of manufactured
   homes attributable to impact fees prior to August 17, 1999.

2. Taxpayer was required to collect and remit sales taxes on
   the separately stated impact fees for sales of manufactured
   homes after August 17, 1999.

Closing Statement

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, 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.

Sincerely,

Linda W. Bridges
Revenue Program Administrator
Technical Assistance and Dispute Resolution
(850) 488-7157

LWB/
Control #: 43499