Were payments for refrigerated and non-refrigerated port-authority warehouse space exempt when the lease also permitted other cargo use?

Subject

Real Property Lease with Port Authority

Plain-English summary

The port-authority warehouse payments were exempt only while the space was used exclusively to store transient cargo connected with loading or unloading. The Department included lease payments, ad valorem taxes paid for the authority, and the stated pass-through utility charges in its original determination.

The lease allowed the company to store other cargo, but the Department focused on actual use. Any use beyond qualifying transient-cargo storage would nullify the exemption.

This August 2001 advisement expressly directs readers to revised TAA 01A-050R, issued October 5, 2001. The revision clarified additional conditions for pass-through utility charges.

What this means for you

Contract permission and actual operations were separate. The exemption survived only if the company kept the space exclusively within the qualifying transient-cargo use.

Common questions

Q: Were lease payments exempt? Yes, while use remained exclusively qualifying.

Q: Were ad valorem payments included? Yes.

Q: What happened if the space stored other cargo? The exemption was lost.

Q: Was this advisement later revised? Yes, by TAA 01A-050R.

Citations and references

• Fla. Stat. § 212.031(1)(a)8. — port-authority cargo lease exemption
• Fla. Stat. § 315.02(2) — port authority definition
• Fla. Admin. Code r. 12A-1.070(1)(a)7. — real-property rentals
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01A-050

Original ruling text

SUMMARY
QUESTION: Are payments made to a Port Authority for space
used for refrigerated and non-refrigerated cargo exempt

from tax pursuant to s. 212.031(1)(a)8., F.S.?

ANSWER - Based on Facts Below: If the space is used

exclusively for the storage of transient cargo, the
exemption will apply. However, use of the space for any

other purpose would nullify the exemption.

See Revised TAA 01A-050R, dated Oct. 5, 2001

Aug 14, 2001

Re: TAA 01A-050
Sales and Use Tax - Real Property Lease with Port Authority
Section 212.031(1)(a)8., F.S.
Rule 12A-1.070(1)(a)7., F.A.C.
(Company)
(Authority)

Dear:

This is a response to your requests dated April 18, 2001, and
June 5, 2001, for the issuance of a Technical Assistance
Advisement (TAA) concerning the above referenced parties and
matter. Your letters and supporting documents have been
carefully examined, and the Department finds your request 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,

Florida Statutes.

Facts

With your request, you have included copies of an "Agreement and

Lease", dated XX, and an "Amended and Restated Agreement and

Lease", dated XX, between Company and Authority. For purposes

of this TAA, our response will address the Amended and Restated

Agreement and Lease.

The document provides for the lease and use of transient
refrigerated and non-refrigerated cargo warehouse space.

Pertinent excerpts from the document are as follows:

Article IV, Use of the Premises, states:

Lessee has the right to use the Premises for the purpose of
storing transient cargo. Transient cargo is defined as

those products that generally do not remain in storage on

the Premises for a period greater than thirty (30) days.

In addition, Lessee may use the Premises to store any

cargo, shipments or merchandise it may choose regardless of
the place of origin of such cargo, shipments or

merchandise, provided however, that the storage of

transient import or export cargo shall at all times be

given precedence by Lessee over the storage requirements of

any other cargo.

Article V, Fees and Charges, provides in part:

5.01. Rental Fees: Lessee shall pay rent to Authority in
the amount of the monthly rate, plus tax, indicated on

Exhibit B....

5.02 Wharfage: Lessee shall pay Authority the wharfage fees
set forth in Exhibit B.

Article VI, Utilities, provides:

Lessee shall be responsible for promptly paying those
persons furnishing or providing utilities or related
services to Lessee. Those utilities or related services
include, but are not necessarily limited to, electricity,
gas, janitorial service, trash removal, and telephone
service. Water and sewage shall be provided by the
Authority. In no event shall Lessee be required by the
Authority to pay a greater cost per unit of electricity

than other tenants receiving electricity over Authority's

lines. Lessee may arrange for direct electric service at

its option and expense.

Article VII, Taxes and Assessments, provides:

Lessee shall bear, pay and discharge, on or before the last
day on which payment may be made without penalty or
interest, all ad valorem real estate taxes or other taxes,
which shall or may during the Term of this Agreement be
charged, levied, assessed, imposed, become due or payable,
or become liens upon, or arise in connection with Lessee's
use, occupancy or possession of the Premise or any part
thereof. None of these provisions, covenants or conditions
of this Agreement shall be construed as a release or waiver
on the part of Authority, as a political subdivision of the
State of Florida and the City..., of the right to assess,

levy and collect from Lessee any license, personal,
intangible, occupation, ad valorem or other tax which shall
be lawfully imposed on the business or property of Lessee.
Authority will provide information available from and
currently in possession of the Authority as necessary to
Lessee on any determination of value for tax assessment

purposes.

Exhibit B, Schedule of Fees and Charges, provides, in
addition to charges for refrigerated and non refrigerated

warehouse space:

2. Wharfage Rate: Commencing on the Commencement Date of
   the Agreement, Lessee shall pay Authority $1.30 per short
   ton for all refrigerated cargo for the first year of this

Agreement and thereafter...

3. Increase in Refrigerated Cargo Wharfage Rates:
   Commencing on the first anniversary of the Commencement
   Date of the Agreement, and every year thereafter, the above
   wharfage rate shall increase in direct proportion to the
   percentage increase rate in Authority's published

tariff...

Advisement Requested

Whether payments made to Authority for the lease of the
building, electricity, and property taxes are exempt from tax

pursuant to Rule 12A-1.070(1)(a)7., F.A.C.

Applicable Law and Discussion

Section 212.031(1)(a), Florida Statutes (F.S.), provides that it
is 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, with certain enumerated exceptions. A "license" to
use real property is defined in section 212.02(10)(i), F.S., as
"... the granting of a privilege to use or occupy a building or

a parcel of real property for any purpose."

Section 212.031(1)(c), F.S., provides in part:

For the exercise of such privilege, a tax is levied in an
amount equal to 6 percent of and on the total rent or
license fee charged for such real property by the person
charging or collecting the rental or license fee. The
total rent or license fee charged for such real property
shall include payments for the granting of a privilege to
use or occupy real property for any purpose and shall

include base rent, percentage rents, or similar charges....

Rule 12A-1.070(1)(a)7., F.A.C., replicates the provisions of s.

212.031(1)(a)8., F.S., which provides an exemption from the tax

as follows:

8.a. Property used at a port authority, as defined in s.
315.02(2), F.S., exclusively for the purpose of oceangoing
vessels or tugs docking, or such vessels mooring on
property used by a port authority for the purpose of
loading or unloading passengers or cargo onto or from such
vessel, or property used at a port authority for fueling
such vessels, or to the extent that the amount paid for the

use of any property at the port is based on the charge for

the amount of tonnage actually imported or exported through

the port by a tenant.

b. The amount charged for the use of any property in excess
of the amount charged for tonnage actually imported or
exported shall remain subject to tax except as provided in

sub-subparagraph a.

The term "port authority" or the word "authority" are defined
under s. 315.02(2), F.S., to mean "any port authority in Florida
created by or pursuant to the provisions of any general or
special law or any district or board of county commissioners
acting as a port authority under or pursuant to the provisions

of any general or special law".

Rule 12A-1.070(4)(c), F.A.C., further provides "Ad valorem taxes
paid by the tenant or other person actually occupying, using, or
entitled to use any real property to the lessor or any other
person on behalf of the lessor, including transactions between

affiliated entities, are taxable".

Pursuant to s. 212.031(7), F.S.:

(7) Utility charges subject to sales tax which are paid by
a tenant to the lessor and which are part of a payment for
the privilege or right to use or occupy real property are
exempt from tax if the lessor has paid sales tax on the
purchase of such utilities and the charges billed by the
lessor to the tenant are separately stated and at the same

or a lower price than those paid by the lessor.

In summary, under Florida's sales and use tax laws, the rental
or lease of real property is taxable unless specifically
exempted by the law. The tax is imposed on all considerations
due and payable for the privilege of occupying the real
property. The payment of ad valorem taxes is taxable, whether
paid to the landlord or to a third party on behalf of the

landlord, if it is required by the lease as a condition of
occupancy. However, pass-through utility charges would be
exempt provided the landlord has paid the tax to the utility
provider and has not marked up the cost of the utilities, or

separately stated the charges.

Property used at a port authority as defined in s. 315.02(2),
F.S., "exclusively for the purpose of oceangoing vessels or tugs
docking, or such vessels mooring on property used by a port
authority for the purpose of loading or unloading passengers or
cargo onto or from such a vessel, or property used at a port

authority for fueling such vessels..." is exempt from the tax.

If a lease contract for property used at a port authority

contains a minimum annual tonnage clause: (1) charges for
tonnage actually imported or exported through the port are
exempt, and (2) any payment made by the tenant to make up the
difference between the charges for tonnage actually generated
and the charges which the tenant guaranteed under the lease is
subject to sales tax. Consequently, direct payments made under
the minimum annual tonnage guarantee are subject to sales tax,
unless the property is exempt under another provision of the

statute.

Determination

At issue here is the meaning of the phrase in s.
212.031(1)(a)8.a., F.S., which provides an exemption from sales
tax on"... property used at a port authority... exclusively...

for the purpose of loading or unloading passengers or cargo...."
The Department finds that Authority is a "port authority" within
the meaning and intent of s. 315.02(2), F.S., and that the

leased facilities are located at the port authority. The
refrigerated and non-refrigerated space, which is a temporary
storage facility, is used for the purpose of loading and loading
cargo. As such, the Department concludes that the exemption
provided in s. 212.031(1)(a)8.a., F.S., is applicable to all
payments made by Company on the condition that the space is used
exclusively for the storage of transient cargo. This would
include lease payments, and ad valorem taxes paid on behalf of

Authority. Pass-through utility charges would also be exempt.

Fees paid to Authority for "wharfage" may be considered as
additional fees paid for the license to use the real property.

It is understood that these fees are paid for the license to use
real property within the port authority exclusively for the

purposes of docking, mooring, and unloading passengers and

cargo. As such, these fees would fall within the exemption

provided under s. 212.031(1)(a)8., F.S.

It is noted, however, that the Article IV (Use of Premises), of

the Amended and Restated Agreement and Lease, provides that
"Lessee may use the Premises to store any cargo, shipments or
merchandise it may choose regardless of the place of origin of
such cargo, shipments or merchandise...." Such use of the
leased space would nullify the exemption provided under s.
212.0031(1)(a)8., F.S., since the space would not be used
"exclusively" for the purpose of loading or unloading cargo onto

or from an oceangoing vessel.

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 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 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,

Dee Overcash

Senior Tax Specialist

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