Did an assigned airport lease qualify for Florida's historical airline cargo-loading real-property tax exemption?

Plain-English summary

Florida conditionally allowed the airport-property exemption for space actually used by the certified cargo airline to load and unload property from aircraft. The company held a federal all-cargo air-service certificate, had acquired an assignment of the airport lease, and used warehouse, office, pavement, parking, and land areas in its cargo operation.

Two identity and payment conditions were essential. Only the company associated with the air-service certificate qualified as the airline; its affiliates or subsidiaries did not qualify without similar certificates. And because an affiliate payment agent made the rent payments, the airline had to show that the agent paid on its behalf.

The exemption was also use-specific. Warehouse, air-cargo, operational-control, and office space could qualify only to the extent used exclusively for loading or unloading cargo. Security offices, unrelated storage, other business activity, and movement of cargo from the airport to non-airport destinations did not qualify. Mixed-use areas required allocation under the cited rule.

What this means for you

For the historical airport exemption, documentation had to connect the certified airline, the actual user, the payer, and each area's exclusive function. A lease assignment or airport location alone was not enough.

Common questions

Q: Did the affiliate payment agent itself qualify as an airline?
A: No. The exemption depended on the certified airline's use and proof that the agent paid on its behalf.

Q: Did every affiliate or subsidiary qualify?
A: No. Florida limited airline status to the entity tied to the certificate unless another entity held its own similar certificate.

Q: Was all office space exempt?
A: No. Only office space devoted exclusively to qualifying cargo functions could be exempt.

Citations and references

• Fla. Stat. § 212.031(1)(a)7 — historical airport-property lease exemption
• Fla. Admin. Code r. 12A-1.070 — historical real-property rental rule and allocation
• Department of Revenue v. Anderson, 403 So. 2d 397 (Fla. 1981) — strict construction of exemptions
• State ex rel. Szabo Food Services, Inc. v. Dickinson, 286 So. 2d 529 (Fla. 1973) — strict construction cited by the Department
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 03A-021

Original ruling text

SUMMARY

QUESTION: Whether the assignment of a real property lease a
Company qualifies for the exemption under section
212.031(1)(a)7., F.S.

ANSWER - Based on Facts Below: Provided that the Company
actually uses the property located at Airport, and that the
payments by Agent to the Airport for the lease of real
property are being made on behalf of the Company, the
Company would be eligible for the exemption provided in
section 212.031(1)(a)7., F.S., to the extent that the
property is being used exclusively for the statutory
purpose.

May 05, 2003

Subject: Technical Assistance Advisement 03A-021
XXX ("Company")
Real Property Lease at Airport
Sales and Use Tax
Section 212.031, F.S.
Rule 12A-1.070, F.A.C.
FEI # XX

Dear :

This response is in reply to your petition received February 24,
2003, requesting the Department's issuance of a Technical
Assistance Advisement pursuant to s. 213.22, F.S., and Chapter
12-11, F.A.C., regarding the above referenced matter and party.
An examination of your petition has established that you have
complied with the statutory and regulatory requirements for
issuance of a TAA. Therefore, the Department is hereby granting
your request for issuance of a TAA.

ISSUE

Whether the assignment of a real property lease to Company
qualifies for the exemption under section 212.031(1)(a)7., F.S.

FACTS

Your letter provides in part:

[Company] purchased certain assets from XXX ("Lessee"),
including acquiring an assignment of the leased XXX ("Airport")
property for its own use. [Airport] expressly consented in
writing to the assignment of the lease to [Company] [and such
other affiliates or subsidiaries of Company that it may
designate] (see previously submitted assignment agreement). The
square footage rented under the original lease was adjusted by
the parties. The real property is composed of various areas
leased at varying rates per square foot. [Company] uses it in
its capacity as an "airline" (see enclosed adjustment letter
from [Airport] dated March 5, 2001). Payment under the assigned
lease is made through a [Company] affiliate payment agent
company,

XXX ("Agent"), which has no employees or other physical presence
in Florida.

Under the above assignment, [Company] and its subsidiaries have
a direct and legal right to, and in fact do use, the airport
real property. [Company] is an airline as evidenced by the
enclosed copy of a United States Department of Transportation,
Federal Aviation Administration, Domestic All-Cargo Air Service
Certificate, dated XX, issued "[Company]" and a DOT/FAA web page
printout evidencing that [Company] is authorized to operate as a
cargo airline under certificate number XX. This site also lists
225 aircraft used by [Company] as a cargo airline.

The airport property is situated so that [Company]'s
aircraft abut an opening through which the goods, packages,
and deliverables pass for... shipping. The aircraft, once
loaded or unloaded at this site, egress the airport runways
by way of the tarmac and taxiway.

The following is a description of the square footage, rate,
and function of the various areas comprising the leased
property.

Square Footage Analysis for Airport Building Site [XX]

Building [XX] - Premises Square Footage Rate

Warehouse space (1st level) 104,823

Annual

$14.00 $1,467,522.00

Office space total

52,188

Vehicle pavement

102,297

$ 0.18

18,413.46

93,167

$ 0.00

0.00

Rooftop vehicle parking
Land

296,956

Special Features
Total

$14.00

$ 0.85

730,632.00

252,412.60
101,875.80

649,431

$2,570,855.86

Area Functions

[1.] Warehouse Space.

This space is used for the storing, loading and unloading,
onto and off of aircraft, of goods, deliverables and or
passengers. Trucks arrive in the vehicle pavement area
abutting this space and either drop off or pick up goods
and deliverables that "flow" through this area to either go
on to or come off of aircraft. The goods and deliverables
are loaded and unloaded from the aircraft that abut this
space.

[2.] Office Space.

The activities performed in the office space are directly
integral to the storing, loading, and unloading of the
goods and deliverables onto and off of aircraft. Without
the activities and functions performed in the office space,
no goods and deliverables would be loaded and unloaded onto
and off of aircraft. This space is devoted exclusively to
this function. From time to time, packages are brought
into and out of this area as part of this function. This
area is present because of the need for proximity to the

goods and deliverables being loaded and unloaded.

[3.] Vehicular Pavement.

This area directly abuts the warehouse space. As provided
above, trucks arrive in the vehicle pavement area and
either drop off or pick up goods and deliverables which
"flow" through this area to either go on to or come off of
aircraft. As above, without the activities and functions
performed in the vehicle pavement space, no goods and
deliverables would be loaded and unloaded onto and off of
aircraft. This space is devoted exclusively to this
function.

[4.] Rooftop Vehicle Parking.

This area is used for auto parking. This space is directly
on top of warehouse space. This area is provided at no
charge (see enclosed adjustment letter from [Airport] dated
March 5, 2001).

[5.] Land.

This area represents the underlying land area footprint
upon which the above area rests as well as border areas
surrounding these areas.

DOCUMENTS PROVIDED BY TAXPAYER

You have provided the following relevant documents:

1) "Consent to Assignment" dated August 17, 2000;
2) "Letter Adjustment, Lease #XX," dated March 5, 2001
3) A Construction/ Finance and Lease Agreement between
[County] and [Lessee] dated January 26, 1993;
4) The First Amendment to the Lease Agreement between [County]
and [Lessee], dated September 13, 1994;
5) Letter Amendment, Lease #XX, dated September 16, 1996;
6) Letter Adjustment, Lease #XX, dated August 7, 2000; and
7) A "Domestic All-Cargo Air Service Certificate" issued to
Company by the United States Department of Transportation

on December 24, 1987.
8) Power of Attorney.

TAXPAYER POSITION

Taxpayer asserts that:

Lease payments made for the use by [Company] as an airline,
of the commercial real property, as express assignees under
the Airport's "Consent to Assignment" for the use of real
property "located at an airport" and "used by an airline
for loading and unloading of passengers and cargo" are
excluded from Florida sales tax as indicated above.

APPLICABLE STATUTES AND RULES

Section 212.031, F.S., provides in part:

(1)(a) It is declared to be 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 unless such
property is:

7. Property used at an airport exclusively for the purpose
   of aircraft landing or aircraft taxiing or property used by
   an airline for the purpose of loading or unloading
   passengers or property onto or from aircraft or for fueling
   aircraft.

Rule 12A-1.070, F.A.C., provides in part:

(1)(a) Every person who rents or leases any real property
or who grants a license to use, occupy, or enter upon any
real property is exercising a taxable privilege unless such
real property is:

6.a. Property used at an airport exclusively for the
purpose of aircraft landing or aircraft taxiing or property
used by an airline for the purpose of loading or unloading
passengers or property onto or from aircraft or for fueling

aircraft. See subsection (3).

b. Property which is used by an airline for loading or
unloading passengers onto or from an aircraft is exempt.
This property includes: common walkways inside a terminal
building used by passengers for boarding or departing from
an aircraft, ticket counters, baggage claim areas, ramp and
apron areas, and departure lounges (the rooms which are
used by passengers as a sitting or gathering area
immediately before surrendering their tickets to board the
aircraft). Departure lounges commonly known as VIP
lounges, or airport clubs which are affiliated with an
airline or a club which requires a membership or charge or
for which membership or usage is determined by ticket
status are not included as property exempt from tax. The
lease or license to use passenger loading bridges (jetways)
and baggage conveyor systems comes under this exemption,
provided that the jetways and baggage conveyor systems are
deemed real property.

(I) In order for the jetways and baggage conveyors to be
deemed real property, the owner of these items must also be
the owner of the land to which they are attached, and must
have had the intention that such property become a
permanent accession to the realty from the moment of
installation. The items shall not be considered real
property if the owner, when the owner is not the airport,
retains title to the items after the purchase/installation
indebtedness has been paid in full.

(II) Any operator of an airport, such as an airport
authority, which is the lessee of the land on which the
airport has its situs is, for the purpose of this subsubparagraph, deemed the owner of such land.

c. Real property used by an airline for purposes of loading
or unloading passengers or property onto or from an
aircraft which is exempt from tax includes: office areas
used to process tickets, baggage processing areas,
operations areas used for the purpose of the operational
control of an airline's aircraft, and air cargo areas.

(I) If any portion of the above property is used for any
other purpose, it is taxed on a pro-rata basis, which shall
be determined by the square footage of the portion of the
areas in the airport that are used by an airline
exclusively for the purpose of loading or unloading
passengers or property onto or from aircraft (which areas
shall be the numerator) compared to the total square
footage of such areas used by the airline (which areas
shall be the denominator).

(II) Example: An airline leases a total of 3,000 square
feet from an airport authority. The airline uses the space
as follows: 1,000 square feet are used to process tickets
and check in the passengers' luggage; 1,000 square feet are
used for the passengers' departure lounge; and 1,000 square
feet are used for the management office and the employees'
lounge. The 1,000 square feet used to process tickets and
check in the passengers' luggage is exempt; the 1,000
square feet used as the passengers' departure lounge is
also exempt; and the 1,000 square feet used as the
management office and employees' lounge is taxable.
Therefore, a total of 2,000 square feet is exempt because
that portion of the total space leased by the airline is
used exclusively for the purposes of loading or unloading
passengers or property onto or from an aircraft. However,
the total amount used as office space and the employees'
lounge (i.e., 1,000 square feet) is taxable, because that
portion of the space leased by the airline is not used
exclusively for the purposes of loading or unloading
passengers or property onto or from an aircraft.

RESPONSE

Pursuant to section 212.031(1)(a)7., F.S., "[p]roperty used at
an airport exclusively for the purpose of aircraft landing or
aircraft taxiing or property used by an airline for the purpose
of loading or unloading passengers or property onto or from
aircraft or for fueling aircraft" is exempt from the tax imposed
by that section. To determine whether Company qualifies for this
exemption, it must first be established whether Company is an

airline.

Since Company has an "All Cargo Air Service Certificate", number
XX ("Certificate") issued by the Department of Transportation,
it would be considered an airline. However, only the Company
with the FEI number associated with the Certificate issued by
the Department of Transportation would be considered an airline,
not any of its subsidiaries or affiliates, unless the
subsidiaries or affiliates have been issued similar
certificates.

Pursuant to section 212.031(1)(a)7., F.S., "[p]roperty used at
an airport exclusively for the purpose of aircraft landing or
aircraft taxiing or property used by an airline for the purpose
of loading or unloading passengers or property onto or from
aircraft or for fueling aircraft" is exempt from the tax imposed
by that section.

An airline must be the party using the property in order to
receive the exemption. Here, it has not been shown that an
airline, i.e. the entity with the FEI number listed above, is
actually using the area for the loading and unloading of
property. Florida courts have consistently held that exemptions
must not be expanded beyond their express terms and must be
strictly and narrowly construed against the taxpayer. See
Department of Revenue v. Anderson, 403 So.2d 397 (Fla. 1981);
State ex rel. Szabo Food Services. Inc. v. Dickinson, 286 So.2d
529 (Fla. 1973). Consequently, under Florida law, the burden is
on the taxpayer, as the party claiming the exemption, to
establish from its actual books and records that it is clearly
entitled to a particular exemption.

Further, the Department has long held that only payments made
"by an airline" for the use of real property for air cargo
facilities and services are exempt from taxation under section
212.031(1)(a)7., F.S. However, payments made for the use of
such property by an entity that is not an airline would
generally be taxable. (Emphasis Supplied.) In the instant case,
the lease payments are made "through a [Company] affiliate
payment agent company [Agent], which has no employees or other
physical presence in Florida". It has not been shown that the

payments are made on behalf of, or by, an airline that is using
the demised area for the loading or unloading of property. As
discussed above, the burden is on the taxpayer to prove it is
clearly entitled to the exemption.

Therefore, provided that Company (with the FEI number listed
above) actually uses the property located at Airport, and that
the payments by Agent to the Airport for the lease of real
property are being made on behalf of Company (with the FEI
number listed above), Company would be eligible for the
exemption provided in section 212.031(1)(a)7., F.S., to the
extent that the property is being used exclusively for the
statutory purpose. Rule 12A-1.070(1)(a)6.c., F.A.C. provides
that "[r]eal property used by an airline for purposes of loading
or unloading passengers or property onto or from an aircraft
which is exempt from tax includes: office areas used to process
tickets, baggage processing areas, operations areas used for the
purpose of the operational control of an airline's aircraft, and
air cargo areas".

In addition, any space devoted exclusively to the function of
storing, sorting, or processing air cargo that is loaded or
unloaded onto or from aircraft is not subject to tax. As a
consequence, the exception from the tax will not extend to, for
example, any office space not devoted exclusively to such
storage, sorting, or processing, nor to any use of the property
as a site for a security office, nor to any space used for the
storage of property or equipment not used in such storage,
sorting or processing. Similarly, the space used for other
business activities such as the movement of cargo from the
airport to non-airport destinations shall not be excluded from
the tax.

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 advise 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 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,

Kelley A. Cramer
Attorney
Technical Assistance and Dispute Resolution
(850) 922-4835

KC/
Ctrl# 53972