When a condo manager's agreement set a $7 tax-inclusive price for a beach-chair setup, what amount did it owe the rental vendor and who remitted tax?

Plain-English summary

Florida read the agreement's $7 beach-chair setup price as tax-inclusive: $6.58 rent plus $0.42 tax. The condominium rental manager had to pay the vendor the full $7 for each setup, and the vendor had to remit the tax.

A setup consisted of two beach chairs and one umbrella. Although the vendor believed the manager charged guests $7 plus tax and then paid the vendor only $6.58, it supplied no documentation for that belief. The written agreement instead said the setup plus tax equaled $7.

An even-dollar total was permitted

The dealer still had to separately state the tax collected from the rental amount. Florida said the parties could set the pre-tax rental price so that adding tax produced an even-dollar total.

Bundling chairs with lodging was not a resale

If the management company included chair use in one transient-accommodation package and did not separately state a chair-rental charge to guests, it was not reselling the chairs. It therefore could not give the chair vendor a resale certificate.

Florida treated the vendor's chair rental to the manager and the manager's accommodation charge as separate taxable privileges, not duplicate tax on the same transaction.

What this means for you

Rental vendors and accommodation managers should make clear whether a quoted amount includes tax, identify which party is the dealer for each transaction, and preserve guest invoices if claiming a separate chair resale or duplicate collection.

Common questions

Q: How much did the manager owe the vendor?
A: $7 total: $6.58 rental price and $0.42 tax under the agreement and rate used in the ruling.

Q: Who remitted the $0.42?
A: The beach-chair vendor.

Q: Could the manager issue a resale certificate?
A: Not when chair use was bundled into lodging without a separately stated chair-rental charge to the guest.

Q: Did Florida find double taxation?
A: No. The documents showed a tax-inclusive $7 vendor transaction and a separate accommodation transaction.

Citations and references

• Fla. Stat. § 212.05(1)(c) — rental of tangible personal property
• Fla. Stat. § 212.07(2) — separately stated sales tax
• Fla. Admin. Code rr. 12A-1.060 and 12A-1.061 — rules cited in the ruling
• Ryder Truck Rental, Inc. v. Bryant, 170 So. 2d 822 (Fla. 1964)
• American Video Corp. v. Lewis, 389 So. 2d 1059 (Fla. 1st DCA 1980)
• Department of Revenue v. Anderson, 403 So. 2d 397 (Fla. 1981)
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 03A-048

Original ruling text

SUMMARY

QUESTION: What is the correct billing method on the rental
of beach chairs?

ANSWER - Based on Facts Below: A dealer is required to
separately state the amount of sales tax collected from the
sales price or rental amount. There is no prohibition
against setting the sales price is such a manner so that,
when the tax is added, the total equals an even dollar
amount.

It is a common practice for vacation rental management
companies and similar entities providing transient rental
accommodations to charge a package price (plus sales tax)
for the accommodations, which may include items such as
beach chair rentals. When these items are not separately
stated, they are not being resold to the rental guest and
the management company cannot issue a resale certificate to
the beach chair vendor. This practice does not constitute
double taxation.

Oct 06, 2003

Re: Technical Assistance Advisement 03A-048
Sales and Use Tax - Beach Chair Rentals
Section 212.05, F.S.Rules 12A-1.060, 12A-1.061, F.A.C.
Petitioner: XXX (herein "Taxpayer")
FEI: XX

Dear :

This letter is a response to your petition dated August 18,
2003, for the Department's issuance of a Technical Assistance
Advisement ("TAA") concerning the above referenced party and
matter. Your petition 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 s. 213.22, F.S.

FACTS

Taxpayer has entered into an agreement with a condominium rental
management company (hereinafter "Management Company") for the
rental of beach chairs and umbrellas in an arrangement known as
a "set-up". A set-up consists of two beach chairs and one
umbrella. According to section I., paragraph E., of the
agreement provided with Taxpayer's petition, Taxpayer provides
two set-ups for each unit managed by Management Company and
occupied by a Rental Guest. According to section I., paragraph
D., of the agreement, Management Company collects "for the
Packaged Beach Set-Ups plus Sales Tax, $7.00 per night for each
unit occupied by a Rental Guest". Management Company remits the
tax to the Department of Revenue and remits Taxpayer's portion
to Taxpayer, in accordance with the terms of the agreement.

According to Taxpayer, Management Company is remitting $6.58 to
Taxpayer and withholding $0.42 for tax. Taxpayer believes that
Management Company is collecting $7.42 per set-up from its
guests for each set-up; however, no documentation was provided
to support this assertion. Taxpayer also believes it is due
$7.00 for each set-up from Management Company.

REQUESTED ADVISEMENT

Advice is requested on the proper application of the tax to the
agreement; specifically, whether Management Company should remit
to Taxpayer $7.00 less tax.

DETERMINATION

Section 212.05(1)(c), Florida Statutes, imposes tax on the
rental of tangible personal property. Although Taxpayer's
agreement refers to the transaction as a "service", it is an
agreement for the rental of tangible personal property. Based
on the agreement, Taxpayer and Management Company are aware that
each set-up is subject to tax.

Section 212.07(2), Florida Statutes, requires the dealer to
separately state the amount of sales tax collected from the
sales price or rental amount. There is no prohibition against
setting the sales price is such a manner so that, when the tax
is added, the total equals an even dollar amount.

Taxpayer believes that double taxation is occurring, because it
believes that Management Company is collecting $7.00 plus tax
($7.42) from its rental guests, but only remitting $6.58 ($7.00
less tax) to Taxpayer. However, the language of the agreement
states that the total of a set-up plus tax equals $7.00 (not
$7.00 plus tax). See Agreement, Section I., Paragraph D.

Additionally, it is common practice for management companies and
similar entities providing transient rental accommodations to
charge a package price for the accommodations, which may include
items such as beach chair rentals. When these items are not
separately stated, they are not being resold to the rental
guest; therefore, the management company cannot issue a resale
certificate to the vendor, such as Taxpayer. This practice does
not constitute double taxation. The Florida Supreme Court has
held that it is appropriate, in the instance of different
transactions, to tax each activity, because "[c]learly there is
no `pyramiding' or duplication of the tax since each is on a
separate and distinct taxable privilege." See Ryder Truck
Rental, Inc. v. Bryant, 170 So.2d 822, 825 (Fla. 1964). If
Management Company does not separately state a charge for
renting beach set-ups, then its charge is for transient rentals
and not for rental of beach set-ups. However, Taxpayer's charge
to Management Company is a charge for rental of beach set-ups.
These are two separate and distinct taxable privileges.
Furthermore, in American Video Corp. v. Lewis, 389 So.2d 1059
(Fla. 1DCA 1980), the court held that where the provider of
cable television services bought "drop-in items" (i.e., hooks,
cables, transformers, rods, etc.) for use in providing cable
services, those items were not "rented" to the provider's
customers; therefore, there was no "resale" to the customers,
which would cause the provider's initial purchase of those items
to be subject to sales tax. The court noted that there was no
separate charge in its monthly billing for these items to the
provider's customers. See also Department of Revenue v.

Anderson, 403 So.2d 397 (Fla.#1981).

It would be incorrect for Management Company to charge its
guests $7.00 plus tax, and remit to Taxpayer $7.00 less tax, as
this would appear to result in double taxation. However, no
documentation was provided to show that double taxation is
occurring. Furthermore, as stated, the agreement indicates that
the total of a set-up, including the tax, is $7.00.

Management Company should pay $7.00 ($6.58 for rental, plus
$0.42 for tax) to Taxpayer for each beach set-up, and Taxpayer
should remit the tax due out of the $7.00 directly to the
Department of Revenue.

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 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,

Sara D. Faulkenberry
Tax Law Specialist

Technical Assistance and Dispute Resolution
850/414-9838

Control #56502