Were cleaning services for timeshare units, residential common areas, and outdoor resort areas taxable, and how could managers recover tax paid by mistake?

Plain-English summary

Florida found the timeshare-resort cleaning services nontaxable and required any refund of tax paid by mistake to begin with the cleaning vendor. Transient rentals did not turn residential units or their associated common areas into nonresidential facilities for the cleaning-services tax.

The two management companies bought cleaning for individual timeshare units and common areas on behalf of owners. Units were used both by owners and short-term renters, but occupants used them only as temporary residences and could not operate a business there.

Residential units and common areas remained nontaxable

Rule 12A-1.0091 excluded cleaning of residential facilities, including condominiums and timeshare units, from tax. It also covered common areas associated with those residential facilities.

The rule expressly treated a multi-unit structure as residential when each unit was intended as a temporary or permanent private residence. It did not matter that renting the accommodation itself might be taxable under a different statute.

Here, common-area use was limited to owners, residents, tenants, and their invitees, with no separate charge or public access. Florida therefore treated cleaning of the units and associated indoor common areas as nontaxable.

Outdoor cleaning was nontaxable independently

The cleaning-services tax applied to nonresidential buildings. Florida said cleaning outside a building—such as parking lots, outdoor walkways, swimming pools, tennis courts, and playgrounds—was not taxable regardless of whether the outdoor area was associated with a nonresidential building.

The Department did not decide the treatment of restaurant or similar food-service cleaning. No facts showed whether the resorts contained such facilities, and the ruling noted that cleaning them would be nonresidential and taxable.

The customer had to seek its refund from the vendor

When a customer paid tax to a dealer on a nontaxable service, Rule 12A-1.014 required the customer to secure the refund from that dealer rather than directly from the Department of Revenue. The dealer then could seek a state refund or credit after refunding the customer.

If the cleaning provider refused, the manager could request an assignment of the provider's refund rights and apply to the state with that assignment. The TAA said no other option was available.

The three-year period depended on the state filing date

The Department limited a refund or credit to tax remitted within three years measured from when the refund application reached the Department. An earlier demand made only to the vendor did not preserve a longer period for a later state claim.

What this means for you

Timeshare and condominium managers

Separate residential units and associated resident-only common areas from restaurants, stores, or other nonresidential facilities when reviewing cleaning invoices.

Cleaning companies

Do not charge the nonresidential-cleaning tax solely because residential units are rented for short stays. Keep invoice detail showing the areas cleaned.

Accountants and tax professionals

Act quickly on tax charged by mistake. The customer normally needs the vendor to issue the refund, and any vendor or assigned state claim must stay within the applicable filing period.

Common questions

Q: Did transient rental use make timeshare-unit cleaning taxable?
A: No. The units remained temporary residential accommodations.

Q: Were hallways and resident-only recreational common areas taxable?
A: No, under the facts presented.

Q: Were parking-lot and outdoor-walkway cleaning taxable?
A: No. They were outside buildings.

Q: Could the resort manager request the refund directly from Florida?
A: Not initially. It had to seek the refund from the cleaning provider; if refused, it could request an assignment of the provider's refund rights.

Citations and references

• Fla. Stat. § 212.05(1)(i)1.b. — tax on enumerated nonresidential cleaning services
• Fla. Stat. § 215.26 — refunds of tax paid in error and filing deadline
• Fla. Admin. Code r. 12A-1.0091 — nontaxable residential cleaning and taxable nonresidential cleaning
• Fla. Admin. Code r. 12A-1.014 — customer, dealer, refund, credit, and assignment procedures

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 04A-039

Original ruling text

SUMMARY

QUESTION 1: Are cleaning services provided to condominium
units that may be used for transient rentals subject to
tax?

ANSWER - Based on Facts Below: No. Cleaning services
provided to residential buildings, including residential
condominiums and residential timeshare units, and their
associated common areas are not subject to tax. Cleaning
services provided to outside areas, such as parking lots
and outdoor walkways are not subject to tax.

QUESTION 2: If Taxpayer has been paying tax on nontaxable
cleaning services to its vendor, is it due a refund?

ANSWER - Based on Facts Below: Refunds of taxes paid in
error on nontaxable services must be claimed from the
provider of the services, not from the Department of
Revenue. The statute of limitations on claiming refunds is
three years from the date the tax was remitted

Jul 06, 2004

Re: Technical Assistance Advisement 04A-039
Sales and Use Tax - Residential Cleaning Services; Refunds
Sections: 212.05, 215.26, F.S.
Rules: 12A-1.0091, 12A-1.014, F.A.C.
Petitioners: XXX (herein "Taxpayer R")
XXX (herein "Taxpayer S")
FEI: XX

Dear :

This letter is a response to your petition dated April 22, 2004,
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

The petition sets forth the following facts:

1. [Taxpayer R] and [Taxpayer S] manage [resorts] which are
   multiple timeshare developments located in [] Florida.
   Each facility is a timeshare resort operating in accordance
   with the laws of the State of Florida.

2. Each timeshare has formed an Association that operates
   in a similar fashion....

3. The owners are all owners of timeshare interests or fee
   simple interest in units in the condominiums pursuant to
   Florida Statutes.

4. [Taxpayer R] and [Taxpayer S] have entered into
   contractual arrangements to operate and manage the [resort]
   timeshare properties....

5. In accordance with their agreement to manage and operate
   the resort timeshare properties, [Taxpayer S] and [Taxpayer
   R] purchase cleaning services for each timeshare unit and
   the common areas....

6. Each timeshare interest owner pays his or her share of
   the cleaning expenses as part of the assessments made
   against his or her timeshare interest, which share is
   determined by the timeshare interest's appurtenant
   percentage ownership in the timeshare resort and common
   elements.

7. The occupancy units at the timeshare resorts are used
   both for owner occupancy and transient rentals. The
   occupants make the unit their residence on a temporary
   basis and engage in no use other than residential.

8. The documents provide that the Owner of a Unit shall
occupy his unit as a single family private dwelling for
himself, members of his family, his social guests, lessees,
licenses, and invitees. Transient rentals are permitted,
however, the owner, tenant or guest occupying the unit is
not permitted to use the unit for operation of a business,
trade, or other commercial activity.

9. The Resorts consist of multiple buildings containing
   individual units and common elements.

10. The cleaning service is provided to all of the resorts
    in the name of the management company. All monthly
    cleaning bills are received and paid by [Taxpayer R] and/or
    [Taxpayer S] on behalf of the timeshare owners.

11. The cleaning service provided for the individual units
    and common areas is for the care and daily living needs of
    the occupants.

12. The use of the common areas is restricted to owners,
    tenants and invitees of owners or tenants in residence.
    There is no charge for use of any common elements, and they
    are not held out for use by the general public.

13. Cleaning services for the common areas includes:
    hallways, recreational areas, club laundry rooms that house
    coin [operated] machines, clubhouse facilities, outside
    walkways, and parking areas.

REQUESTED ADVISEMENT

The petition poses the following questions:

[1.] Does the fact [that] some of the units are used for
short term or transient rentals have any bearing on the
taxability of the cleaning services?

[2.] Under the specific fact pattern described above, is
[Taxpayer R] required to pay sales tax on the cleaning

services purchased[?]

[3.] If the facts stated above have existed for the past
five years, and the resorts have been paying sales tax to
the cleaning vendor, what options are available to obtain a
refund of sales taxes paid in error?

[4.] If [Taxpayer R] requests a refund from the vendor for
the time allowed under Florida law and the vendor refuses
to give the appropriate refund, what options are available
to [Taxpayer R] to obtain the appropriate refund?

[5.] If [Taxpayer R] requested a refund prior to filing a
TAA and the vendor refused; then following the [issuance]
of the TAA indicating a refund was due, the vendor changes
its position and provides a refund, would the amount due
properly be calculated from the date the original request
was made for a refund from the vendor?

LAW AND DISCUSSION

I. Taxability of Cleaning Services

Section 212.05(1)(i)1.b., Florida Statutes, imposes tax on the
sale of nonresidential cleaning services. The taxable cleaning
services are those enumerated in SIC Industry Group Number 734.
Rule 12A-1.0091, Florida Administrative Code, implements the
statute with regard to the taxability of nonresidential cleaning
services, and it states in pertinent part as follows:

(1)(a) Nonresidential cleaning services are subject to tax.
Nonresidential cleaning services are those services (not
involving repair) rendered to maintain the clean and
sanitary appearance and operating condition of a
nonresidential building, but they do not include cleaning
services provided for tangible personal property....

(b) Residential cleaning services are not taxable. Charges
for cleaning residential facilities used as living
accommodations for persons, such as detached or single
family dwellings, apartments, duplexes, triplexes,

quadraplexes, residential condominiums, residential
cooperatives, residential time-share units, beach cottages,
nursing homes, and mobile home parks, and the common areas
of those residential facilities, are not subject to tax.
Residential facilities include multiple unit structures
where each unit or accommodation is intended for use as a
private temporary or permanent residence, but do not
include a facility that is intended for commercial or
industrial purposes. Charges to clean residential
facilities that provide temporary or permanent residences
are not subject to tax, even though the rental, lease,
letting, or licensing of such living accommodations may be
subject to the tax imposed under s. 212.03, F.S. (Emphasis
Supplied)

Tax is imposed on the cleaning of nonresidential buildings. No
tax is imposed on charges for cleaning "outside" of a building.
Therefore, charges for cleaning parking lots, outside walkways,
and outdoor recreational facilities (swimming pools, tennis
courts, playgrounds, etc.) are not subject to tax regardless
whether they are associated with a nonresidential building.

Residential condominiums and residential time-share units are
considered to be residential for purposes of the imposition of
tax on the sale of nonresidential cleaning services, regardless
whether units are used for transient rental purposes. Based on
the facts stated, the cleaning services for the timeshare units
and the associated common areas are not subject to the tax

No information was supplied concerning whether any restaurant or
similar food service establishment is in the resort. Cleaning
services to such facilities would not be considered residential
cleaning, and charges for cleaning such facilities is subject to
tax.

II. Refunds of Taxes Paid in Error

Section 215.26, Florida Statutes, discusses refunds of taxes
paid in error, and it states in pertinent part as follows:

(1) The Chief Financial Officer may refund to the person

who paid same, or his or her heirs, personal
representatives, or assigns, any moneys paid into the State
Treasury which constitute:

(a) An overpayment of any tax, license, or account due;

(b) A payment where no tax, license, or account is due; and

(c) Any payment made into the State Treasury in error;

and if any such payment has been credited to an
appropriation, such appropriation shall at the time of
making any such refund, be charged therewith. There are
appropriated from the proper respective funds from time to
time such sums as may be necessary for such refunds.

(2) Application for refunds as provided by this section
must be filed with the Chief Financial Officer, except as
otherwise provided in this subsection, within 3 years after
the right to the refund has accrued or else the right is
barred. Except as provided in chapter 198 and s. 220.23, an
application for a refund of a tax enumerated in s. 72.011,
which tax was paid after September 30, 1994, and before
July 1, 1999, must be filed with the Chief Financial
Officer within 5 years after the date the tax is paid, and
within 3 years after the date the tax was paid for taxes
paid on or after July 1, 1999....

(4) This section is the exclusive procedure and remedy for
refund claims between individual funds and accounts in the
State Treasury. (Emphasis Supplied)

Rule 12A-1.014, Florida Administrative Code, implements the
refund procedures with respect to sales and use tax, and it
states in pertinent part as follows:

(3) Whenever a dealer credits a customer with tax on
returned merchandise or for tax erroneously collected, the
dealer must refund such tax to the customer before the
dealer's claim to the State for credit or refund will be
approved.

(4) A taxpayer who has overpaid tax to a dealer, or who has
paid tax to a dealer when no tax is due, must secure a
refund of the tax from the dealer and not from the
Department of Revenue.

(5)(a) Any dealer entitled to a refund of tax paid to the
Department of Revenue may seek a refund by filing an
Application for Refund-Sales and Use Tax (form DR-26S,
incorporated by reference in Rule 12-26.008, F.A.C.) with
the Department. Form DR-26S must meet the requirements of
Sections 213.255(2) and (3), F.S., and Rule 12-26.003,
F.A.C.

1. Form DR-26S, Application for Refund-Sales and Use Tax,
   must be filed with the Department for tax paid on or after
   October 1, 1994, and prior to July 1, 1999, within 5 years
   after the date the tax was paid.

2. Form DR-26S, Application for Refund-Sales and Use Tax,
   must be filed with the Department for tax paid on or after
   July 1, 1999, within 3 years after the date the tax was
   paid.

(b) In lieu of a refund to which the dealer is entitled,
the dealer may take a credit on the dealer's sales and use
tax return within 3 years after the date the tax was paid
in accordance with the timing provisions of Section
215.26(2), F.S. (Emphasis Supplied)

Refunds of tax overpaid to a dealer must be obtained from the
dealer and not from the Department of Revenue. Taxpayer R may
claim a refund of any tax overpaid directly from the cleaning
service provider. The statute of limitations for claiming a
refund is three years, not five. If the cleaning service
provider declines to refund taxes collected in error, Taxpayer R
may request an assignment of rights from cleaning service
provider in order to obtain any refund due directly from the
state. No other options are available.

The Department of Revenue and the Chief Financial Officer will

only grant refunds of taxes overpaid within three years of the
date the taxes were overpaid, based on the date the refund
application is received by the Department of Revenue. The
cleaning service provider can only receive a refund or credit of
taxes it collected in error and remitted within three years,
based on the date it applies for such refund. Likewise, if
Taxpayer R were to obtain an assignment of rights to a refund
from the cleaning service provider, it would only receive a
refund based on the date the refund application and assignment
of rights are received by the Department of Revenue. The
Department of Revenue has no authority over whether the cleaning
service provider should provide a refund of taxes collected in
error to Taxpayer R for a time period in excess of that which
the cleaning service provider could receive a refund or credit
from the Department of Revenue.

CONCLUSION

Cleaning services provided to residential buildings, including
residential condominiums and residential timeshare units, and
their associated common areas are not subject to tax. Cleaning
services provided to outside areas, such as parking lots and
outdoor walkways are not subject to tax.

Refunds of taxes paid in error on nontaxable services must be
claimed from the provider of the services, not from the
Department of Revenue. The statute of limitations on claiming
refunds is three years from the date the tax was remitted.

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

Control #59889