Were airport concession fees and required improvements taxable as rent for Florida sales-tax purposes?

Plain-English summary

An airport ground-transportation concessionaire paid fees based on passenger counts and a minimum annual guarantee. Its agreement also required it to install improvements that generally became the county airport's property when the agreement ended.

Florida found that the concession fees were privilege, franchise, concession, or business-license fees paid to an airport. Section 212.02(10)(j) excluded those payments from rent or license payments for real property, so they were not taxable under section 212.031.

The required capital improvements were treated differently. Because they were a condition of occupancy and remained with the airport after the agreement, their value was rent consideration subject to sales tax.

What this means for you

An airport agreement can contain both excluded concession fees and taxable noncash rent. Each obligation must be classified by what it pays for and whether required improvements revert to the airport.

Common questions

Were the passenger-based concession fees taxable as commercial rent? No. They fell within the statutory exclusion for airport privilege, franchise, concession, and business-license fees.

Were required improvements taxable? Yes. Their value was taxable rent consideration because the agreement required them and title passed to the airport when the agreement ended.

Did the ruling treat all improvements identically? It addressed the required improvements described in the agreement that became the county's property, subject to the agreement's removal provision.

Citations and references

• Fla. Stat. § 212.02(10)(j) (airport privilege, franchise, concession, and business-license fees)
• Fla. Stat. § 212.031 (tax on renting, leasing, or licensing real property)
• Fla. Admin. Code r. 12A-1.070 (leases and licenses of real property)
• Department of Revenue v. Seminole Clubs, Inc., 745 So. 2d 473 (Fla. 5th DCA 1999)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 06A-024

Original ruling text

SUMMARY
QUESTION: Whether "concession fees" paid to Airports under a concession agreement are subject to tax under
section 212.0361, F.S.?
ANSWER: No. Pursuant to Section 212.02(10)(j), F.S., privilege, franchise, or concession fees, or fees for a license to
do business, paid to an airport, are not payments for leasing, letting, renting, or granting a license for the use of real
property. Therefore, these fees are not subject to sales and use tax under Section 212.031, F.S.
However, capital improvements required by a lease agreement as a condition of occupancy that remain with the
lessor after the term of the lease would be considered "rent consideration" for purposes of 212.031, F.S. As such, the
value of the improvements would be subject to sales tax under 212.031, F.S.

August 8, 2006

Re: Technical Assistance Advisement 06A-024
XXX ("Taxpayer")
FEIN: XX
Concession Fees Paid to Airports
Sales and Use Tax
Sections 212.02(10)(j) and 212.031, Florida Statutes ("F.S.")
Rule 12A-1.070, Florida Administrative Code ("F.A.C.")
Dear :
This response is in reply to your letter dated XX and additional information provided on XX, requesting the
Department's issuance of a Technical Assistance Advisement ("TAA") pursuant to Section 213.22, F.S., and Rule
Chapter 12-11, F.A.C., regarding the Department's position on the issue of concession fees paid to airports. An
examination of your letter 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 "concession fees" paid to XXX("Airport") under a concession agreement would be subject to tax under
section 212.031, F.S.
FACTS
XXX by and through its Department of Airports owns and operates Airport. The "Airport Ground Transportation
Concession Agreement" ("concession agreement") in question originated when Taxpayer responded to County's

public solicitation for proposals for airport ground transportation services. The bidding opened on XX. Taxpayer's
proposal was accepted, and the parties subsequently entered into the concession agreement in question.
The pertinent Articles of the concession agreement provide, in part:
Article 4 - Premises and Privileges
4.01 Assigned Premises. County hereby grants Concessionaire a license to: (i) use the XXX Areas for the installation,
operation and maintenance of XXX or Ground Transportation Service Desks; and (ii) use the Passenger Loading
Areas for the loading and unloading of Airport passengers and their baggage. Concessionaire acknowledges and
agrees that this Agreement is an agreement for services and nothing in this Agreement shall be construed as granting
Concessionaire any title, interest or estate in the Assigned Premises....
4.02 Holding Area. County may enter an addendum to this Agreement, in the form attached hereto as Exhibit A
("Addendum"), to provide Concessionaire with a license to use a Holding Area within the Airport for the staging of
Concessionaire's vehicles while waiting to be dispatched by the Terminal Dispatchers. The Director of Purchasing
may execute the Addendum on behalf of County.
4.03 Use of Public Areas. In addition to the license to use the Assigned Premises granted to Concessionaire pursuant
to Article 4.01, County hereby grants to Concessionaire:
(A) the nonexclusive right to use the public areas within the Terminal for Concessionaire, its Employees, contractors,
patrons, invitees suppliers of service and agents in connection with its operations hereunder. For purposes of this
paragraph, "Public Areas" means the public corridors, restrooms and other areas within the Terminal that the general
public has the right to access....
(B) the nonexclusive right of ingress to and egress from the Terminal over and across public roadways and walkways
serving the Airport for Concessionaire and its Employees, contractors, patrons, invitees, suppliers of service and
agents in connection with its operations hereunder....
Article 5 - Concession Fees and Accountability
5.01 Concession Fees. In consideration of the Concession privileges and rights granted herein, Concessionaire shall
pay to County Concession Fees in accordance with this Article 5. Concessionaire acknowledges that County reserves
the right to negotiate an increase in Concession Fees payable to County during the Renewal Term.
5.02 Per Capita Charge and Minimum Annual Guarantee
(A) The Per Capita Charge shall be XXX multiplied by the total number of Deplaned Passengers each month
("Monthly Per Capita Payment")
(B) The Minimum Annual Guarantee for the first Contract Year shall be XX ("Minimum Annual Guarantee"). The
Minimum Annual Guarantee may be adjusted in each subsequent Contract Year by Department based upon the

number of Deplaned Passengers in the preceding Contract Year; provided, however, the Minimum Annual Guarantee
shall never be decreased to an amount less than the first Contract Year's Minimum Annual Guarantee and shall never
be increased to an amount more than Per Capita Charge multiplied by the total number of Deplaned Passengers
during the preceding Contract Year.
(C) Except as otherwise provided for in Article 5.03, Concessionaire shall pay the Minimum Annual Guarantee to the
County in equal monthly installments of XX the Minimum Annual Guarantee.... In the event the Monthly Per Capita
Payment is greater than the Minimum Monthly Guarantee for the same month, the Department shall invoice
Concessionaire for the difference between the Monthly Per Capita Payment and the Minimum Monthly Guarantee....
5.03 Abatement of Minimum Annual Guarantee. In the event the number of Deplaned Passengers at the Airport
during any calendar month is less than XX percent (XX%) of the number of Deplaned Passengers in the same month
in the base calendar year of 2004, Concessionaire shall be required to pay only the Monthly Per Capita Payment....
5.04 Per Capita Charge Adjustment. For each percent, or fraction thereof, increase in Concessionaire's fares and
rates, which requires prior Department approval, the Per Capita Charge shall be increased concurrently by the same
percentage....
5.05 Unpaid Fees. In the event Concessionaire fails to make payment of any fees or charges when due and payable
in accordance with the terms of this Agreement, interest at the rate established from time to time by the Board
(currently set at XX (XX%) per month, which shall not exceed XX percent (XX%) per annum), shall accrue against the
delinquent payment(s) from the date due until the date payment is received by Department....
5.06 Sales and Use Tax. Concessionaire shall pay monthly to County any sales, use or other tax or any imposition in
lieu thereof (excluding state and/or Federal Income Tax) now or hereafter imposed upon the rents, use or occupancy
of the Assigned Premises imposed by the United States of America, the State of Florida, or XXX County,
notwithstanding the fact that the statute, rule, ordinance or enactment imposing the same may endeavor to impose the
tax on County.

Article 7 - Construction of Improvements
7.01 Installation of XXX. Concessionaire shall, at its sole cost and expense, install XXX (XX) XXX within each of the
XXX (XX) XXX Areas. The XXX shall be of a size, shape, appearance, and quality customary for this sort of operation
and in accordance with good business practice, industry standards, and all applicable laws, rules, and regulations.
Prior to the installation of the XXX in the XXX Areas, Concessionaire shall obtain Department’s approval of each XXX
as to size, shape, appearance, and quality.
7.02 Improvements, Alterations or Additions. Concessionaire shall make no improvements, alterations, or additions to
the Assigned Premises without Department's prior written approval, which approval may be granted or withheld by
Department in its sole discretion for any reason or no reason at all.

7.03 Construction Requirements. All improvements made by Concessionaire to the Assigned Premises shall be of
high quality, shall meet all applicable federal, state, and local laws, regulations, rules, and requirements and shall
follow standard construction methods. Prior to the commencement of construction, one (1) full and complete set of
plans and specifications for all improvements shall be submitted to Department for approval, which approval may be
granted or withheld in Department's sole discretion. All improvements shall be completed in accordance with
construction standards established by Department and the plans and specifications approved by Department.
7.04 Construction Bonds. Concessionaire shall ensure that all improvements are constructed to completion in
accordance with the approved plans and specifications and that all persons or entities performing work or providing
materials relating to such improvements including, but not limited to, all contractors, subcontractors, subsubcontractors, laborers, materialmen and suppliers are paid in full for such services and materials. Concessionaire,
at its sole cost and expense, shall cause to be made, executed and delivered to County prior to commencement of
any improvements, a bond, drawn in a form and issued by a company approved by County, guaranteeing compliance
by concessionaire of its obligations arising under this Article 7.

Article 8 - Title to Improvements
8.01 Title to Improvements. All improvements constructed or placed upon the Assigned Premises, excluding
furnishings, trade fixtures and equipment shall become the absolute property of County upon termination or expiration
of this Agreement and County shall have every right, title, and interest therein, free and clear of any liens, mortgages
and other encumbrances. Notwithstanding the foregoing, County may require Concessionaire, at Concessionaire's
sole cost and expense, to remove all, or a portion, of the improvements and to restore the Assigned Premises to its
original condition, reasonable wear and tear expected, within (30) Days of the expiration or termination of this
Agreement.
8.02 Evidence of Transfer of Ownership. Upon the request of County, Concessionaire shall provide County with a bill
of sale or other evidence of the transfer of ownership of the improvements together with evidence satisfactory to
county that the improvements are free from liens, mortgages and other encumbrances.

Article 16 - Laws, Regulations, Permits and Taxes
16.04 Payment of Taxes. Concessionaire shall pay any and all taxes and other costs lawfully assessed against its
interest in the Assigned Premises, improvements, and operations under this Agreement....
TAXPAYER’S POSITION
Your letter of March 14, 2006 provides, in part:

It is our position that subsection (10) of s. 212.02, F.S., amending paragraph (j) excludes sales tax in a concession fee
paid for a license to do business when paid to an airport and therefore we request that a Technical Assistance
Advisement be issued that states that in the Concession Agreement between [Taxpayer] and County that sales tax
need not be collected for the right to do business pursuant to the concession agreement.

APPLICABLE STATUTES AND RULES
Section 212.02, F.S., provides, in pertinent part, the following:

(10) "Lease," "let," or "rental" mean leasing or renting of living quarters or sleeping or housekeeping accommodations
in hotels, apartment houses, roominghouses, tourist or trailer camps and real property, the same being defined as
follows:...

(j) Privilege, franchise, or concession fees, or fees for a license to do business, paid to an airport are not payments for
leasing, letting, renting, or granting a license for the use of real property.

Section 212.031, F.S., provides, in pertinent part, the following:
(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....

DISCUSSION/CONCLUSION
Having reviewed the information provided with your Technical Assistance Advisement request, it has been determined
that the "concession fees" provided for in Article 5 of the contract cited in the "facts" above are "[p]rivilege, franchise,
or concession fees, or fees for a license to do business, paid to an airport" pursuant to Section 212.02(10)(j), F.S., and
as such, are "not payments for leasing, letting, renting, or granting a license of the use of real property." Therefore,
these fees are not subject to sales and use tax under Section 212.031, F.S.
However, Florida courts have recognized that capital improvements, required under a lease as a condition of
occupancy and remaining with the lessor after the term of the lease, are a form of rent consideration subject to Florida
sales tax under Section 212.031, F.S. See Department of Revenue, State of Florida v. Seminole Clubs, Inc., 745
So.2d 473 (Fla. 5th DCA, 1999).
Pursuant to Articles 7 and 8 of the contract cited in the "facts" above, Taxpayer is required to make certain real
property improvements to the premises in question and such improvements "... become the absolute property of
County upon termination or expiration of [the] [a]greement." Therefore, sales tax is due under Section 212.031, F.S.,

on the value of the required capital improvements made by the Taxpayer.
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 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,
Melissa Soriano
Attorney
Technical Assistance and Dispute Resolution
(850) 922-4839
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