What percentage of rent for a mixed-use port-authority lease was subject to Florida sales tax?

Plain-English summary

Florida ruled that 44.55% of a tenant's rent under a 12.12-acre port-authority lease was subject to sales tax as of October 1, 2009.

Florida exempted port property used exclusively for oceangoing vessels to dock or to load or unload cargo. The tenant used 5.86 acres to unload and temporarily hold aggregate from vessels and 0.86 acres for an operating cement dome and its equipment and electrical rooms. Those 6.72 acres qualified for the exclusion.

Florida treated the remaining 5.40 acres as taxable under the submitted uses, which included railroad right-of-way and outbound loading areas for trucks and railcars. Dividing taxable acreage by total acreage produced the 44.55% rent allocation.

The Department did not verify the acreage and limited its response to the reasonableness of the allocation method.

What this means for you

Port location alone does not exempt an entire lease. The property must be used exclusively for the qualifying vessel and cargo activities, and mixed-use rent must be reasonably allocated.

Common questions

How many acres were exempt? 6.72 of 12.12 acres.

What percentage of rent was taxable? 44.55%.

Did the Department verify the acreage? No.

Citations and references

• Fla. Stat. §§ 212.031 and 315.02, and Fla. Admin. Code r. 12A-1.070, as quoted and discussed in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 10A-019

Original ruling text

SUMMARY
ISSUE: What portion of the Taxpayer’s rent payments will be subject to sales tax under section
212.031, F.S.?
Response: Section 212.031(1)(b), F.S., and Rule 12A-1.070(14)(a), F.A.C., provide that the
Department shall identify those portions of “rent” that are taxable and those that are tax-exempt.
In reaching this determination, the Department must develop a case-by-case approach that is
reasonable. There are several approaches that may be used to reach a reasonable determination.
Which approach is most reasonable is a decision that must be made depending on the facts and
circumstances of the individual taxpayer.
April 2, 2010
XXX
XXX
XXX
XXX
Re:

Subject: Technical Assistance Advisement (TAA) 10A-019
Sales and Use Tax – Taxable Portions of a Port Authority Lease
Sections 212.031, 315.02, Florida Statutes (F.S.)
XXX (Taxpayer)
FEI #: XXX

Dear XXX:
This is in response to your letter dated February 8, 2010, requesting this Department’s issuance
of a Technical Assistance Advisement (“TAA”) pursuant to section 213.22, F.S., and Rule
Chapter 12-11, F.A.C., concerning the taxable portions of a port authority lease. An examination
of your letter has established you have complied with the statutory and regulatory requirements
for issuance of a TAA. Therefore, the Department is hereby granting your request for a TAA.
Issue
What portion of the Taxpayer’s rent payments will be subject to sales tax under section 212.031,
F.S.?
Facts
The taxpayer leases property from the XXX (Authority) in connection with its activity of
unloading dry cement and sand, gravel and stone from oceangoing cargo vessels that is
subsequently distributed to its customers. The total acreage of the Ground Lease Agreement is
12.12 acres. Your letter dated February 8, 2010, provides the following in pertinent part:
The leased area consists of three distinct areas as follows.…:

Technical Assistance Advisement
Page 2 of 4
1) Unloading or Loading Oceangoing Vessels: This area measures 354.756 square feet
or 8.14 acres. It is comprised of two areas. The first area, measuring 255.281 square
feet, or 5.86 acres, known as the Aggregate Facility, is used for unloading aggregate
materials from oceangoing vessels and held until it can be shipped to customers. The
second area, measuring 99.475 square feet or 2.28 acres, is the location of the Domes
where the dry cement is unloaded from the oceangoing vessels and held until it can be
shipped to customers.
On January 24, 2006, the … County authorized and issued a permit for the
construction of three domes for the unloading and temporary storage of dry cement.
The domes are used to hold the dry cement as it is discharged from an oceangoing
vessel until it is transferred to the Cement Outbound Loading Area. Dome # 1 was
placed into service when the first oceangoing vessel arrived on December 7, 2006.
Adjacent to Dome # 1 is an equipment room and an electrical room. The electrical
room supplies power distribution to power the ship unloading equipment and related
equipment which is located in the equipment room and on the equipment room roof,
and to the dock/dome area for shipside safety and security lighting. The electrical
room distributes power to [the] equipment room for a) air blowers for the dome which
are used to level the dome cargo in preparation for unloading the vessel or after the
vessel[‘s] departure to manipulate the material in the dome and b) one of two
compressors which supply transport air to move the material away from the dome
over to the Cement Outbound Loading building. The area where Dome #1 and the
equipment and electrical rooms are located measures 37.656 square feet, or .86 acres.
Future Dome #2 and Future Dome #3 have had preliminary development that was
completed on October 18, 2007. The square feet for the locations of Future Dome #2
measures 31.475 square feet or .72 acres and Future Dome #3 measures 30.5444
square feet, or 0.70 acres….
2) Railroad Right of Way: This area measures 0.41 acres. It is used for the movement of
railroad cars.
3) Aggregate Outbound Loading Area and Cement Outbound Loading Area: This area
measures 3.57 acres. It is used for the outbound loading of the dry cement as well as
aggregate materials onto railroad cars and trucks. Located within this area are a rail
yard with several railroad tracks, a two story building housing loading equipment
with an attached silo, and a trailer used as the administrative office for the onsite
operations.
Requested Advisement
Taxpayer requests that the Department review the facts provided above, and then advise the
Taxpayer which portions of the rental payments are subject to Florida sales tax on the applicable
property as of October 1, 2009, when the Aggregate Facility became operational.
Applicable Authority and Discussion

Technical Assistance Advisement
Page 3 of 4
The Department has not verified the square footage of the figures that were provided. This
response is regarding the methodology you are using to calculate the taxable portion of the
Taxpayer’s lease agreement.
Section 212.031(1)(a), F.S., provides that “the business of renting, leasing, letting, or granting a
license for the use of any real property” is a taxable privilege. However, section 212.031(1),
F.S., provides the following in part:
(a) … unless such property is:

8.a. Property used at a port authority, as defined in s. 315.02(2), 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….
(Emphasis Added.)
Section 212.031, F.S., imposes the tax on the total rent or license fee charged for such real
property by the person charging or collecting the rental or license fee. However, section
212.031(1)(a)8., F.S., excludes real property “used at a port authority … exclusively … for the
purpose of loading or unloading passengers or cargo onto or from such a vessel….” The facts
provide that Taxpayer’s lease is for real property located at a port authority, as defined in section
315.02(2), F.S.; therefore, under this lease, the real property exclusively used for the purpose of
loading or unloading passengers or cargo onto or from vessels is excluded from sales tax.
Rule 12A-1.070(14)(a), F.A.C., authorizes the Department to determine the taxable portion of
the total rent payment when, in a lease of real property, there are multiple uses of such property
and a portion of the property is subject to the tax while another portion is not subject to the tax.
The following equation is a reasonable method useful for calculating the taxable portion of a
lease payment under a lease for multiple use property:

Total rent or license fee *

Taxable square footage used
Entire square footage of the lease

= Taxable rent

In this case, Taxpayer leased a total of 12.12 acres from Authority. According to the facts you
provided, the Aggregate Facility of 5.86 acres was put into service on October 1, 2009, for
unloading sand, gravel, and stone directly from the oceangoing vessels and to be held until it can
be shipped to customers. Dome #1, the adjacent equipment room, and electrical room, is 0.86
acres. Dome # 1 and the adjacent rooms were placed into service prior to October 1, 2009, for
the unloading and temporary storage of dry cement. Applying the usage information provided
by you, the following percentage of the rent is taxable:
(12.12 acres – 6.72 acres)
12.12 acres

= 44.55% of the total rent is taxable.

Technical Assistance Advisement
Page 4 of 4
Conclusion
Based on the figures provided, a taxable percentage of 44.55% of the rent is subject to sales tax
as of October 1, 2009.
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 that 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,

Angel Sessions
Senior Tax Attorney
Technical Assistance and Dispute Resolution
(850) 922-4708
Record ID: 79061