What share of rent for a mixed-use, 36,000-square-foot assisted living facility was subject to Florida sales tax?

Plain-English summary

Florida ruled that only 1.12% of the rent for a 36,000-square-foot assisted living facility was subject to sales tax.

The for-profit operator used the property primarily as residences for aged residents and to provide their care, including club, health and wellness, transportation, food, housekeeping, and other services depending on membership level. Florida's mixed-use rule exempted the portion used for residential units and resident care.

Under the updated plans, the only commercial space was a 404-square-foot beauty shop. Dividing that area by the total leased space produced the 1.12% taxable share. The Department did not independently verify the measurements; it approved the methodology based on the submitted figures and plans.

What this means for you

A for-profit aged-care facility can allocate rent between exempt residential/care space and taxable commercial space by square footage. Current, supportable floor plans and accurate use classifications are essential.

Common questions

Was the entire lease exempt? No. The beauty shop was taxable commercial space.

How much rent was taxable? 1.12%, based on 404 taxable square feet out of 36,000.

Did Florida verify the measurements? No. The ruling was limited to the allocation method using the submitted figures.

Citations and references

• Fla. Stat. §§ 212.03 and 212.031, 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-020

Original ruling text

SUMMARY
QUESTION: What percentage of a 36,000 square feet lease of an assisted living facility used to
provide care for its residents is exempt from sales/use tax?
ANSWER: Section 212.031(1)(b), F.S., provides that “[t]he portion of the premises leased or
rented by a for-profit entity providing a residential facility for the aged will be exempt on the
basis of a pro rata portion calculated by combining the square footage of the areas used for
residential units … and dividing the resultant sum by the total square footage of the rented
premises….” Based on the figures and floor plans provided, the only taxable area is the area
used for the beauty shop, and 1.12% of the rent is subject to sales tax.
April 19, 2010
XXX
XXX
XXX
XXX
Re:

Subject: Technical Assistance Advisement (TAA) 10A-020
Sales and Use Tax – Real Property Lease: Assisted Living Facility
Section 212.031(1), Florida Statutes (F.S.)
Rule 12A-1.070, Florida Administrative Code (F.A.C.)
XXX (Taxpayer)
FEI #: XXX

Dear XXX:
This is in response to your letter received March 4, 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 real property 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 percentage of a 36,000 square feet lease of an assisted living facility is exempt from
sales/use tax?
Facts
Taxpayer entered into a lease agreement for an assisted living facility on December 17, 2007.
The lease term is for five years, from January 1, 2008, to December 11, 2012. The leased
property consists of a 36,000 square foot two-story building (excluding one office within the
building being leased to a related entity). The building consists of a thirty-bed assisted living
facility and a private clubhouse.

Technical Assistance Advisement
Page 2 of 4
The floor plans provided by Taxpayer show that the facility contains a bank, a market, and a
beauty shop; however, Taxpayer stated that the floor plans were for the initial usage and are
outdated. Taxpayer provided an updated schematic of the current usage of the floor plans, which
no longer include the bank or the market. The current schematic still has a beauty shop.
The lease provides that Taxpayer is to provide services to the residents at the assisted living
facility, regulated under Chapter 400 of the Florida Statutes. The services provided depend on
which of the four club memberships the resident chooses. The membership choices, from the
most basic to the most extensive services, are Basic Club Membership, Limited Club
Membership, Social Club Membership, and Full Club Membership. All four memberships
provide the members with club privileges, with access to all club facilities, health and wellness
services, social and recreational services, transportation services, and food/meal services.
Except for the Basic Club Membership, all the memberships also include housekeeping and
maintenance services, such as weekly maid service and laundry service.
In addition to the Club Membership services included in the resident’s plan, the residents may
also pay for additional services offered at the facility. For example, the residents may pay for
additional meals not included in their membership, business services, such as photocopies and
notary services, and beauty, barber, and spa services provided by independent contractors.
Requested Advisement
Taxpayer requests that the Department determine what portion of the 36,000 square feet lease of
the assisted living facility is subject to sales tax.
Applicable Authority and Discussion
The Department has not verified the square footage of the figures that were provided. This
response is limited to the methodology you are using to calculate the taxable portion of the
Taxpayer’s lease agreement.
Section 212.031(1)(a), F.S., imposes sales tax on the privilege of engaging in the leasing of, or
the granting of a license to use real property, with specified exemptions. Subparagraph 2.
exempts the lease of real property “[u]sed exclusively as dwelling units.” Properties that are
used as dwelling units are taxed under Section 212.03, F.S. Section 212.03(7)(a) [last sentence],
F.S., provides that the tax “shall not apply to or be imposed upon or collected on the basis of
rentals to any person who resides in any building or group of buildings intended primarily for
lease or rent to persons as their permanent or principal place of residence.” In this case,
Taxpayer entered into the lease primarily to lease or rent the rooms to seniors and to provide the
seniors with various services.

Section 212.031(1)(b), F.S., provides the following:

Technical Assistance Advisement
Page 3 of 4
When a lease involves multiple use of real property wherein a part of the real property is
subject to the tax herein, and a part of the property would be excluded from the tax under
… subparagraph (a)(2)., … the department shall determine, from the lease or license and
such other information as may be available, that portion of the total rental charge which
is exempt from the tax imposed by this section. The portion of the premises leased or
rented by a for-profit entity providing a residential facility for the aged will be exempt on
the basis of a pro rata portion calculated by combining the square footage of the areas
used for residential units by the aged and for the care of such residents and dividing the
resultant sum by the total square footage of the rented premises…. (Emphasis Added.)
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
Entire square footage of the lease

= Taxable rent

In this case, the total leased space is 36,000 square feet. According to the floor plans and the
updated schematic provided by the Taxpayer, the only area used for commercial purposes is the
beauty shop. There are no unimproved grounds surrounding the nursing home. Hence, the
taxable area is the area used for the beauty shop, which measures approximately 23’2” x 20’2”
or 404 square feet. Applying the usage information provided by you, the following percentage
of the rent is taxable:
404 sq-ft-used for the beauty shop
36,000 sq ft on entire lease

= 1.12% of the total rent is taxable.

Conclusion
Based on the figures and floor plans provided, the only taxable area is the area used for the
beauty shop, and 1.12% of the rent is subject to sales 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 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

Technical Assistance Advisement
Page 4 of 4
letter.
Sincerely,

Angel Sessions
Senior Tax Attorney
Technical Assistance and Dispute Resolution
(850) 922-4708
Record ID: 79900