Was a tennis instructor's payment of 25% of lesson and program revenue to a city taxable as consideration for using city courts and facilities?

Plain-English summary

A city gave a tennis professional access to teaching courts, additional courts for programs, office space and equipment, staff support, a phone line, and storage. The instructor collected lesson, clinic, camp, and after-school fees, kept 75%, and paid 25% to the city.

Florida treated the arrangement as a license to use real property. The city's 25% share was taxable percentage rent, and the instructor had to pay tax to the city for the city to collect and remit.

Tennis instruction itself could be a nontaxable service, but that did not exempt the separate payment for courts and other real property.

What this means for you

Revenue sharing can be rent. When a service provider receives the right to occupy or use premises, a percentage of service revenue paid to the property owner may be taxable real-property consideration.

Common questions

Was the 25% city payment taxable? Yes.

Did the instructional nature of tennis lessons create an exemption? No.

Who collected the tax? The city, from the instructor.

Citations and references

• Fla. Stat. §§ 212.02, 212.031, and 212.05, as quoted and discussed in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 10A-033

Original ruling text

SUMMARY
QUESTION: Whether the payment from a tennis instructor, who provides services at a city
park, constitutes payment for the use of real property, and hence is subject to sales tax under
Section 212.031, F.S.
ANSWER: The City is in the business of granting a license for the use of real property. The
percentage of sales received by the City is consideration paid for the use of real property; hence,
it is subject to tax under Section 212.031, F.S.
July 2, 2010
XXX
Re:

Subject: Technical Assistance Advisement (TAA) 10A-033
Sales and Use Tax – Use of Real Property
Sections 212.02, 212.031, and 212.05, Florida Statutes (F.S.)
XXX (Taxpayer)
Bus. Partner #: XXX
SAP Certificate #: XXX

Dear XXX:
This is in response to your letter dated April 2, 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 use of real property. 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
Whether the payment from a tennis instructor, who provides services at a city park, constitutes
payment for the use of real property, and hence is subject to sales tax under Section 212.031,
F.S.
Facts
Taxpayer, a City, entered into an agreement with a tennis instructor (Contractor) for the
Contractor to provide tennis lessons and other services at city-owned tennis courts (Park). The
agreement provides the following in pertinent part:
General Activities
A. Of all monies generated through general daily instructional activities run by the
contracted tennis Pro at [the Park] and other City satellite courts the Contractor will
collect all monies - retain seventy five percent, and remit twenty five percent to the

Technical Assistance Advisement
Page 2 of 4
City….
B. General activities will consist of (but not [be] limited [to]) clinics, lessons, camps,
and after-school programs.
C. The Pro will be responsible for arranging, programming and conducting of all general
activities. City staff will provide the necessary support to assist the Pro in
coordination and scheduling of general activities.
D. The Pro will be responsible for all costs associated with these activities.

The City will provide the following to the Pro:

1. Two teaching courts (one clay court, one hardcourt) as needed. This to be evaluated
   by City Staff and Supervisor from growth of adult programming.
2. Up to six courts as needed for after-school programs (3-7 p.m.) and summer camps
   (9-5 pm), including two teaching courts.
3. Office space and equipment (use of a desk, fax machine, phone[,] refrigerator). The
   Contractor will be held responsible to maintain City office space and equipment in a
   professional and orderly fashion.
4. One phone line for local business calls.
5. Staff support with information distribution, scheduling, and registration for activities.
6. On-site storage space for tennis equipment.
   Requested Advisement
   Taxpayer requests a determination on the following issues:
7. Is the Contractor engaging in the business of renting, leasing, or letting the real
   property from the City?
8. The usage of the real property (owned by the [City]) by the Contractor is for the
   provision of professional tennis services (lessons, clinics, tournaments, etc.) wherein
   the Contractor collects all fees (payments) and then remits the stated percentage of
   sales to the City. Are these percentage of sales payments to the City subject to the
   state sales tax and county surtax?
9. Would the Contractor on the basis of providing the professional services listed as
   tennis services, lessons, clinics, tournaments, etc., be exempt from sales tax on the
   percentage of sales payments because the professional services might be considered
   instructional and/or for training purposes?
   Applicable Authority and Discussion
   Section 212.031(1)(a), F.S., provides 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 ….” “Person” includes any individual and any political subdivision, municipality, state
   agency, bureau, or department. Section 212.02(12), F.S. “Business” means “any activity
   engaged in by any person, or caused to be engaged in by him or her, with the object of private or
   public gain, benefit, or advantage, either direct or indirect.” Section 212.02(2), F.S. Hence, in
   this case, the City, rather than the Contractor, is the person engaging in the business of granting a

Technical Assistance Advisement
Page 3 of 4
license for the use of real property.
Section 212.031, F.S., taxes the separate and distinct privilege of leasing or licensing real
property. A license is defined as, “the granting of a privilege to use or occupy a building or a
parcel of real property for any purpose.” Section 212.02(10)(i), F.S. Tax is due on the total
consideration “for the granting of a privilege to use or occupy real property for any purpose and
shall include base rent, percentage rents, or similar charges.” Section 212.031(1)(c), F.S. Here,
the Agreement between the Pro and the City states that the City will provide the Pro with two
teaching courts, up to six courts as needed for after-school programs, office space and
equipment, and on-site storage space for tennis equipments. The Agreement clearly shows that
the Pro is granted the right to occupy City’s real property for the purpose of conducting his
tennis business; hence, the percentage of sales payments made to the City is consideration paid
for the use of real property, and is subject to state sales tax and county surtax.
As stated above, Section 212.031, F.S., is a separate and distinct taxable privilege from the
taxable privilege of selling tangible personal property imposed by Section 212.05, F.S.
Although instructional and/or training fees are not taxable under Section 212.05, F.S., because
they are not for the sale of tangible personal property, the amount paid by the Pro to the City is
not excluded from sales tax under Section 212.031, F.S. Section 212.031, F.S., simply imposes a
tax on consideration paid to use real property for any purpose, and it does not exclude rental
considerations paid for properties that are used for nontaxable services.
In this case, the Contractor shall pay the tax imposed on the rental or license fee to the City.
Section 212.031(2)(a), F.S. The City is responsible for collecting and remitting the tax to the
Department. Section 212.031(3), F.S.
Conclusion
The City is in the business of granting a license for the use of real property. The percentage of
sales received by the City is consideration paid for the use of real property; hence, it is subject to
tax under Section 212.031, F.S.
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

Technical Assistance Advisement
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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: 81719