Did a commercial landlord have to remit rental sales tax when its tenant paid rent but refused to pay the tax?

Plain-English summary

The Florida Department of Revenue concluded that a commercial landlord remained liable for sales tax on rent received when the tenant refused to pay the tax and did not prove an exemption.

Florida requires the lessor to charge tax in addition to rent when the rental payment is received. The tax is a debt from the tenant to the landlord, but a dealer that fails to collect it is also personally liable to the Department.

The tenant's assertion that it was exempt as a mobile communications service was unsupported in the materials reviewed. Rent paid into a court registry also did not avoid the tax; if released without a separate tax amount, the rental proceeds were to be treated as including the tax.

What this means for you

Commercial landlords

Do not stop collecting tax based only on a tenant's assertion. Obtain and retain evidence establishing the claimed exemption.

Tenants

Withholding the tax does not resolve the dispute; the amount remains recoverable by the landlord as a debt under the statute cited in the ruling.

Common questions

Q: Was the landlord liable when the tenant refused to pay tax?
A: Yes.

Q: Did paying rent into a court registry make it exempt?
A: No.

Citations and references

• Fla. Stat. §§ 212.031, 212.07(2) and (3), and 213.22
• Florida Revenue Commission v. Maas Brothers, Inc., 226 So. 2d 849 (Fla. 1st DCA 1969)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 13A-010

Original ruling text

Executive Director
Marshall Stranburg

SUMMARY

TAX: Sales and Use Tax
TAA NUMBER: 13A-010
QUESTION: Is the Landlord required to remit the sales tax due for the rental payments
received from the Tenant when the Tenant does not pay the applicable sales tax?
ANSWER: Section 212.07(3), F.S., provides that, in addition to other sanctions, a dealer who
does not collect the tax is liable for the tax itself. Thus, the Landlord is liable for any applicable
sales tax that it fails to collect from the lessee when the rental payments are received by the
Landlord.
May 6, 2013
Re:

Subject: Technical Assistance Advisement – TAA 13A-010
Sales and Use Tax – Commercial Rental
Sections 212.031 and 212.07, Florida Statutes (F.S.)
XX (“the Landlord”)
FEI # XXX
XX (“the Tenant”)
FEI # XXX

Dear Mr. XXX:
This is in response to your letter dated XXX, 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 Landlord’s obligation to remit the sales tax due for the rental
payments received from the Tenant when the Tenant does not pay the applicable sales tax. 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.
Facts
Your letter provides the following in part:
Consistent with relevant statutory requirements governing the collection and remittance
of such Sales Taxes [the Landlord] has requested [the Tenant] to remit sales taxes due
with its payments of monthly base rent; and [the Landlord] has previously remitted such
taxes on prepaid installments of base rent. Despite [the Landlord’s] requests, [the
Child Support Enforcement – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – James McAdams, Director  Information Services – Tony Powell, Director

www.myflorida.com/dor
Tallahassee, Florida 32399-0100

Technical Assistance Advisement
Page 2 of 6
Tenant] has refused to remit sales tax with its payments of rent and has steadfastly
claimed that it is exempt from such payments as a “mobile communications service” as
defined under Section 202.11(7)[, F.S.] This issue is one of a number of issues that are
currently the subject of a lawsuit between [the Tenant] and [the Landlord], and as of this
date, [the Tenant] remits payments of base rent (but not sales tax on that amount) into the
registry of the court. [The Landlord] is . . . spending unnecessary time and resources to
protect itself from its liability to [the] Department to collect sales taxes on rent that it
receives, when the tenant refuses to pay that tax based upon its contention that it is
exempt. [The Landlord]
. . . wants to ensure that [it is] taking proper measures with respect to the collection of
any sales taxes that may be due to [the State] on base rent [collected] in the future
from[the Tenant]. [The Landlord] also desires to receive the base rent that has thus far
been placed into the registry of the court without liability to the Department . . . .
Along with the request for advisement, the Landlord provided a copy of the Industrial Lease
Agreement (the Agreement), executed on February 21, 2012, between the Landlord and Tenant.
The Landlord also provided a copy of the referenced Court Order, dated February 14, 2013,
whereby the Tenant is required to remit the unpaid accrued rent and subsequent monthly rental
payments into the court registry.
The Agreement provides the following in part:
. . . 4. Rent.
4.1 Base Rent. . . . Tenant shall pay Landlord, as monthly Base Rent, without any offset
or deduction the amount of $8,947 + the amount of Florida Sales Tax then applicable
(currently 7.0%). Commencing on the 1st day of the first anniversary date of the
Commencement Date, Tenant shall pay Landlord, as monthly Base Rent, without any
offset or deduction, the amount of $9,760.00+ the amount of Florida Sales Tax then
applicable (currently 7.0%). Commencing on the 1st day of the second anniversary date
of the Commencement Date, Tenant shalt pay Landlord as monthly Base Rent, without
any offset or deduction the amount of $10,573.00 + the amount of Florida Sales Tax then
applicable (currently 7.0% ). . . . Tenant represents that it is entitled an to an exemption
from payment of the amount of Sales Tax on rent pursuant to Florida Statute 212.032,
and intends to apply for a Certificate of Exemption from the Florida Department of
Revenue to evidence its tax exempt status. In light of the foregoing, Landlord agrees that
it shall collect sales tax due as aforesaid on any Base Rent due hereunder until Tenant
produces its Certificate to Landlord, and thereafter such amounts will not be collected.
Tenant shall apply directly to the Department of Revenue for reimbursement of any sales
taxes that are collected and remitted prior to the confirmation of its tax exemption and
will indemnify Landlord from payment of any tax that may be due to the Department of
Revenue, if any, hereunder.

Technical Assistance Advisement
Page 3 of 6

6. Use and Condition of Premises. The Premises shall he used and occupied only as a
   data center and co-location facility and for no other purpose. . . .
   The Court Order, dated February 14, 2013, provides the following in part:
   Ordered and Adjudged as follows:
7. The Defendant’s Motion is granted on the terms hereinafter set forth. Without
   prejudice to either party’s position at trial, the Court determines that the Defendant shall
   pay $44,735.00 as accrued rent through February, 2013. On or before 2:00 p.m. on
   Thursday February 14, 2013, the Defendant shall deposit $21,000.00 into the court
   registry, and serve on Plaintiff’s counsel a receipt for the deposit. On or before 12pm,
   Tuesday, February 19, 2013, the Defendant shall deposit $22,735 into the Court Registry,
   and serve on Plaintiff’s counsel a receipt for the deposit. . . .
8. In the event the Defendant timely deposits the amount set forth in paragraph 1, then on
   or before March 1, 2013, and on or before the first of every month thereafter during the
   pendency of this action, the Defendant shall timely deposit into the court registry, and
   simultaneously furnish a receipt evidencing the deposit to Plaintiff’s counsel, the sum of
   $9,760.00. . . .
   The Landlord previously requested and received a Letter of Technical Advice, dated November
   15, 2012, regarding the Tenant’s claim that it is exempt from paying sales tax for the lease of real
   property “pursuant to Florida Statute 212.032.” After review of the facts provided with the
   originally request, as well as reviewing the Tenant’s website, the author determined that the
   Tenant’s lease real property is subject to sales tax pursuant to section 212.031, F.S.
   It is important to note that the Department is unaware whether the Tenant has requested any
   advisement regarding its purported exempt status as provided in the Agreement. Florida courts
   have consistently held that exemptions must not be expanded beyond their express terms and
   must be strictly and narrowly construed against the taxpayer. See Department of Revenue v.
   Anderson, 403 So.2d 397 (Fla. 1981); State ex rel. Szabo Food Services. Inc. v. Dickinson, 286
   So.2d 529 (Fla. 1973). Consequently, under Florida law, the burden is on the taxpayer, as the
   party claiming the exemption, to establish from its actual books and records that it is clearly
   entitled to a particular exemption.
   Requested Advisement
   The Landlord requests an advisement that addresses whether the Landlord is required to remit
   the sales tax due for the rental payments received from the Tenant when the Tenant does not pay
   the applicable sales tax.

Technical Assistance Advisement
Page 4 of 6
Applicable Authority and Discussion
Section 212.031, F.S., provides the following in part:
(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 . . . .

(3) The tax imposed by this section shall be in addition to the total amount of the rental or
license fee, shall be charged by the lessor . . ., and shall be due and payable at the time of
the receipt of such rental or license fee payment by the lessor . . . . The same duties
imposed by this chapter upon dealers in tangible personal property respecting the
collection and remission of the tax; the making of returns; the keeping of books, records,
and accounts; and the compliance with the rules and regulations of the department in the
administration of this chapter shall apply to and be binding upon all persons who manage
any leases or operate real property . . . .
(4) The tax imposed by this section shall constitute a lien on the property of the lessee or
licensee of any real estate in the same manner as, and shall be collectible as are, liens
authorized and imposed by ss. 713.68 and 713.69.

Section 212.07, F.S., provides the following in part:
(2) A dealer shall, as far as practicable, add the amount of the tax imposed under this
chapter to the sale price, and the amount of the tax shall be separately stated as Florida
tax on any charge ticket, sales slip, invoice, or other tangible evidence of sale. Such tax
shall constitute a part of such price, charge, or proof of sale which shall be a debt from
the purchaser or consumer to the dealer, until paid, and shall be recoverable at law in the
same manner as other debts. . . .
(3) Any dealer who fails, neglects, or refuses to collect the tax herein provided, either by
himself or herself or through the dealer’s agents or employees, is, in addition to the
penalty of being liable for and paying the tax himself or herself, guilty of a misdemeanor
of the first degree, punishable as provided in s. 775.082 or s. 775.083.

Section 212.031(1)(a), F.S., provides 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, with certain enumerated exceptions. Section 212.031(1)(c), F.S.,
provides that the tax is levied in an amount equal to 6 percent of and on the total rent or license
fee charged for such real property by the person charging or collecting the rental or license fee.
Section 212.031(3), F.S., provides that the tax is due and payable at the time of the receipt of
such rental or license fee payment by the lessor or other person who receives the rental or
payment.

Technical Assistance Advisement
Page 5 of 6
Section 212.07(2), F.S., provides that sales tax due is a debt from the Tenant to the Landlord,
and is recoverable “at law in the same manner as other debts.” Section 212.031(4), F.S.,
provides that the tax constitutes a lien on the property of the lessee.
Section 212.07(3), F.S., provides that, in addition to other sanctions, a dealer who does not
collect the tax is liable for the tax itself. Thus, the Landlord is liable for any applicable sales tax
that it fails to collect from the lessee.
In Florida Revenue Commission v. Maas Brothers. Inc.. 226 So.2d 849 (Fla.App. 1st 1969) the
Court determined that in cases where a tenant makes rental payments and does not pay the
applicable sales tax in error, the rental payment should include the tax. In that case, lessees of
commercial real property prepaid substantial sums of rent not yet due admittedly to avoid
liability for payment of the rental tax imposed pursuant to the 1968 amendment to the Revenue
Act which would accrue and become due on all rentals paid subsequent to April 1, 1968. The
Court concluded that “the prepaid rent should have included the tax, and liability therefor is not
avoided merely because prepayment was made prior to the effective date of the Act.

In this case, the Court Order requires the Tenant to pay accrued rent and subsequent rental
payments into the court registry. The Court Order does not make reference to the sales tax that
is due for the rent paid. The Tenant has not provided any evidence that its rental payments are
exempt from the tax imposed by s. 212.031, F.S.
Conclusion
The Tenant has not provided evidence to the Landlord that it is entitled to an exemption from the
tax imposed in s. 212.031, F.S. Under the facts as provided to the Department, absent a specific
exemption, the Landlord has an obligation to collect, and the lessee has an obligation to pay,
state sales tax and the county imposed discretionary sales surtax, if any, on the payments the
Tenant makes to the Landlord.
Section 212.031(3), F.S., provides that the tax due is in addition to the rent charged by the
Landlord. As provided in s. 212.07(3), F.S., the Landlord is liable for any applicable sales tax
that it fails to collect from the lessee when the rental payments are received by the Landlord.
Further, if the court disperses the rental amounts that have been paid by the Tenant into the court
registry, absent the applicable tax due, the rental amounts should include sales tax as determined
in Mass Brothers, supra.
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.

Technical Assistance Advisement
Page 6 of 6
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,

Brinton Hevey
Tax Law Specialist
Technical Assistance and Dispute Resolution
850/717-6839
Record ID: 140857