May a Florida tenant use appraised values—not only square footage—to allocate taxable rent for multiuse hotel and golf property?

Plain-English summary

The Florida Department of Revenue approved using independent appraisal values to allocate rent for multiuse property containing a hotel, golf course, restaurant, bar, pro shop, tennis courts, and other areas. Square footage was not the only acceptable method under section 212.031(1)(b).

The allocation still had to reasonably measure the taxable rental. Hotel rooms used by guests and related common areas such as hallways could fall within the dwelling-unit exemption, while other areas remained taxable.

The tenant could combine appraisal values with actual use information, but could not rely on an estimated percentage for the hotel's dwelling and common areas. Actual square footage and the lease's available information had to support that portion.

What this means for you

Owners and tenants of mixed-use property

Appraisals can better reflect economic value when taxable and exempt spaces differ sharply in value per square foot. The method must still be reasonable and tied to actual use.

Hotel and resort operators

Identify guest-room and common dwelling areas precisely. Restaurants, bars, golf, retail, and similar areas need separate classification.

Accountants and tax professionals

Retain appraisals, floor plans, leases, and use records. The Department may accept a blended method but will not accept unsupported estimates.

Common questions

Q: Was square footage the only permitted allocation method?
A: No. The Department accepted appraisal values as part of a reasonable allocation.

Q: Could the taxpayer estimate the hotel's dwelling percentage?
A: No. Actual square footage for dwelling units and common areas was required.

Q: Why use appraised values?
A: They can reflect value differences between portions of the property that raw square footage misses.

Citations and references

• Fla. Stat. §§ 212.031(1)(a)2., 212.031(1)(b), and 213.22
• Fla. Admin. Code r. 12A-1.070
• Department of Revenue v. Vanjaria Enterprises, Inc., 675 So. 2d 252 (Fla. 5th DCA 1996)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 18A-010

Original ruling text

QUESTION: MAY TAXPAYER DETERMINE THE TAXABLE PERCENTAGE OF LEASE PAYMENTS OF
MULTI-USE PROPERTY USING APPRAISAL VALUATIONS IN LIEU OF USING ONLY SQUARE
FOOTAGE DATA.
ANSWER: YES, SO LONG AS THE METHOD REFLECTS A REASONABLE VALUATION OF THE
TAXABLE RENTAL.

July 6, 2018
XXXXXXX
XXXXXXX
XXXXXXX
XXXXXXX
Subject: Technical Assistance Advisement (“TAA”)
TAA 18AAMS#: 7000071854
Sales and Use Tax-Real Property Rentals
Section(s) 212.031, Florida Statutes (“F.S.”)
Rule(s) 12A-1.070, Florida Administrative Code (“F.A.C.”)
XXXXXX (“Owner”)(“Landlord”)
FEIN: XX-XXXXXXX
XXXXXX (“Tenant”)
FEIN: XX-XXXXXXX
XXXXXX (“Petitioner”)(“Purchaser”)
Business Partner Number: XXXXX
FEIN: XX-XXXXXXX

XXXXXXX
July 6, 2018
Florida Department of Revenue
Page 2

Dear XX XXXXXXXXXXXXXX:
This letter is a response to your petition dated April 22, 2018, for the Department’s issuance of
a Technical Assistance Advisement (“TAA”) to Petitioner, regarding real property rentals. Your
petition has been carefully examined, and the Department finds it to be in compliance with the
requisite criteria set forth in Rule Chapter 12-11, F.A.C. This response to your request
constitutes a TAA and is issued to you under the authority of section 213.22, F.S.
Facts
Purchaser is a XXXXXXXXXXXXXXX headquartered in XXXXXXXXXXXX, XXXXXXXXXXXX. Owner is
the owner of record. Owner leases the property to Tenant. The leased premises include hotel
property, including land, buildings, furniture, fixtures, and equipment. The leased premises
also include a
golf course. The XXXXXX has a XXXX full-service bar and restaurant, locker rooms, pro shop, and
tennis courts. Tenant will enter into a contract with a management company.
The leased property has two independent appraisals. The XXXXX is valued at $XXXXXXXXX. The
remainder of the leased premises are valued at $XXXXXXXX. The golf course has over
XXXXXXXXXXX square feet, and the remainder of the property has XXXXXXXX square feet.
Issue
Whether Tenant may use appraisal values instead of only square footage of the leased premises
to determine the taxable rent portion?
Taxpayer Position
The hotel includes dwelling areas that are not subject to tax, as provided by section
212.031(1)(a)2., Florida Statutes (“F.S.”). Petitioner maintains that the property is multi-use
property, as provided by s. 212.031(1)(b), F.S. Petitioner believes a more accurate
determination of the taxable rental portion requires the use of separate valuations for the golf
course and the hotel.
Petitioner proposes to use the square footage of the leased premises to determine an
allocation of the taxable rental area. Petitioner proposes that the taxable value should be
divided by the total appraised value of the leased premises. Petitioner believes that
approximately ten (10) percent of the non-XXXXXXX areas are used for non-dwelling purposes.

XXXXXXX
July 6, 2018
Florida Department of Revenue
Page 3

Petitioner proposes to determine the taxable rental by using the following formula:
$XXXXXXXXX (XXXXXX appraisal) + $XXXXXXXXX (XX% of other leased premises)
$XXXXXXXXXX (Total appraisal value of the leased premises)
This proposed formula will result in 14.37% of the total rental to be considered the taxable
rental amount.
Although Petitioner believes that approximately ten (10) percent of the non-XXXXXXXX areas
are used for non-dwelling purposes, Petitioner will determine the dwelling areas of the hotel
property based on the room areas and common areas, such as the hallways.
Law and Discussion
Section 212.031, F.S., requires property owners, such as Landlord to collect sales tax from
lessees, such as Tenant, on real property rentals. Section 212.031(1)(a)2., F.S., provides for an
exemption for real property leased that is used exclusively as a dwelling unit. This includes the
hotel rooms used by the guests, and common areas, such as the hallways. It may include other
areas, depending on the facts. Section 212.031(1)(b), F.S., addresses situations in which the
leased property is multi-use property that includes areas that are not subject to the tax, such as
property used exclusively as a dwelling unit, and other areas that are subject to the tax imposed
by s. 212.031, F.S. Section 212.031(1)(b), F.S., provides that the allocation is based on the lease
agreement and other available information. Although, an allocation using square footage
information is used as an example in Rule 12A-1.070, Florida Administrative Code (“F.A.C.”), the
Department will use reasonable methods to determine taxable rental. See
Department of Revenue v. Vanjaria Enterprises, Inc., 675 So.2d 252 (Fla. 5th DCA 1996).
Response
Based on the facts provided, the use of both appraisal values to determine the percentage of
the taxable rental amount is reasonable. Tenant is required to use the actual square feet of the
dwelling units, and common areas based on the lease amount, and other information available
instead of an estimated percentage.
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.

XXXXXXX
July 6, 2018
Florida Department of Revenue
Page 4

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 10
days of the date of this letter.
Respectfully,
Chuck Wallace
Chuck Wallace
Technical Assistance & Dispute Resolution
(850) 717-7541
AMS #: 7000071854