Are mandatory assessments paid by Florida homeowners for association-owned club facilities subject to admissions tax?

Plain-English summary

The Florida Department of Revenue ruled that a homeowners' association did not have to collect admissions tax on mandatory annual assessments paid by resident owners after the association merged with a recreational club. The club property became association-owned common areas, and the assessments were required as a condition of property ownership.

The exemption covered the residential Full, Sports, Tennis, and Grandfathered member classes even though their facility-use rights differed. What mattered was that the payors owned homes in the community and the assessments supported association common areas.

Annual assessments, fees, and dues charged to members who did not own community property were taxable. Optional user fees and memberships were also taxable. Capital contributions by equity members for an ownership interest were exempt, and special assessments required separate application of the rule's criteria.

What this means for you

Homeowners' associations with club facilities

Ownership-based mandatory assessments can remain exempt even when membership classes have different use rights, provided the facilities are association common areas and the charges are tied to property ownership.

Communities with nonresident members

Track nonresident charges separately. They were taxable because payment was not a condition of owning property governed by the association.

Accountants and tax professionals

Review the merger documents, easements, ownership of facilities, assessment liens, and membership classes. Optional charges and special assessments need their own analysis.

Common questions

Q: Were mandatory resident-owner assessments taxable?
A: No. They met the rule for ownership-based HOA payments supporting common areas.

Q: Did different recreational-use rights change the result?
A: Not for the listed resident-owner classes in this ruling.

Q: Were nonresident member dues taxable?
A: Yes, because they were not required as a condition of owning community property.

Q: Were optional user fees taxable?
A: Yes.

Q: Were equity capital contributions taxable?
A: No, when paid to purchase an equitable ownership interest and the rule's criteria were satisfied.

Citations and references

• Fla. Stat. §§ 212.02(1), 212.04, and 213.22
• Fla. Admin. Code r. 12A-1.005(4), including (4)(a) and (4)(d)3.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 19A-001

Original ruling text

TAX: Sales and Use Tax
TAA NUMBER: 19A-001
ISSUE: Admissions
STATUTE CITE(S): Section(s) 212.02(1) and 212.04, F.S.
RULE CITE(S): Rule 12A-1.005(4)(d)3., F.A.C.
QUESTION: Are certain mandatory assessment payments made by members of a homeowners’
association to the homeowners’ association subject to the sales tax on admissions when the
payments are made as a condition to ownership of real property governed by the association, and
the club facilities are common areas owned by the association?
ANSWER: No, so long as the criteria provided by Rule 12A-1.005(4)(d)3., F.A.C., are
satisfied. Mandatory assessments paid by homeowners’ association members to the
homeowners’ association that are required to be paid as a condition to ownership or occupancy
of real property, and are paid for maintenance of club facilities, are part of the common areas
owned by the association, and are for the use of all members are not subject to the sales tax
imposed by s. 212.04, F.S. The optional payments made by the members regarding use of
facilities are subject to sales tax.
January 16, 2019
XXXXXXXXXXXXXX
XXXXXXXXXXXXXX
XXXXXXXXXXXXXX
Subject: Technical Assistance Advisement (“TAA”)
TAA 19A‐001
AMS#: 7000131133
Sales and Use Tax‐Admissions
Section(s) 212.02(1) and 212.04, Florida Statutes (“F.S.”)
Rule(s) 12A‐1.005(4), Florida Administrative Code (“F.A.C.”)

January 16, 2019
Florida Department of Revenue
Page 2

XXXXXXXXXXXXXX (“Petitioner”)(“Club”)
Business Partner Number: XXXXXXXX
FEIN: XX‐XXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXX (Association”)
Business Partner Number: XXXXXXXX
FEIN: XX‐XXXXXXX
XXXXXXXXXXXXXXXX (“Community”)
Dear XX XXXXXXXXXXXXX:
This letter is a response to your petition dated November 2, 2018, for the Department’s
issuance of a Technical Assistance Advisement (“TAA”) to Petitioner, regarding member
assessments. 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
Club and Association are member‐owned not‐for‐profit Florida corporations. Club and
Association plan to merge into one corporation, with Association being the surviving legal
entity. Petitioner provided the proposed Amended Articles of Incorporation (‘Articles”),
proposed Amended Declaration of Covenants and Restrictions (“Declaration”), and the
proposed Amended By‐Laws (“By‐Laws”) for Association. Association is licensed by the State of
Florida as a homeowners’ association. Club and Association are in Community, which is a
XXXXXXXXX. There are XXXXX residential units in Association.
Club has a golf course, tennis courts, a clubhouse, physical fitness facilities, spa, restaurants,
and other recreational facilities. The residential units in Community will be governed by
Declaration. The Declaration provides an easement to the unit owners for use of the common
areas, including the property obtained from Club.
The owners of residential units in Community are required to be Association members.
XXXXXXX (XXXX) members of Association are not members of Club. The XX members are
referred to as Grandfathered Members. Grandfathered Members are not allowed to use Club’s
facilities, and will not be able to use Club’s facilities after the merger. After the merger, when
the unit owned by a Grandfathered Member is sold to a new purchaser, the new purchaser will
not be able to be a Grandfathered Member in Association.

January 16, 2019
Florida Department of Revenue
Page 3

XXXXXXXXXX (XX) members of Club are non‐equity members of Club. The XX non‐equity
members are not members of Association. Club has XXXX Full Members, XXX Sports Members,
and XX Tennis Members. The Full, Sports, and Tennis Members are equity members in Club.
The use rights vary for the equity members in Club. Tennis Members have no use rights to the
golf course. Sports Members have more restrictions on the use rights to the golf course and
tennis facilities than Full Members. After the merger, the Full, Tennis, and Sports Members of
Club will have the same use rights in Association owned property received from Club as the
member had in Club facilities before the merger.
After the merger, all purchasers of a residential units in Community after the merger date will
be required to be a Full Member of Association. After the merger, the purchaser will be
required to pay a capital contribution for the equitable interest obtained in Association, for and
all annual and special assessments. After the merger, the Full, Sports, Tennis, and
Grandfathered Members will have the same varied use rights in the Club property owned by
Association as the Full, Sports, Tennis, and Grandfathered Members had prior to the merger.
After the merger, Association will allow some former residential owners in Community to
continue to retain use rights of the facilities previously owned by Club for a reduced assessment
payment. After the merger, there will be one non‐residential member who will pay annual
fees.
After the merger, the property obtained from Club by Association will be owned by Association
as common areas for use by Association members. Residential unit owners will obtain an
easement in the common areas. After the merger, Association will issue mandatory annual
assessments to all Association members to pay for Association’s budgeted costs. The annual
assessment amount will vary depending on type of membership but will be on a pro rata basis
for members within a given membership class. Association will levy a lien on the residential
unit property for unpaid amounts related to assessments, dues, or fees. Association may levy
special (operating and capital) assessments against members due to budget shortfalls and to
fund capital reserves. These assessments are levied against members in a similar proportional
manner as with the annual assessments.
Issue
Whether the assessments and fees are subject to sales tax?
Law and Discussion
Section 212.04, F.S., provides that sales tax must be collected by a person on the amount
received from the sale of admissions. Section 212.02(1), F.S., provides that dues and fees

January 16, 2019
Florida Department of Revenue
Page 4

payments to a private club or membership club are admissions. Rule 12A‐1.005(4)(d)3., F.A.C.,
provides the following:
Fees paid to private clubs or membership clubs that do not entitle the payor to
the use of the club’s recreational or physical fitness facilities are not subject to
tax. Examples of such fees are:

3. Mandatory dues and fees paid to a condominium association, homeowners’
   association, or cooperative association when they are required to be paid as a
   condition of ownership or occupancy of real property and the club facilities are
   part of the common elements or common areas of the real property.
   As provided by Rule 12A‐1.005(4)(d)3., F.A.C., mandatory assessments paid by the Full, Sports,
   and Tennis Members, will not be subject to sales tax so long as the payments are made as a
   condition of ownership of the real property in Community, and the club facilities are
   Association common areas for use of the Association members. Based on the information
   provided, the annual assessments that will be paid by residential owners of Community who
   are Full Members, Tennis Members, and Sports Members will qualify for the exemption
   provided by Rule 12‐1.005(4)(d)3., F.A.C. The exemption does not apply to annual assessments
   or annual dues paid by members that do not own property within Community because
   payment of the assessment is not made as a condition of ownership.
   Capital contributions made by a residential owner of Community to obtain the membership
   that is an equitable ownership interest is not subject to sales tax as provided by 12A‐
   1.005(4)(a)1.a., and (4)(a)2.d., F.A.C.

Since Petitioner provided only general information regarding specific future capital
expenditures, and operating assessments, the Department will not provide a detailed response
regarding special assessments that may be levied by Association. In regard to the special
assessments used for capital reserves (capital assessment), the exemption provided by Rule
12A‐1.005(4)(a)1.a., and (4)(a)2.d., F.A.C., for capital assessments may be satisfied so long as all
criteria are satisfied. So long as the operating assessments are levied similarly to the annual
assessment, then taxation of the operating assessment will be the same depending on the class
of membership.
Sales tax must be collected on all other optional memberships, or user fees or dues received
after the merger.
Response

January 16, 2019
Florida Department of Revenue
Page 5

Association is not required to collect sales tax on annual assessments levied against Association
members who are residential owners in Community for Full, Sports, Tennis, and Grandfathered
Members for use of common areas.
Sales tax must be collected by Association on annual assessments, annual fees, and dues
against Association members who are not residential owners in Community. Association is not
required to collect sales tax on capital contributions by equity members for the purchase of an
equitable ownership interest in Association. Sales tax must be collected on all other optional
user fee charges.
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.
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 #: 7000131133