Was a proposed allocation between taxable and exempt rent reasonable for a project combining student housing, common areas, classrooms, and wetlands?

Plain-English summary

Florida approved most of a proposed allocation between taxable and exempt rent for a large mixed-use student project.

Residential rooms and areas used exclusively by residents—such as qualifying hallways, residential parking, and community centers—fell within the dwelling-unit exemption. Educational centers and classrooms did not, because their purpose was education rather than residential use. Parking serving nonresidents also was not exempt residential common space.

The parties could use reasonable square footage and relative market-value appraisals, including different supported values for wetlands and developed parcels, to calculate taxable rent.

What this means for you

Student-housing projects

Map every leased area by actual use. Housing-related common areas and educational facilities can receive different treatment within the same project.

Property and accounting teams

Square footage is not the only possible method. Consistent, independent relative-value appraisals can support an allocation.

Common questions

Were classrooms exempt as residential space? No.

Were resident-only common areas exempt? Yes, on the described facts.

Could appraised values be used? Yes, if consistently supported.

Citations and references

• Fla. Stat. Sec. 212.031(1)(a)2.
• Fla. Stat. Sec. 212.031(1)(b)
• Fla. Admin. Code R. 12A-1.070

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 20A-002

Original ruling text

QUESTION: Is Petitioner’s method of allocation of taxable rent reasonable?
ANSWER: Yes. Except for the areas used for educational purposes allocated as exempt
residential use, the proposed method is a reasonable allocation. Appraisal of the specific
property may be used in determining the taxable rental portion of the rental.

February 14, 2020

XXXXXXXX
XXXXXXXX
XXXXXXXX
XXXXXXXX
Re:

Technical Assistance Advisement No. 20A-002
Sales and Use Tax
Real Property Rentals
Sections 212.031, Florida Statutes (F.S.)
Rule 12A-1.070, Florida Administrative Code (“F.A.C.”)
XXXXXXXXX (“Petitioner”)
Business Partner Number: XXXXXXXXX
FEIN: XXXXXXXXX
XXXXXXXXXXXXXX (“Lessor”)
FEIN: XXXXXXXXX
XXXXXXXXXXXXXX (“Lessee”)
FEIN: XXXXXXXXX
XXXXXXXXXXXXXX (“Project”)
Parcel # XXXXXXXXXXXXXXXXX (“Parcel A”)
Parcel # XXXXXXXXXXXXXXXXX (“Parcel B”)
Parcel # XXXXXXXXXXXXXXXXX (“Parcel C”)
XXXXXXXXXXXXX: (“Independent Appraiser”)

Dear XXXXXXXX:

XXXXXXXX
February 14, 2020
Florida Department of Revenue
Page 2

This is in response to your request dated August 22, 2019, for a Technical Assistance
Advisement (TAA) pursuant to s. 213.22, F.S., and Rule Chapter 12-11, Florida Administrative
Code (F.A.C.), concerning the application of Florida’s sales tax regarding Petitioner’s lease
agreements. An examination of your letter has established that 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
Lessor leased property to Lessee pursuant to two lease agreements. The lease agreements
require construction of buildings on a portion of the property. Lessee is required to manage
Project, which will include the operation of housing and education to students participating in
Petitioner’s college intern program. Project will include student housing, community centers,
education centers, pools, and maintenance buildings. In addition to the buildings Project will
include parking, walkways, pools, and outdoor spaces which will be common areas for free use
of the residents. Project will include storm water retention under the parking lots. Parcel A
and B of Project also includes wetlands.
Petitioner provided copies of the lease agreements, a breakdown of the square footage of the
residential buildings, community centers, maintenance buildings, gate houses, pool equipment
areas, public restrooms, security pavilion, and other areas. Petitioner also provided appraisal
information regarding Parcels A and B.
The total project will include approximately XXXX acres of land, and include student housing,
community centers, education centers, pools, and maintenance buildings. The west parcel lease
covers XXXXX acres (XXXXXXXX sq. ft.) of which XXXX acres will be developed. The remaining
XXXXX acres of the parcel are undeveloped wetlands. The west XXXXXXXXXXX parcel ID numbers
are XXXXXXXXXX (development), XXXXXXXXX (wetlands), and XXXXXXXXXXXX (wetlands). The
east parcel lease covers XXXXXXX acres (XXXXXXXXXXXX sq. ft.) of which all will be developed.
The east XXXXXXXXXXXX parcel ID number is XXXXXXXXXXXX. Illustrative site plans are included
as Attachment C.
Total Project Land Acreage Leased to XXXXX (Per Ground
Lease)
Parcel
Acres

Square Feet

XXXXXXXXX Parcel

XXXX XXXXXXX

XXXXXX Housing XXXXX Parcel TOTAL
FC CIP Housing West Parcel Uplands
FC CIP Housing West Parcel Wetlands

XXXX XXXXXXX
XXX
XXXX

XXXXXXXX
February 14, 2020
Florida Department of Revenue
Page 3

A detailed breakdown of square footage uses of each building, including the first-floor square
footage, and the proposed taxable portions are included as Attachment D. A summary of the
data is provided below:
Total Square
Footage
(1st Floor)
XXXXX
XXXXX
XXXXX

Taxable Area
SF Total
XXX
XXX
XXX

Taxable Portion of
Total Building SF
XX%
XX%
XX%

Parcel
XXX
XXX
XXX

Building
Education Center
Community Center
Community Center

XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX

Building XX (Type B)
Building XX (Type B)
Building XX (Type B)
Building XX (Type H)
Building XX (Type H)
Building XX (Type B)
Building XX (Type B)
Building XX (Type B)
Building XX (Type G)
Building XX (Type B)
Building XX (Type D)
Building XX (Type I)
Building XX (Type I)
Building XX (Type B)
Building XX (Type G)
Building XX (Type B)
Building XX (Type F)
Building XX
Building XX (Type B)
Building XX (Type B)

XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX

XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX

X%
X%
X%
X%
X%
X%
X%
X%
X%
X%
X%
X%
X%
X%
X%
X%
X%
X%
X%
X%

XXX
XXX
XXX

Maintenance Building
Gate House North
Gate House South

XXX
XXX
XXX

XXX
XXX
XXX

100%
100%
100%

XXX

Pool Equip & Restrooms

XXX

XX

XX%

XXX

Security Pavilion

XXX

XXX

100%

XXXXXXXX
February 14, 2020
Florida Department of Revenue
Page 4

XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX
XXX

Building XX (Type B)
Building XX (Type B)
Building XX (Type A)
Building XX (Type G)
Building XX (Type G)
Building XX (Type A)
Building XX (Type G)
Building XX (Type B)
Building XX (Type A)
Building XX (Type A)
Building XX (Type G)
Building XX (Type B)
Building XX (Type B)
Building XX (Type G)
Building XX (Type A)
Building XX (Type A)
Building XX (Type G)
Building XX (Type G)
Building XX (Type G)
Building XX (Type G)
Building XX (Type A)

XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX
XXXX

XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX
XX

X%
X%
X%
X%
X%
4%
4%
4%
4%
4%
4%
3%
4%
4%
4%
4%
4%
4%
4%
4%
4%

XXX
XXX

Maintenance Building
Gate House

XXXX
XXXX

XXXX
XXXX

100%
100%

XXX

Pool Equip & Restrooms

XXXX

XXX

XX%

XXX

Security Pavilion

XXX
XXXXXXXX

XXX
XXXXX

XX%

In addition to the buildings, the project contains approximately XXX XXXX square feet of parking
and common areas including walkways, pools, and outdoor resident spaces. Storm water
retention will be constructed under the project’s parking lots.
Regarding the wetlands surrounding the west parcel, the XXX acres are classified as a “pond” for
property tax purposes (property use code XXX).
REQUESTED RULINGS
Petitioner maintains that the property is multi-use property because a portion of the property
leased is used as dwelling units for residential purposes by students. Petitioner proposes to

XXXXXXXX
February 14, 2020
Florida Department of Revenue
Page 5

allocate the rental payment associated with property used as dwelling units using square
footage information as proposed in the request. The proposal includes classrooms as exempt
property. Petitioner believes that wetlands should be calculated using only a quarter of the
value per square foot as compared to areas that will include buildings and common areas.
LAW AND DISCUSSION
Section 212.031, F.S., requires property owners, such as Lessor to collect sales tax from lessees,
such as Lessee, 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
residential rooms and the common areas. The common areas include hallways, residential
parking areas, and the community centers used exclusively for residents. It may include other
areas, depending on the facts. It does not include the educational centers and classrooms as
the purpose of those areas are educational and not as a dwelling area. The parking areas next
to the educational centers used by persons other than residents is not considered a common
area.
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 the taxable rental amount. See Department of Revenue v.
Vanjaria Enterprises, Inc., 675 So.2d 252 (Fla. 5th DCA 1996). Fair market value property
appraisals of the leased property may be used to determine a reasonable allocation.
RESPONSE
Except for the educational centers, such as the classrooms, that are used for educational
purposes, and not exclusively as a dwelling unit, Petitioner’s proposed method of allocation
using square footage determined by Petitioner in compiling the request is reasonable. Based
on the facts provided, the use of the different appraisal value for wetlands to determine the
percentage of the taxable rental amount is reasonable. Petitioner may use relative market
value appraisals of different parcels such as from Independent Appraiser so long as that
valuation is consistent to other market value appraisals.
This response constitutes a Technical Assistance Advisement under s. 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 s. 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

XXXXXXXX
February 14, 2020
Florida Department of Revenue
Page 6

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 documents are public
records under Chapter 119, F.S., which are subject to disclosure to the public under the
conditions of s. 213.22, F.S. Your name, address, and any other details, which might lead to
identification of the taxpayer, must be deleted before disclosure.
In an effort to protect the confidentiality of such information, we request you provide the
undersigned with an edited copy of your request for Technical Assistance Advisement, backup
material and response within fifteen days of the date of this advisement.
Sincerely,

Chuck Wallace
Chuck Wallace
Conferee
Technical Assistance and Dispute Resolution
Record ID: 297638