Could a registered dealer avoid tax on its prime city lease by collecting Florida sales tax from its real-property sublessees?

Plain-English summary

Florida approved a registered dealer's treatment of its city lease and real-property subleases.

The dealer leased a marina and restaurant building from a city, then subleased wet slips, dry-storage facilities, and the restaurant building. Instead of paying sales tax on the prime lease, it collected and remitted tax on rent from its sublessees.

That treatment complied with the law as long as the dealer remained registered and annually gave the city a Florida resale certificate. The cited rule also requires tax on the portion of the rental charge attributable to any taxable space the prime tenant retains.

What this means for you

Businesses that sublease commercial property

When the property will be subleased, the prime lease may qualify as a sale for resale. Registration, collection and remittance on subrent, and delivery of a resale certificate to the prime landlord are essential conditions.

Landlords and municipal lessors

The ruling applies the rule against pyramiding tax through successive rental transactions: the immediate user pays tax to the immediate landlord, while a qualifying intermediary can document the prime lease as a resale.

Common questions

Did the dealer owe tax to the city on the prime lease? Not under the approved arrangement.

What had to happen instead? The dealer had to remain registered, collect and remit tax on its subleases, and annually extend a resale certificate to the city.

What if the dealer kept taxable space for itself? The cited rule requires it to pay tax attributable to that retained space.

Citations and references

• Fla. Stat. Sec. 212.031(1)
• Fla. Stat. Sec. 212.031(2)
• Fla. Stat. Sec. 212.18(3)
• Fla. Admin. Code R. 12A-1.039(1)(b)4.
• Fla. Admin. Code R. 12A-1.070(7)(a)
• Fla. Admin. Code R. 12A-1.070(9)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 21A-002

Original ruling text

QUESTION(S)/ANSWER(S):
Is Taxpayer is in compliance with Florida State Sales tax laws/requirements whereby
Taxpayer collected sales taxes from its sublessees and remits same to the State of
Florida, rather than paying sales tax on its lease with the city; and whether Taxpayer’s
use of its Annual Resale Certificates to bill sublessees satisfies its tax liability to the State
of Florida.
Taxpayer, by collecting tax on the rent from its sublessees and remitting that tax to the
Department, rather than remitting tax on its prime lease with the City, is incompliance with
the law as long as Taxpayer continues to be a registered dealer and continues to annually
extend a resale certificate to the City.

January 15, 2021

XXXXXXXXX
XXXXXXXXX
XXXXXXXXX
XXXXXXXXX
Re:

Technical Assistance Advisement 21A-002
Sales and Use Tax – Subleasing Real Property
Sections 212.18 and 212.031, Florida Statutes
Rules 12A-1.039 and 12A-1.070, Florida Administrative Code
XXXXXXXXX (the Taxpayer)
FEIN#: XXXXXXXXX

Dear Mr. XXXXXXXXX,
This is in response to your letter dated November 5, 2020, requesting this Department’s
issuance of a Technical Assistance Advisement (“TAA”) pursuant to Section 213.22,
Florida Statutes (Fla. Stat.), and Chapter 12-11, Florida Administrative Code (Fla. Admin.
Code), regarding the taxability of your client’s subleasing of real property. Your request
has been carefully examined, and the Department finds it to be in compliance with the
requisite criteria set forth in Chapter 12-11, Fla. Admin. Code.

Technical Assistance Advisement
Page #2

Please be advised that Technical Assistance Advisements shall have no precedential
value except to the taxpayer who requests the advisement, and then only for the specific
transaction addressed in the Technical Assistance Advisement, unless specifically stated
otherwise in the advisement.
This response to your request constitutes a TAA and is issued to you under the authority
of Section 213.22, Fla. Stat.

Facts Provided by Taxpayer
On November 5, 2020, you wrote to the Department, requesting the issuance of a TAA.
You explained that your client, XXXXXXXXX (“Taxpayer”), a registered dealer in
possession of an Annual Resale Certificate issued by the Department, entered into a
lease whereby it rents certain real property, consisting of a marina and restaurant
building, from the City of XXXXXXXXX. Taxpayer, in turn, sublets wet slips and dry
storage facilities, as well as the restaurant building itself, to its sublessees. You state that
Taxpayer, as lessee, has not paid any sales tax to the City of XXXXXXXXX on its lease
with the city, instead collecting, as lessor, rent from its sublessees, and remitting tax on
the rent to the Department.
You attach to your letter as Exhibit 1 a copy of your request for a Letter of Technical
Assistance dated October 16, 2020. You attach to your letter as Exhibit 2 a copy of the
undersigned’s October 28, 2020, response to your request for informal guidance. You
also submit with your current request Exhibit 3, a copy of the Lease Agreement between
the City of XXXXXXXXX, lessor, and Taxpayer, lessee, and Exhibit 4, the City of
XXXXXXXXX written consent for Taxpayer to sublet the restaurant building. You explain
that pursuant to section 3 of the Lease Agreement, Taxpayer is required to sublet wet
and dry slips as part of the marina’s operations.
You let us know that the City of XXXXXXXXX has requested that you obtain a TAA from
the Department. You write the Department to request a TAA, clarifying whether:
XXXXXXXXX is in compliance with Florida State Sales tax
laws/requirements whereby XXXXXXXXX collected sales taxes from
its sublessees and remits same to the State of Florida, rather than
paying sales tax on its lease with the city; and
XXXXXXXXX use of Annual Resale Certificates to bill sublessees
satisfies its tax liability to the State of Florida.

Technical Assistance Advisement
Page #3

Law and Discussion
Pursuant to Section 212.031(1)(a), Fla. Stat., it is the intent of the legislature “… 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 unless such property
is [exempt].” For the exercise of such a privilege, a 5.5 percent tax is assessed on the
total rent or license fee charged by the person charging or collecting the rental or license
fee. See Section 212.031(1)(c), Fla. Stat. Section 212.18(3), Fla. Stat., provides that all
persons must be registered with the Department of Revenue before engaging in business
subject to sales tax in Florida. Florida law defines those persons who are required to
register, collect, and remit tax as "dealers."
In accordance with Section 212.031(2)(a), Fla. Stat., it is the tenant actually occupying,
using, or entitled to the use of the property from which the rental fee is subject to taxation
who shall pay the tax to his or her immediate landlord or other person granting the right
to the tenant to occupy or use the real property. Section 212.031(2)(b), Fla. Stat., states
that it is the Legislature’s intent that only one tax be collected on the rental fee payable
for the occupancy or use of real property. Paragraph (2)(b) prohibits the pyramiding of
tax collected by a progression of transactions and likewise prohibits a decrease in tax due
by any such progression of transactions.
Therefore, to answer your question as to whether Taxpayer is in compliance with the law
by collecting tax from its sublessees and remitting that tax to the Department, rather than
paying tax on its prime lease with the City of XXXXXXXXX, the answer is “yes.”
The answer to your second question, whether Taxpayer’s presentation of a resale
certificate to the City of XXXXXXXXX, in order for Taxpayer to collect tax from its
subleases, satisfies Taxpayer’s tax liability to the State of Florida, is also “yes.”
Pursuant to Rule 12A-1.070(7)(a), Fla. Admin. Code, where a tenant or person entitled to
use any real property which is subject to tax sublets or assigns and collects rent, such
tenant or other person is required to register with the Department as a sales tax dealer
and collect and remit the tax on all subleases or assignments.
Taxpayer, by collecting tax on the rent from its sublessees and remitting that tax to the
Department, rather than remitting tax on its prime lease with the City of XXXXXXXXX, is
incompliance with the law as long as Taxpayer continues to be a registered dealer and
continues to annually extend a resale certificate to the City of XXXXXXXXX.
The lease or rental of real property to a dealer, when the property will subsequently be
leased by the dealer’s tenants, is considered a sale for resale. See Rule 12A1.039(1)(b)4., Fla. Administrative Code.
Rule 12A-1.070(9), Fla. Admin. Code, states:
If a tenant or other person sublets or assigns his interest in all of the
leased or licensed premises, or retains only an incidental portion of

Technical Assistance Advisement
Page #4

the entire premises, then such tenant or other person may elect not
to pay tax on the prime lease or license, provided that such tenant
or other person shall register as a dealer and collect and remit tax due
on the sub-rentals or assignments and pay the tax due on the portion
of the rental charges or license fees pertaining to any taxable space
which he retains. If the tenant or licensee elects not to pay the tax
to his landlord, or other person granting the right to occupy or
use such real property, he should extend to his landlord or such
other person a resale certificate.
Emphasis added.
Taxpayer states that it is a registered dealer and each year presents to the City of
XXXXXXXXX a Florida Annual Resale Certificate for Sales Tax. Under the facts
presented, Taxpayer is in compliance with the law by collecting tax on the rent from its
sublessees and remitting that tax to the Department.

Concluding Statement
Taxpayer, by collecting tax on the rent from its sublessees and remitting that tax to the
Department, rather than remitting tax on its prime lease with the City of XXXXXXXXX, is
incompliance with the law as long as Taxpayer continues to be a registered dealer and
continues to annually extend a resale certificate to the City of XXXXXXXXX.
This response constitutes a Technical Assistance Advisement under Section 213.22, Fla.
Stat., 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, Fla. Stat. 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, Fla. Stat., and are subject to disclosure to the
public under the conditions of Section 213.22, Fla. Stat. 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.

Technical Assistance Advisement
Page #5

Respectfully,

Donna La Plante
Donna La Plante
Senior Attorney
Florida Department of Revenue
Technical Assistance and Dispute Resolution

cc:
XXXXXXXXX
XXXXXXXXX
XXXXXXXXX
Record ID: #442926