Were court-ordered settlement payments taxable as commercial rent after the tenant surrendered possession and could no longer use the property?

Plain-English summary

The tenant's settlement payments were not subject to Florida's tax on commercial real-property rent.

After a local zoning change prevented the planned store, the tenant terminated the lease, stopped paying rent, returned the keys, and surrendered possession. Litigation ended in a settlement and judgment requiring monthly payments while the landlord sought a replacement tenant, but the former tenant no longer possessed or had the right to occupy the property.

The tenant recorded the payments in a "Lease Termination Settlements" account rather than as rental expense, and its corrected Form 1099-MISC reported them as other income rather than rent. Together with the surrender and zoning facts, that documentation showed damages for termination rather than consideration for occupancy.

What this means for you

Florida looks beyond the payment schedule or a settlement's use of lease language. The key question is whether the payment is actually for the use or right to occupy real property. Book treatment matters, but the cited rule allows other documents to prove the true character of the payment.

Common questions

Were the post-surrender payments taxable as rent? No, under the facts and documentation presented.

Why were they treated as termination damages? The tenant had surrendered possession, lacked any right to occupy, could not use the site for its intended purpose, and did not record the payments as rent.

Does accounting treatment always control? No. Rule 12A-1.070(4)(g) allows leases and other evidence to establish whether a payment is actually for occupancy or for termination.

Would payments for continued use be taxable? Yes. Section 212.031 taxes consideration for the privilege of occupancy.

Citations and references

• Fla. Stat. § 212.031(1) and (3).
• Fla. Stat. § 212.054.
• Fla. Admin. Code rr. 12A-1.070(4)(g) and 12A-15.003(8).

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 23A-017

Original ruling text

QUESTION:

Is the sales and use tax on the rental, lease or license to use commercial real
property pursuant to s. 212.031, F.S. imposed on payments made by [Taxpayer]
pursuant to the Lease and the Settlement Agreement following [Taxpayer’s]
turnover of possession to the Owner in
, where [Taxpayer] was
legally foreclosed from constructing its store for its intended purpose due to a
change in local zoning laws and has not, since that date, had possession or the right
to occupy the property?

RESPONSE:

Based on the facts provided, the sales and use tax on the rental, lease or license to
use commercial real property pursuant to s. 212.031, F.S., does not apply to
payments made by Taxpayer pursuant to the Settlement Agreement and the Court’s
Judgment of
, where Taxpayer returned possession of the
property to the owner, has not had the right to occupy the property since that time,
and was legally foreclosed from using the property for its intended purpose due to
a change in local zoning laws.

September 21, 2023

Via Email:
Re:

Dear

Technical Assistance Advisement – TAA #: 23A-017
. (“Taxpayer” “Lessee” “Tenant”)
BP #:
(“Owner” “Lessor” “Landlord”)
FEI #4
Sales and Use Tax – Lease Termination Payments
Section(s) 212.031 and 212.054, Florida Statutes - (“F.S.”)
Rule(s) 12A-1.070 and 12A-15.003, Florida Administrative Code - (“F.A.C.”)
:

This is in response to your letter dated March 3, 2023, and “Amended” on March 31, 2023, requesting
this Department’s issuance of a Technical Assistance Advisement (“TAA”) pursuant to Section(s.)

Technical Assistance Advisement
September 21, 2023
Page 2

213.22, F.S., and Rule Chapter 12-11 F.A.C., Florida Administrative Code, regarding the matter
discussed below. 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, F.A.C. This response to your request
constitutes a TAA and is issued to you under the authority of s. 213.22, F.S.
REQUESTED ADVISEMENT
Is the sales and use tax on the rental, lease or license to use commercial real property pursuant to s.
212.031, F.S., imposed on payments made by Taxpayer pursuant to the Lease and the Settlement
Agreement following [Taxpayer’s] turnover of possession to the Owner in
, where
[Taxpayer] was legally foreclosed from constructing its store for its intended purpose due to a change
in local zoning laws and has not, since that date, had possession or the right to occupy the property?
FACTS
Your request provides in part:
I.

Background Facts
[Taxpayer] is an

corporation with its principal place of business at
. [Taxpayer] operates a large chain of
stores at various locations in Florida and throughout the United States.
[Taxpayer] entered into a lease with (“Owner”) on
for a space
intended to be utilized as a
store at
in the
(the “Lease”). A copy of the Lease, as amended, is attached as Exhibit B.
Subsequent to executing this lease and prior to [Taxpayer] beginning construction
of its store, the city of
changed its zoning laws in a manner that
prevented [Taxpayer] from constructing the store for its intended purpose. [
’s zoning laws were changed in June 2019, when the City passed an ordinance
prohibiting the operation of a [Taxpayer] (or similar) store on
]. As of
the date of the zoning law change, the City had not approved plans for the
construction of [Taxpayers] store and the [Taxpayer] store had not been built. As a
result of its inability to occupy the space for its intended purpose:
•

On
, [Taxpayer] sent a notice to the Owner that the lease was
terminated.
o The owner disputed [Taxpayer’s] right to terminate the lease and
the parties tried jointly to obtain permission from the City for the
property to be built and operated as a [Taxpayer] store. That effect
failed.

•

On

, [Taxpayer] sent notice of termination of the lease to

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September 21, 2023
Page 3

the owner of the property (Exhibit C).
•

On
, [Taxpayer] filed a complaint in circuit court seeking a
declaration that the lease had been properly terminated.

•

[Taxpayer] ceased paying rent beginning in

•

On
possession.

•

On
, [Taxpayer] delivered keys to the Landlord. Since that
time, [Taxpayer] has not had possession of the property.

•

On
, Owner and [Taxpayer] entered into a Settlement
Agreement following litigation concerning the Lease (attached as Exhibit D).
Pursuant to the Settlement Agreement, a Judgement was entered in favor
of the owner, and [Taxpayer] has been paying judgment damages. The
Settlement Agreement modified [Taxpayer’s] liabilities to Owner under the
Lease. Of note:

, Owner requested either rent for

.
or return of

o [Taxpayer] paid the property owner $
as a “Construction
Settlement Sum” to restore the property to the condition it was in
at the onset of the Lease Agreement.
o Pursuant to the Lease and Settlement Agreement, the property
owner agreed to exercise commercially reasonable efforts to obtain
a new tenant.
o For financial reporting purposes, [Taxpayer] has recorded payments
made under the Settlement Agreement as Lease Termination
payments, and NOT as rental expense.
In
, Owner and [Taxpayer] entered into a Second Agreement on additional
outstanding issues, including the payment to Owner for its costs to maintain the property.
Included in that Second Agreement is the following language:
The parties agree that [Taxpayer], who does not have possession of the premises,
shall pay 2% GROSS REVENUE to [Owner] until [Owner] enters into a lease
agreement with a tenant who takes possession for the ENTIRE premises. The parties
acknowledge that [Taxpayer] does not currently occupy or have the right to occupy
the premises as a result of [Taxpayer’s] early termination and has not since
. With respect to accrued 2% fees, the timetable for which begins on THE
DATE SET FORTH IN [Owner’s] MOTION. The parties agree that [Taxpayer] shall pay
ALL OF [Owner’s] 2% FEES THROUGH
by
.

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September 21, 2023
Page 4

Notwithstanding the terms of the Lease and the Settlement Agreement providing for the
payment of “rent,” at no time since the turnover of keys to the Owner in
has
[Taxpayer] had actual or constructive use or possession of the property subject to the
Lease. Nor has [Taxpayer] had the right to “occupy” the space.
II.

Question for Consideration
[Taxpayer] sets forth the following questions for consideration by the Department
in responding to request for a Technical Assistance Advisement:
•

III.

Is the sales and use tax on the rental, lease or license to use commercial real
property pursuant to s. 212.031, F.S. imposed on payments made by
[Taxpayer] pursuant to the Lease and the Settlement Agreement following
[Taxpayer’s] turnover of possession to the Owner in
, where
[Taxpayer] was legally foreclosed from constructing its store for its intended
purpose due to a change in local zoning laws and has not, since that date, had
possession or the right to occupy the property?

Requested Guidance
[Taxpayer] requests that the Department issue a Technical Assistance Advisement
answering the question stated above as follows:
•

IV.

No, the sales and use tax on the rental, lease or license to use commercial
real property pursuant to s. 212.031, F.S., does not apply to payments made
by [Taxpayer] pursuant to the Settlement Agreement and the Court’s
Judgment of
, where [Taxpayer] returned possession of the
property to the owner, has not had the right to occupy the property since
that time, and was legally foreclosed from using the property for its intended
purpose due to a change in local zoning laws.

Legal Analysis
Section 212.031 of the Florida Statutes imposes sales tax on the privilege of
engaging in the leasing of, or the granting of a license to use, real property. Such
tax, known colloquially as “commercial lease tax,” is imposed “on the total rent or
license fee charged for such real property by the person charging or collecting the
rental or license fee.” Fla. Stat. § 212.031(1)(c). This statutory provision expands
on the scope of taxable “rental or license fees” as follows and with emphasis
added:
The total rent or license fee charged for such real property shall
include payments for the granting of a privilege to use or occupy

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September 21, 2023
Page 5

real property for any purpose and shall include base rent, percentage
rents, or similar charges. Such charges shall be included in the total
rent or license fee subject to tax under this section whether or not
they can be attributed to the ability of the lessor’s or licensor’s
property as used or operated to attract customers. Payments for
intrinsically valuable personal property such as franchises,
trademarks, service marks, logos, or patents are not subject to tax
under this section. In the case of a contractual arrangement that
provides for both payments taxable as total rent or license fee and
payments not subject to tax, the tax shall be based on a reasonable
allocation of such payments and shall not apply to that portion which
is for the nontaxable payments.
The Department’s accompanying regulation defines a “license” with respect to real
property as a “privilege to use or occupy a building or parcel of real property for
any purpose.” Fla. Admin. Code r. 12A-1.070(1)(e). However, the regulation
specifies that the tenant must be “actually occupying, using, or entitled to use” the
leased property:
The tax shall be paid on all considerations due and payable by the
tenant or other person actually occupying, using, or entitled to use
any real property to his property owner or other person for the
privilege of use, occupancy, or the right to use or occupy any real
property for any purpose.
Fla. Admin. Code r. 12A-1.070(4)(b) (emphasis added). Other provisions of the
regulation are keyed to a cognizable legal right to occupancy or use of the lease
property. See, e.g., Fla. Admin. Code rr. 12A-1.070(4)(a) (“The tenant or person
actually occupying, using, or entitled to use any real property from which rental or
license fee is subject to taxation … shall pay the tax to his immediate landlord or
other person granting the right to such tenant or person to occupy or use such real
property.”), 12A-1.070(23) (“The applicable tax rate for rental payments made by
a tenant is based on the date that the tenant occupies or is entitled to occupy the
property.”)
The operative terms from the above-excerpted statute and regulation –
specifically, “occupancy” and “use” – do not have a codified definition for purposes
of the sales and use tax on commercial real property leases. When a statute or
regulation fails to define terms, the terms must be given their ordinary meaning.
Rinker Materials Corp. v. City of North Miami, 286 So. 2d 552 (Fla. 1973).
“Occupancy” is commonly defined as the “act, state, or condition or holding,
possessing, or residing in or on something” and, in the context of real property,
“actual possession, residence, or tenancy.” Black’s Law Dictionary (11th ed. 2019)
(emphasis added). “Use” ordinarily means the “long-continued possession and

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September 21, 2023
Page 6

employment of a thing for the purpose for which it is adapted, as distinguished
from a possession and employment that is merely temporary or occasional.” Id.
Both terms are keyed to “possession,” which is in turn defined as the “fact of having
or holding property in one’s power” or the “exercise of dominion over property.”
Id.
Occupancy and use (and, by extension, possession) of real property by a tenant
must not be constructive or theoretical under the express terminology utilized in
the Department’s regulations; rather, such occupancy and use by the tenant must
be “actual.” The term “actual” is generally understood to mean “existing in fact” or
“real.” Id.; see also Intel Corp. Inv. Policy Comm v. Sulyma, 140 S. Ct. 768, 776 (2020)
(relying on this same definition); Cresthaven-Ashley Master Ass’n, Inc. v. Empire
Indem. Ins. Co., Case No. 19-80959-CIV-SINGHAL/MATTHEWMAN, 2021 WL
8536459, at *5 (S.D. Fla. Dec. 22, 2021) (same; applying Florida law) The use of this
term should be interpreted as a substantive qualifier to the words that succeed it.
See Fla Dep’t of Revenue v. Fla. Mun. Power Agency, 789 So. 2d 320, 324 (Fla. 2001)
(requiring that statutes be interpreted “as they are written and give effect to each
word”); Johnson v. Feder, 485 So. 2d 409, 411 (Fla. 1986) (requiring Florida courts
to employ “well-established norms of statutory construction to choose that
interpretation of statutes and rules which renders their provisions meaningful”);
State v. Fla. Senior Living Ass’n, Inc., 295 So, 3d 904, 912 (Fla. 1st DCA 2020)
(applying rules of statutory construction to regulations and requiring that “when
words in the rule are not defined, like in a statute, they are to be given ‘their plain
and ordinary meaning.’”) (quoting Fla. E. Coast Indus. Inc. v. State, Dep’t of Cmty.
Affairs, 677 So. 2d 357, 362 (Fla. 1st DCA 1996)). Thus, the significance of the word
“actual” must be recognized and, in turn, an actual occupancy and use by a tenant
requires as a factual matter that the lessee hold some real, physical connection to
the lease property.
That actual occupancy and use by a tenant is a prerequisite to the imposition of
sales and use tax on a commercial real property lease is similarly supported by
substantive principles of landlord- tenant law. A tenant’s possession of the lease
premises is “essential to the character of a lease” at common law, and “[t]o create
a leasehold estate, the tenant must be vested with exclusive possession of the
property even against the owner of the fee.” 34 Fla. Jur. 2d Landlord and Tenant
§35 (citing Am. Jur. 2d Landlord and Tenant §21). Florida courts have held that the
consideration for a lease of premises for use in operation of moving of storage
business was wholly lacking, requiring mutual release of parties and return of
security deposit, where use of property as prescribed in lease was in violation of
local zoning ordinances. See, e.g., La Rosa Del Monte Exp., Inc. v. G.S.W. Enters.
Corp., 483 So. 2d 472, 473 (Fla. Dist. Ct. App. 1986) (“Where parties contract for
the use of the property which use is not allowed by law, the consideration wholly
fails, and the money paid for the contract should be returned and the parties
mutually released.”).

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Page 7

Here, subsequent to the zoning law changes and after [Taxpayer’s] efforts to obtain
relief from the zoning change failed, [Taxpayer] turned over possession to the
property to the landlord. Thereafter, at no time did [Taxpayer] have actual or
constructive occupancy and use of the Owner’s property. The Owner has
acknowledged in writing that [Taxpayer] does not currently occupy or have the
right to occupy the premises as a result of [Taxpayer’s] early termination, and it
has not since
(it returned the keys to the property on
) Although certain payments due from [Taxpayer] to owner were labeled by
the Lease and Settlement as “rent,” the economic reality is that these amounts
paid cannot legally be construed as rent since they were not payments for the
occupancy or use of Owner’s property. To allow for these payments to be treated
as taxable rent for purposes of Fla. Stat. § 212.031 and Fla. Admin. Code r. 12A1.070 would be an impermissible elevation of form over substance of the
transaction. See, e.g. Yes Dear, Inc. v. Dep’t of Revenue, 523 So.2d 1235, 1237 (Fla.
1st DCA 1988) (observing that courts are “unwilling to elevate form over
substance” in applying the sales and use tax laws); Technical Assistance
Advisement 94A-052 (“Florida courts have rejected the notion that a taxpayer can
exalt the form in which an agreement or transaction is cast over its substance. The
substance of an agreement or transaction and not the form dictates its tax
consequences.”), Technical Assistance Advisement 89A-037 (holding, in the
context of taxable leases of tangible personal property, that “[t]o impose Florida
sales or use tax on the Lease payments, thereby characterizing the transaction as
other than what it truly is, a financing arrangement, would be to elevate form over
substance”).
V.

Conclusion
Based on the facts and analysis presented therein, [Taxpayer] requests that the
Department consider the analysis set forth above and issue a Technical Assistance
Advisement declaring that Florida sales and use tax does not apply to payments
made by [Taxpayer] pursuant to the Lease and the Settlement Agreement, because
after [Taxpayer] was legally foreclosed from using the property for its intended
purpose (construction of a [Taxpayer] store), it returned possession to the Owner.
At no time after that, has [Taxpayer] occupied, used, or had a right to occupy or
use the property.

The

, Settlement Agreement, states in part:

5. Settlement of Certain Claims by Judgement:

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September 21, 2023
Page 8

5.1.
The Parties agree to the entry of the Final Judgment … as Exhibit 1, and
further agree that entry of that judgement does not constitute a waiver of [Taxpayer’s] right
to appeal. The terms of the Final Judgement are incorporated herein as part of the
Agreement.
5.1.1.
Stay of Execution of Final Judgement: The Parties agree that there shall
be no execution, any collection efforts, and no discovery in aid of execution, on the Final
Judgement until thirty days after issuance of any Mandate.
5.2. Upon receipt of an IRS Form W-9, [Taxpayer] shall pay 947 the sum
($
referred to hereafter as the “Construction Settlement Sum” ….

),

6. The Parties agree that, pursuant to the Lease and the trial court’s ruling on
   summary judgment, as referenced in the Final Judgement, and if the Final Judgement is
   affirmed on appeal, through the expiration of the Term of the Lease, Tenant shall pay
   Landlord only the amounts and items identified in paragraphs 6-6.4 and no other amounts
   or items. Nothing herein shall affect and/or alter the terms, conditions, rights and
   obligations, if any, under that portion of the Lease shall continue. Tenant shall pay on a
   monthly basis: a fixed rent of $
   per month; all bills for water, sewer, rents, sewer
   charges, heat, gas, phone and electricity used in the Building, consistent with Article 9 of the
   Lease; (b) reasonable commercial general liability and property damage insurance with
   respect to the operation of the Leased Premises, consistent with Article 20(b) of the Lease;
   (c) ad valorem real estate taxes, including all special benefit taxes and general and special
   assessments levied and assessed against the Leased Premises, consistent with Article 19 of
   the Lease, including its provisions with respect to refunds or rebates; (d) any tax, charge,
   assessment, or other imposition that is imposed by a governmental authority and which is
   based upon the rents payable under the Lease, consistent with Article 27(a) of the Lease;
   (e) any sales and use taxes upon the rent, use or occupancy of the Premises imposed by the
   State of Florida or
   or any political subdivision thereof, consistent with
   Article 27(b) of the Lease; and (f) the reasonable cost of maintenance of the Premises as
   contemplated under Paragraph 2(f) of the Lease (collectively, the “Monthly Lease
   Payment”); the Monthly Lease Payment is payable subject to the provisions in 6.1 through
   6.5 … .
   (Emphasis added).

The Final Judgement, filed on
Agreement, Ordered that:

, in response to the

, Settlement

1.
Defendant/Counter-Plaintiff, [Landlord], … shall recover from Plaintiff/CounterDefendant [Taxpayer] (“[Taxpayer]”) …, the sum of $
(

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September 21, 2023
Page 9

including

), representing all amounts due and unpaid through and
, that shall bear interest at
%, for which let execution issue.

2.
Execution on this Final Judgement shall be stayed until thirty (30) days after
issuance of the Mandate after any appellate ruling or part of an appellate ruling affirming
the trial court’s summary judgement that [Taxpayer] breached the Lease.
3.
This Judgement is without prejudice to [Taxpayer’s] right to appeal this Final
Judgement and to challenge the Liability Summary Judgement Order in that appeal.
4.
This Judgement is without prejudice to, and the Court retains jurisdiction to
consider and adjudicate any subsequent requests by [Landlord] for supplemental
judgements for damages for unpaid rent and other amounts due for the period beginning
, and thereafter.…
5.
This Final Judgement shall be without prejudice to any subsequent request by
[Taxpayer]. for reduction of amounts due to [Landlord] for the period of
, and
thereafter, based on mitigation rent and other amounts received or that should have been
received by [Landlord] for that period.
6.
The Court reserves jurisdiction to determine the amount of reasonable
attorneys’ fees and costs to be awarded to [Landlord] and to enforce the Settlement
Agreement between the parties regarding monies due and damages, without a waiver of
[Taxpayer’s] right to appeal.

Taxpayer provided a “Corrected” copy of its
Form 1099-MISC, issued to Landlord, reflecting that
the payments were not recorded as “Rent,” but instead “Other Income.” Additionally, Taxpayer
provided a copy of a Declaration of Taxpayer’s Manager of Lease Administration, an employee of
Taxpayer, declaring that Taxpayer has not been recording its post-judgement payments as rent, and
instead has been paying monthly payment pursuant to a final judgement.
According to the Declaration, the Manager of Lease Administration further declared that generally
when Taxpayer is renting and has possession of a property it books its monthly rent payments to a
rent account – since the payments are not rent, Taxpayer is not booking its post judgement payments
to Landlord to a rent account. When Taxpayer started making monthly post-judgement payments to
Landlord in
, Taxpayer created a new account named “Lease Termination Settlements” and
since
, Taxpayer has been making the judgement payments from the Lease Termination
Settlements account.
It is Taxpayer’s contention that the termination payments are not payments for the use or occupancy
of the premises.

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September 21, 2023
Page 10

LAW AND DISCUSSION
Section 212.031(1)(a), F.S., imposes sales tax on the privilege of engaging in the renting, leasing,
letting, or granting a license for the use of real property for any purpose, unless specifically exempt.
Section 212.031(3), F.S., provides that tax is imposed on all consideration due and payable for the
privilege of occupancy. Section 212.031(1)(c), F.S., provides that tax is levied at the rate of 5.5 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. In addition to the 5.5 percent sales and use tax, if the rental occurs
within a county that imposes discretionary sales surtax, the surtax is due on the entire consideration
paid for the renting, leasing, letting, or granting a license for the use of any real property. See s.
212.054, F.S. and Rule 12A-15.003(8), F.A.C.1
Rule 12A-1.070(4)(g), F.A.C., provides in part:

1. The amount charged by a lessor to a lessee to cancel or terminate a lease agreement
   is subject to tax if the lessor records such charge as rental income in its books and records.
   If such charge is not recorded as rental income by the lessor, then such charge is not
   considered a payment for the lease of the real property but as a payment to cancel or
   terminate the lease agreement.
2. Notwithstanding the provisions of subparagraph 1., above, if the amount paid by a
   lessee to a lessor to cancel or terminate a lease agreement is recorded as a rental expense
   in the lessee’s books and records, then such payment is subject to tax. However, if the lessee
   does not record that payment as a rental expense, then such payment is not considered a
   payment for the lease of the real property but as a payment to cancel or terminate the
   agreement, and is not subject to tax. If the lessee records the payment as a rental expense
   but does not remit tax to the lessor on such payment, then the lessee is required to remit
   the tax on such charge directly to the Department of Revenue. The lessee is required to
   remit the tax on Form DR-15, Sales and Use Tax Return, if a registered dealer, or if
   unregistered, the lessee is required to remit the tax on Form DR-15MO, Out-of-State
   Purchase Return. Forms DR-15 and DR-15MO are incorporated by reference in Rule 12A1.097, F.A.C.
3. Should the lessor or lessee record the payment as rental income or expense,
   respectively, but provide sufficient documentation, such as a lease or other tangible
   evidence, to establish that the payment is for other than the use of the real property, then
   such payment is not subject to tax.
4. Should the lessor or lessee record the payment as other than rental income or rental
   expense, respectively, but sufficient documentation exists, such as a lease or other tangible
   evidence, to establish that the payment was additional payment for the use of the real
   property, then such payment is subject to tax.
   1

Effective January 1 of 2018, 2019, and 2020, the state sales tax rate imposed on the total rent charged under s.
212.031, F.S., decreased from 6% to 5.8%; from 5.8 % to 5.7%, and from 5.7% to 5.5%; respectively.

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Page 11

(Emphasis added).

In this case, on
, Taxpayer and Landlord entered into a
real property lease
which was conditioned on among other things, Landlord obtaining all Entitlements necessary for
Taxpayer’s operation.
Pursuant to the lease, it was the intent that Taxpayer would be granted an exclusive right to develop
and operate a “typical [Taxpayer] retail store” after acquiring all necessary governmental permits and
approvals.
On
, Taxpayer sent notice of termination of the lease to Landlord. In
,
Taxpayer stopped making rent payments and on
, Landlord requested either the
rent or return of possession. Taxpayer delivered the keys to Landlord on
, and
has not had possession of the property since that date.
Taxpayer and Landlord entered into a Settlement Agreement under which, as cited above, Article 6,
required that Taxpayer continue to pay rent and all other amounts due to Landlord while efforts to
find a replacement tenant were ongoing.
Although the Final Order and related Settlement Agreement require Taxpayer to pay a fixed rent of
$
per month, you state that the settlement payments are solely related to damages and
are recorded in Taxpayer’s books and records as “Lease Termination payments” and not as rental
expense. Upon review of the documentation and information provided, including the “Corrected”
Form 1099-MISC, issued by Taxpayer to Landlord, the payments were recorded as “Other
Income” and not rent; therefore, the payments made by Taxpayer are not payments for rent and are
not subject to sales tax pursuant to Rule 12A-1.070(4)(g)2., F.A.C.
CONCLUSION
Based on the facts provided, the sales and use tax on the rental, lease or license to use commercial
real property pursuant to s. 212.031, F.S., does not apply to payments made by Taxpayer pursuant to
the Settlement Agreement and the Court’s Judgment of
, where Taxpayer returned
possession of the property to the owner, has not had the right to occupy the property since that time,
and was legally foreclosed from using the property for its intended purpose due to a change in local
zoning laws.
This response constitutes a TAA 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 advice is based, may subject similar future transactions to a different
treatment than expressed in this response.

Technical Assistance Advisement
September 21, 2023
Page 12

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 s.
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 TAA,
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
ten (10) days of the date of this letter.
If you have any further questions with regard to this matter and wish to discuss them, you may
contact me directly at (850)717-6701.
Sincerely,

Shundra McClean
Shundra McClean
Tax Law Specialist
Technical Assistance & Dispute Resolution
cc:

Record ID: 7000947247

Technical Assistance Advisement
September 21, 2023
Page 13

TADR Satisfaction Survey
The Florida Department of Revenue invites you to complete the online TADR Satisfaction Survey to
help us identify ways to improve our service to taxpayers. The survey is an opportunity to provide
feedback on your recent experience with the Department’s office of Technical Assistance and Dispute
Resolution (TADR). To access the survey, place the following address in your browser’s access bar:
https://tadr.questionpro.com
When you open the survey, you’ll be asked to enter the following information. This information will
enable you to complete and submit the survey.
Notification number

7000947247

Respondent code:

44

Tax type:

Sales and Use Tax

Correspondence type:

Technical Assistance

If you need technical assistance accessing the survey, please email Douglas Charity at
[email protected].
Thank you.