Would the mandatory assessment paid by property owners for common-area and club-facility maintenance become taxable after the club merged into the homeowners' association?

Plain-English summary

The mandatory property-owner assessment for maintaining the community's common areas and club facilities was not subject to Florida sales tax after the club merged into the homeowners' association.

Although Florida generally taxes dues and fees for access to recreational or physical-fitness facilities, the assessment here had four features: it was mandatory, paid to the homeowners' association, required as a condition of owning real property, and used for common-area maintenance rather than as payment for the right to use those areas.

That placed the assessment within the rule for mandatory homeowners' association dues and fees tied to common elements or common areas.

What this means for you

The label "club" or the presence of recreational facilities did not control. The Department focused on the legal obligation to pay and what the assessment purchased. A mandatory ownership-based maintenance assessment was different from a fee that entitles a customer to use recreational facilities.

Common questions

Was the assessment taxable as an admission or club due? No, under the described post-merger structure.

Why was it exempt? It was a mandatory HOA assessment required by property ownership and used for common-area maintenance, not a payment for facility access.

Did the merger itself make the assessment taxable? No. The surviving homeowners' association retained the relevant ownership-based assessment structure.

Does the ruling cover optional access agreements for non-property owners? The requested conclusion concerns the mandatory property-owner assessment; separate use or license agreements were distinct arrangements in the facts.

Citations and references

• Fla. Stat. §§ 212.02(1) and 212.04(1)(a).
• Fla. Stat. § 720.301(9).
• Fla. Admin. Code r. 12A-1.005(4)(d)3.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 23A-018

Original ruling text

QUESTION: Whether the assessment used for Association’s costs for Club Common Areas and Club
Facilities maintenance, which is payable by property owners, would be subject to sales and use tax after
the merger?
RESPONSE: No. Club has asserted that the assessment under advisement is: 1) mandatory; 2) paid to the
Homeowners’ Association; 3) required to be paid as a condition of ownership of real property; and 4) used
for homeowners’ association’s costs for common area maintenance and isn’t for the entitlement to use
the common areas.
October 10, 2023

Via e-mail:
Re:

Technical Assistance Advisement – TAA #: 23A-018

Sales and Use Tax – Admissions
Sections 212.02(1), 720.301(9), Florida Statutes - (F.S.)
Rule 12A-1.005, Florida Administrative Code - (F.A.C.)
Dear
This is in response to your letter
requesting this Department’s issuance of a Technical
Assistance Advisement (“TAA”) pursuant to Section(s.) 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.

Letter of Technical Advice
October 10, 2023
Page 3
REQUESTED ADVISEMENT
Club request advisement on whether the assessment used for Association’s costs for Club Common Areas
and Club Facilities maintenance, which is payable by property owners, would be subject to sales and use
tax after the merger.
FACTS
Club is a member-owned not-for-profit Florida corporation owned by
resident equity members and
resident Associate equity members. All
of those Club equity members, are also members of the
Association. Currently, there are also
members. The Club is governed by Chapter
617, F.S., and by Club’s Articles of Incorporation, By-Laws, and the Rules and Regulations. Club currently
owns, operates, and maintains certain “Club Facilities” which consist substantially of

Association is a homeowners’ association which incorporated as a not-for-profit corporation located in
, Florida and consist of
. Association is governed by Chapters 617 and 720, F.S.,
and by recorded restrictive covenants including, but not limited to, its Declaration of Covenants,
(“Declaration”), as same was originally recorded and as same has been amended and restored from time
to time. Association provides private safety functions and services in the area described within Exhibits A1 and A-2 in the Declaration and the Common Areas and Club Facilities. Association is responsible for the
control of

. Finally,
Association operates without profit for the sole and exclusive benefits of its Members.
Association and Club each conduct their operations within the Community, and both are comprised of
substantially the same members except for: (a)
individuals who have full rights and privileges to use
Club Facilities but are not members of Association (“
”); (b) individuals who
have limited contractual rights to use the Club Facilities but are not members of the Association
”); and (c) members of the Club who are not members of the Association
(“
”). Following the effective date of the Merger,
,
and
of the former Club will
not be Members of the Association. These
issued by the former Club shall be
exchanged for forms of use or license agreements to use the Club Facilities, but same shall not confer a
membership in the Association.
It is important to emphasize that per the existing Declaration and the proposed Second Amended and
Restated Declaration, every individual or entity, in accepting a deed or contract of ownership for any Lot
within the Community agrees to and shall be a member of Association and Club, including without
limitation the provisions and obligations imposed by the Governing Documents. Membership shall
continue until such time as the member transfers or conveys record title of a Lot, or such Lot is transferred
and conveyed by operation of law, at which time membership shall automatically be conferred upon the
transferee, subject to the Declaration, including without limitation the provisions of and the obligations
imposed by the Governing Documents.

Letter of Technical Advice
October 10, 2023
Page 3
Membership in the Association has been and shall continue to be separate and distinct from Club
Membership. The process of obtaining a Club Membership is set forth in the By-Laws and other
Governing Documents. Members of the Association who purchase any Lot within the Association
subsequent to the effective date of this Amendment shall be required to obtain a Club Membership in
connection with each Lot and shall be required to maintain such Club Membership in good standing
throughout the duration of their ownership of any Lot within the Community.
It is contemplated that the Merger will be consummated substantially in accordance with a Plan of Merger
pursuant to which: (i) Club will be merged with and into Association as authorized by s.617.0302(16), F,S.;
(ii) the proposed effective date of the Merger is
, and the Association, as the surviving
corporation, will continue to be a Florida not-for-profit corporation and a homeowners association
pursuant to s.720.301(9),F,S.; (iii) all other matters pertaining to the terms and conditions of the Merger,
including the manner and basis of converting the memberships of each merging corporation into
memberships of the surviving corporation; recitation of the approval of the Plan of Merger by the Board
of Directors of the Association and by the Board of
of Club respectively, and recitation of the
voting approvals required by both Association members and Club members will be incorporated into the
finalized Merger Documents.
Pursuant to the proposed Plan of Merger, effective
, the Association, as the surviving
corporation will own Club Facilities by operation of law and shall also operate, manage, and maintain Club
Facilities for the use and benefit of Association Members and their guests. Further it is our understanding
that, Association will retain an equity membership structure after completion of the proposed Merger
and, there shall be one (1) class of Association membership.
Each Lot Owner shall become an Association Member upon title to the Lot being conveyed by deed and
upon recording of said deed in the Public Records of
, Florida. The record owners of
Lots shall be Association Members and no other persons or entities shall be Association Members. An
Association member shall have one vote for each Lot owned. All memberships and corresponding
Membership Certificates issued by Club to individuals or entities who were not Lot Owners at the effective
date of the Merger shall be exchanged for a form of use or license agreement to authorize use of Club
Facilities but shall not confer a membership in the Association.
Upon the effective date of the Merger, there exists one (1) Member of the pre-Merger Association who
was the record owner of a Lot in the Community but was not required to obtain a Club Membership in
the pre-Merger Club pursuant to Article VII, Section R. of the pre-Merger Declaration (Grandfathered
Association Member). All Lot Owners, except for the Grandfathered Association Member, as defined in
the Declaration, will be issued a Club Membership by the Association, and will have full access to all
Common Areas as well as rights and privileges to use the Club Facilities, subject to the restrictions set
forth in the Second Amended and Restated By-Laws.
Lot Owners designated as Associate Members in the Club’s prior By-Laws shall not be permitted to use
the
, except in
events approved by the Board that allow
guests. Further, Associate Members may not serve on committees that relate to
facilities or
; nor shall Associate Members be required to pay Special Assessments pertaining to the
, pursuant to the By-Laws and the Rules and Regulations. Prior to the

Letter of Technical Advice
October 10, 2023
Page 3
Merger, new Associate Memberships were no longer being offered nor will they be offered after the
Effective Date of the Merger.
Members of the former Club, as Lot Owners, are Members of Association. However, said
Members shall not be permitted use of, nor use privileges with respect to Club Facilities.
,
, and
of the
former Club as of the effective date of the Merger will not be Members of Association. These
memberships issued by the former Club shall be exchanged for forms of use or license
agreements to use Club Facilities, but same shall not confer a membership in Association.
After the Merger, a member shall represent themself, or may authorize by written proxy, an individual to
represent the Member in all meetings which a Member of the Association is entitled to attend. In any
meeting of Members, the Lot Owners shall be entitled to one (1) vote for each Lot so owned. The first
Board following the effective date of the Merger (‘initial Post-Merger Board’) shall be comprised of
members consisting of the
members from the pre -Merger Club’s Board of
appointed pursuant to a duly adopted resolution of the Club’s Board of
and the
Officers
from the pre-Merger Association’s Board of Directors holding such office immediately prior to the
effective date of the Merger. The terms of all the Directors and Officers comprising the Initial Post-Merger
Board shall expire upon the adjournment of Association’s first Annual Meeting to take place following the
effective date of the Merger, provided that there is a quorum of Members at such Annual Meeting.
Following the Merger, pursuant to the Merger Documents, it is contemplated that the cost of owning and
operating: (i) the Common Areas other than Club Facilities will be determined based on the Annual Budget
and will be shared equally by all Association Members; and (ii) Club Facilities will be shared among the
various categories of members substantially similar to the manner in which such expenses are shared by
the Resident Equity Members under the existing Club Governing Documents.
A Lot Owner will be deemed to covenant and agree to pay to the Association any annual assessments or
charges and any special assessments for maintenance, or major repairs, capital expenditures or capital
improvements, or for any other operating or common expenses of Association, or for any dues, fees,
charges and/or special assessments attributable to the Club or as part of Club Membership, which for all
purposes, shall be deemed assessments under the Declaration; such assessments to be fixed, established
and collected from time to time by the Association.
There shall be established on the effective date of the Merger, one or more restricted accounts, to hold
all Association funds collected from initial capital contributions required pursuant to Article IV, Section H,
of the Declaration, including such funds held by the pre-Merger Club. The funds held in such restricted
account(s) shall be used solely to fund Capital Projects deemed appropriate by the Board but subject to
the limitations imposed by the Governing Documents, service the Association’s debt obligations
associated with Capital Projects, and to redeem any Membership Bonds. All initial capital contributions,
net of the repayment of outstanding membership bonds, collected by Association shall be allocated to
the “
” account and shall be used solely to fund
and
related to the Common Areas and Club
Facilities and any debt service incurred thereon. Initial Capital Contributions shall not be used to fund any
Operating Expenses or for any other operational purposes.

Letter of Technical Advice
October 10, 2023
Page 3

After the Merger, Association may establish, levy, assess and collect the assessments necessary to operate
Association and carry on its activities, and to create such contingency and working capital funds for
expenditures as may be deemed appropriate by the Board, except as such funds may be restricted or
limited by the express provisions of the Declaration and By-Laws.
Finally, pursuant to the Merger, the obligation to pay all assessments, including dues, annual assessments,
special assessments, initial capital contributions, exterior maintenance assessments, capital assessments,
etc., may be secured by a lien on the owner’s property in the Community. The lien of the assessments and
other fees and costs for which provision is herein made, as well as in any other Article of the Declaration,
shall be subordinate to the lien of any first mortgage to a bank, life insurance company, federal or state
savings and loan association, or real estate investment trust.
In an email reply, dated
described as follows:

, you confirmed that the assessment under advisement could be

1. Assessments are mandatory.
2. Assessments are paid to the association, which is a homeowner’s association.
3. Assessments are required to be paid as a condition of ownership of real property where the
   common areas are located.
4. Assessments are used for the homeowner’s association’s costs for common area maintenance
   and aren’t for the entitlement to use the common areas.
   CLUB’S POSITION
   Club believes, based on the relevant Florida Statutes and Administrative Code, that the required
   membership assessments to be paid to Association, as the surviving entity of the Merger, in connection
   with the lowest available level of required membership, (i.e. Association Membership) will represent
   nontaxable admissions pursuant to Rule 12A-1.005(4)(d)3., F.A.C. because, such amounts are: (i)
   mandatory fees payable by property owners in the community; (ii) paid to a homeowners association; (iii)
   required to be paid as a condition of ownership; and (iv) the Club Common Areas and Club Facilities will
   be part of the common elements or common areas of the real property constituting the Community.
   The Governing Documents require that all new Lot Owners become Association Members and pay the
   same amount of assessments to use the Association Common Areas. Resident Equity Members and
   Associate Equity Members of the Club currently pay and will continue to pay the same amount of dues to
   use the Club Facilities. The
   Members pay discounted Club dues for a period up to
   months for a home renovation project and up to
   months for a new home construction
   project. At the end of the discounted dues period, if the Lot has not been sold to a new Resident Equity
   Member, the
   Member is required to pay full Club dues, The
   Members
   are not permitted to use the Club Facilities at any time both pre-Merger and post-Merger.
   The existing one (1) Grandfathered Member is not permitted to use the Club Facilities and will be replaced
   when the Lot is sold to a new Association Member with full rights and privileges to use the Club Facilities
   and who will pay full assessments and dues. Although the Association intends to maintain the
   membership category post- merger, these members are deemed to be temporary as they

Letter of Technical Advice
October 10, 2023
Page 3
will always be replaced with Association Members with full rights and privileges to use the Club Facilities
who will pay full assessments and dues when their Lots are sold to new owners. Therefore, it is
appropriate to disregard the Grandfathered Member and the
Members in determining
the lowest level of mandatory membership in the Association as neither category is permitted to use the
Club Facilities.
The one (1) Association Membership category, consisting of Resident Equity Members and Associate
Equity Members of the Club, that pay the same amount of dues to use the Club Facilities, would be the
lowest level of mandatory membership in Association in determining the exemption from sales tax.
APPLICABLE LAW AND DISCUSSION
Section 212.02(1), F.S., provides in part, “The term ‘admissions’ means and includes the net sum of money
after deduction of any federal taxes for admitting a person or vehicle or persons to any place of
amusement, sport, or recreation… and all dues and fees paid to private clubs and membership clubs
providing recreational or physical fitness facilities, including, but not limited to, golf, tennis, swimming,
yachting, boating, athletic, exercise, and fitness facilities, …”
Section 212.04(1)(a), F.S., indicates, “... [it is] the legislative intent that every person is exercising a taxable
privilege who sells or receives anything of value by way of admissions.”
Section 720.301(9), F.S., provides, “Homeowners’ associations” or “association” means a Florida
corporation responsible for the operation of a community or a mobile home subdivision in which the
voting membership is made up of parcel owners or their agents, or a combination thereof, and in which
membership is a mandatory condition of parcel ownership, and which is authorized to impose
assessments that, if unpaid, may become a lien on the parcel. The term “homeowners’ association” does
not include a community development district or other similar special taxing district created pursuant to
statute.”
Rule 12A-1.005(4)(d), F.A.C. provides in part as follows:
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.
   CONCLUSION
   The assessment under advisement would not be subject to Florida sales tax as such assessment is: 1)
   mandatory; 2) paid to the Homeowners’ Association; 3) required to be paid as a condition of ownership

Letter of Technical Advice
October 10, 2023
Page 3
of real property; and 4) used for homeowners’ association’s costs for common area maintenance and isn’t
for the entitlement to use the common areas.
For more information concerning all the taxes administered by the Department of Revenue, please refer
to the Department’s Internet site at: www.floridarevenue.com.
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 ten (10) days of the date of this letter.
If you have any further questions regarding this matter and wish to discuss them, you may contact us at
the telephones listed below.
Kind Regards,

Alesia L. Pride
Alesia L. Pride
Tax Law Specialist
Technical Assistance & Dispute Resolution

Record ID: 7000989979