How should a mixed-use hotel master lease allocate rent between taxable commercial space and excluded hotel or parking areas?

Plain-English summary

The Department used a square-footage allocation to determine what portion of rent under a mixed-use hotel master lease was subject to Florida's tax on renting real property.

Hotel dwelling areas were excluded under section 212.031(1)(a)2., and parking space was excluded from this rent-tax calculation because parking was separately taxed under section 212.03(6). The remaining commercial or operational space formed the taxable portion.

The Department rejected the taxpayer's proposed percentage because one redacted area had been treated as exempt but should have been included in the taxable numerator. After that revision, the Department accepted the resulting percentage as a reasonable allocation. The public ruling redacts the measurements and final percentage.

What this means for you

For a lease covering both taxable and excluded uses, Florida can allocate rent using the lease and other available information. Here, square footage was a reasonable method, but the classification of each area mattered as much as the arithmetic.

The Department also noted that it had not independently verified the submitted square-footage figures.

Common questions

Was the entire hotel lease taxable as commercial rent? No. The ruling excluded hotel dwelling areas and separately taxed parking from the section 212.031 rent calculation.

Did the Department accept the taxpayer's proposed allocation? Not as submitted. It moved one redacted area into the taxable space and accepted the revised result.

What was the final taxable percentage? The public ruling redacts it.

Why was parking excluded from this calculation? The ruling states that parking is taxed separately under section 212.03(6), and Florida law avoids pyramiding the rent tax.

Citations and references

• Fla. Stat. § 212.03(1)(a) and (6).
• Fla. Stat. § 212.031(1)(a)-(c) and (2)(b).
• Fla. Admin. Code r. 12A-1.070(14)(a).

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 23A-022

Original ruling text

QUESTION: What percentage of Taxpayer’s rent payments are subject to Florida Sales and
Use Tax?
ANSWER: It is the Department’s position that the taxable percentage of
percent is a reasonable
determination and therefore the portion of the rental consideration paid by lessee which is subject
to sales tax.
December 01, 2023

Via Email:
Subject: Technical Assistance Advisement - 23A-022
Sales and Use Tax – Taxable Portion of Hotel Lease
STATUTE CITE(S): Sections 212.03 and 212.031, Florida Statutes (F.S.)
RULE CITE: Rule 12A-1.070, Florida Administrative Code (F.A.C.)
("Taxpayer")
FEIN:
BP#:
Dear

:

This is in response to your letter dated
requesting this Department’s issuance of a
Technical Assistance Advisement (“TAA”) pursuant to section 213.22, F.S., and Rule Chapter 12-11,
F.A.C., concerning the matter referenced below. An examination of your letter has established that
Taxpayer has complied with the statutory and regulatory requirements for issuance of a TAA.
Therefore, the Department is hereby granting your request for a TAA.
Requested Advisement
What percentage of Taxpayer’s rent payments are subject to Florida Sales and Use Tax?
Facts
Taxpayer and
renovation and operation of

(“Lessee”) entered into a master lease for the
(“Hotel”) in
. The parcel includes a

Technical Assistance Advisement
December 01, 2023
Page 2

addition, the building as
guests of Hotel and the public.

SF of

(“SF”) with
of which

. In
by
.

The following is the detailed breakdown of square footage provided by Taxpayer and its suggested
taxability:

Exempt
Exempt
Taxable

Total

SF
SF
SF
SF

Exempt
Exempt
Exempt
Exempt
Taxable

Total

SF
SF
SF
SF
SF
SF

Exempt
Exempt
Taxable

Total

SF
SF
SF
SF

Exempt
Taxable

Total

SF
SF
SF

SF

Exempt

Taxpayer’s Power of Attorney confirmed in an email dated
, that there was an error in the square
footage assigned to “
”. The square footage should be
, not
. This
revision does not change the Grand Total square footage.
1

Technical Assistance Advisement
December 01, 2023
Page 3

Total

Grand Total

SF
SF

Exempt

SF

Exempt

SF
Taxpayer’s Position

Under the facts involved, Taxpayer believes that
% is a reasonable method useful for calculating
the taxable portion of lease payments under a lease for multiple use property. The
% was
calculated by dividing the grand total SF
) by the taxable SF used by Taxpayer (
).
The numerator in Taxpayer’s calculation is comprised of the SF (
) that is used exclusively by
Taxpayer for its maintenance and operation of Hotel. The numerator does not include the
,
,
,
,
,
,
,
,
(which guest have access to),
(which is “
),”
and other areas which are provided for use to Hotel guests without any additional charge, which are
considered part of the dwelling units and therefore exempt pursuant to s. 212.031(a), F.S. The
numerator furthermore does not include the
which is taxed under s. 212.03(6), F.S. The
denominator in Taxpayer’s calculation is the grand total SF (
) of the land.
Applicable Authority and Discussion
Section 212.03, F.S., provides the following in part:
(1)(a) It is hereby declared to be the legislative intent that every person is exercising
a taxable privilege who engages in the business of renting, leasing, letting, or granting
a license to use any living quarters or sleeping or housekeeping accommodations in,
from, or a part of, or in connection with any hotel . . . .

(6) The Legislative finds that every person who leases or rents parking or storage
spaces for motor vehicles in parking lots or garages . . . is engaging in a taxable
privilege.

Section 212.031, F.S., provides in part:

Technical Assistance Advisement
December 01, 2023
Page 4

(1)(a) It is declared to be the legislative intent 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:

2. Used exclusively as dwelling units.
3. Property subject to tax on parking, docking, or storage spaces under s. 212.03(6),
   F.S.

(b) When a lease involves multiple use of real property wherein a part of the real
property is subject to the tax herein, and a part of the property would be excluded
from the tax under . . .subparagraph (a)2., subparagraph (a)3., . . ., the department
shall determine, from the lease or license and such other information as may be
available, that portion of the total rental charge which is exempt from the tax imposed
by this section . . . .
(c) For the exercise of such privilege, a tax is levied in an amount equal to 4.5 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. The total rent or license fee charged
for such real property shall include payments for the granting of a privilege to use or
occupy real property for any purpose and shall include base rent, percentage rents,
or similar charges. . . . 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.

(2)(b) It is the further intent of this Legislature that only one tax be collected on the
rental or license fee payable for the occupancy or use of any such property,
that the tax so collected shall not be pyramided by a progression of transactions,
and that the amount of the tax due the state shall not be decreased by any such
progression of transactions.

Section 212.031(1)(a), F.S., imposes sales tax on the privilege of engaging in the leasing of, or the
granting of a license to use, real property. Section 212.031(1)(c), F.S., imposes the tax on the total
rent or license fee charged for such real property by the person charging or collecting the rental or
license fee. However, s. 212.031(1)(a)2., F.S., excludes real property from the tax when such property
is “used exclusively as dwelling units.” Section 212.031(1)(a)3., F.S., excludes real property from the
tax when such property is “subject to tax on parking, docking, or storage spaces” under s. 212.03(6),

Technical Assistance Advisement
December 01, 2023
Page 5

F.S. The law further provides that sales tax under s. 212.031, F.S., shall not be pyramided by a
progression of transactions.
Section 212.031(1)(b), F.S., authorizes the Department to determine the taxable portion of the total
rent payment when, in a lease of real property, there are multiple uses of such property, and a portion
of the property is subject to the tax, while another portion is not subject to tax, because of the
applicability of an exemption or exclusion, such as those in s. 212.031(1)(a)2., and 3., F.S. The
Department’s interpretation of this statute is provided in Rule 12A-1.070(14)(a), F.A.C., and provides
that the Department shall determine from the lease or license agreement, or other pertinent
information available, that portion of the rental charge that is exempt from tax.
The Department has not verified the SF of the figures that were provided. Based on the figures
provided, the Department disagrees with Taxpayer’s proposed taxable percentage of
percent.
In particular, the Department opines that the
, which is
square feet, should be included as “taxable” space and not exempt space. Therefore, the numerator
would be
square feet and the denominator would be
square feet, which results in a
taxable percentage of
percent.
Conclusion
It is the Department’s position that the taxable percentage of
percent is a reasonable
determination and therefore the portion of the rental consideration paid by Lessee which is subject
to sales tax.
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.
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)717-6363.

Technical Assistance Advisement
December 01, 2023
Page 6

Sincerely,

Leigh L. Ceci
Leigh L. Ceci, MAcc
Tax Law Specialist
Technical Assistance & Dispute Resolution
(850)717-6363
CC:

Record ID: 7001037543

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