How did Florida sales tax apply when an amusement-park business exchanged themed assets, inventory, vehicles, and real estate with an affiliate?

Subject

Occasional Sale

Plain-English summary

The transaction had different sales-tax results for different asset categories. The exchange itself was a sale because Florida's definition included exchanges and barter, but several exemptions or real-property treatments applied.

• The unique themed property qualified as an exempt occasional or isolated sale because the taxpayer was not in the business of selling it and had made no individual sales of that property during the prior 12 months.
• Aircraft, boats, motor vehicles, and other titled or registered vehicles were not covered by the occasional-sale exemption and remained taxable.
• Surplus merchandise held for resale was exempt only if the taxpayer obtained a valid resale certificate from the affiliate at the time of the exchange.
• Themed and non-themed personal property transferred with real estate for one lump sum was not taxable when it was not separately itemized or priced in the transaction documents.
• Adding cash or a note to equalize the exchanged property values did not change those sales-tax conclusions.

What this means for you

Calling the overall transaction a like-kind exchange did not answer the Florida sales-tax question. The ruling classified each asset group by the seller's activity, registration requirements, resale documentation, and whether the personal property was separately priced from the real estate.

Common questions

Q: Were all amusement-park assets exempt as an occasional sale? No. The ruling approved that treatment for the unique themed property, not every asset category.

Q: Were titled vehicles exempt? No.

Q: Did resale inventory require documentation? Yes. A valid resale certificate was required at the time of the exchange.

Q: Did cash or a note change the analysis? No, on the facts described.

Citations and references

• Fla. Stat. §§ 212.02(2), 212.02(16) — business, occasional sales, and exchanges
• Fla. Admin. Code r. 12A-1.037 — occasional or isolated sales
• Fla. Admin. Code rr. 12A-1.038, 12A-1.039 — resale documentation
• I.R.C. § 1031 — like-kind exchange represented in the facts
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93A-030

Original ruling text

Title:

Occasional Sale

May 10, 1993

RE: TAA 93A-030
Sales Tax; Exchange of Property
s. 212.02(16), F.S.
Rules 12A-1.037, 12A-1.038, 12A-1.039, F.A.C.

Dear :

This acknowledges receipt of your letter of April 14, 1993,
to the Department of Revenue, requesting a Technical Assistance
Advisement, regarding the transaction described below.

FACTS

XXX (hereinafter, Taxpayer) and XXX (hereinafter,
Affiliate) are members of an affiliated group of corporations
that join in the filing of a consolidated U.S. Corporation
Income Tax Return. Affiliate intends to acquire real and
personal property business assets, located out-of-state
(hereinafter, Out-of-State Property). Taxpayer is the owner of
real and personal property business located in Florida
(hereinafter, Florida Property), substantially all of which are
like-kind to the Out-of-State Property. With respect to
Taxpayer, the transaction qualifies as a like-kind exchange
under Internal Revenue Code Section 1031.

Taxpayer and Affiliate are considering entering into a
transaction wherein Taxpayer will transfer the Florida Property
to Affiliate in exchange for the Out-of-State Property. In the
event the value of the Florida Property exceeds the value of the
Out-of-State Property, the difference will be paid by Affiliate
to Taxpayer in cash.

Over 85 percent of the total assessed value of the Florida
Property, as determined by the XXX represents the assessed value
of real property elements. Title to the personal property

elements of the Florida Property will pass from Taxpayer to
Affiliate in Florida. Taxpayer will not itemize nor otherwise
separately state nor price each individual item of tangible
personal property.

The proposed transaction involves "themed" and "non-themed"
property. A majority of assets in the Florida Property, and a
significant portion of the tangible personal property in the
Florida Property and Taxpayer's other businesses, is the themed
property, which is unique to Taxpayer's amusement parks business
and reflects the businesses' themed characteristics; such
property includes, but is not limited to, rides, displays and
exhibits. Non-themed tangible personal property, on the other
hand, is used in the maintenance, administration or recreational
aspects of Taxpayer's business.

When themed tangible personal property is replaced, it is
destroyed, whereas non-themed tangible personal property is
generally disposed of through sales to Taxpayer's employees or
auctions to the general public. The sales of non-themed
tangible personal property are conducted daily for employees;
and auctions open to the general public are conducted six to 12
times per year. Taxpayer collects sales tax on all sales, except
for sales of boats, motor vehicles, etc. (where the purchaser
pays tax at the time such items are registered or titled), and
except where the purchaser extends a resale certificate or
consumer's certificate of exemption. These previous sales of
non-themed tangible personal property are not part of a series
of sales related to, nor in any way connected to, the proposed
exchange.

Non-themed tangible personal property is either permanently
affixed to the realty and essential to the operation of the
themed property; or is tangible personalty such as cash
registers, air compressors, retail display cases, and other
property which is used in the day to day operation of Taxpayer's
business. All non-themed tangible personal property is of a
nature which would be adaptable to other businesses that cater
to the public.

In general, the non-themed tangible personal property

assets which are elements of the Florida Property and are sold
to employees or through public auctions consist of the following
types of property:

(a) machinery and equipment,
(b) surplus merchandise (i.e., inventory)
(c) motor vehicles, boats, and other such items requiring
registration with the state or federal government,
(d) office furniture and equipment, and
(e) merchandising furniture, fixtures and equipment.

With regard to the above listed property, specifically,
surplus merchandise, in (b) above, you state that appropriate
resale documentation will be obtained. Also, with regard to
motor vehicles, boats, and other such items requiring
registration with the state or federal government, listed in (c)
above, you state that appropriate sales taxes will be paid at
the time of titling or registration.

Moreover, you have received prior Letters of Technical
Advice (hereinafter, LTAs), dated March 10, 1993, and April 2,
1993, wherein the Department reviewed this transaction and only
addressed the themed property in the former, and then upon your
request, in the latter LTA, the discussion on the applicability
of documentary stamp taxes was excluded, and the tax treatment
of the non-themed property was addressed.

ISSUE

Whether the exchange of the themed and the non-themed
property is exempt from Florida's sales tax:

(1) as an occasional or isolated sale exemption;
(2) as it relates to the sale of aircraft, boats, mobile
homes and vehicles (i.e., item (c), above);
(3) as a sale for resale exemption (i.e., item (b),
above); and/or
(4) as the part and parcel of real property exemption,
since the items of tangible personal property that are
being exchanged by Taxpayer will not be separately
stated, but will be sold in conjunction with the real

estate for a lump sum amount.

Whether the inclusion of cash or a note has any bearing on
the tax treatment of the items of tangible personal property
encompassed in the sale or transfer of real property?

DISCUSSION

(1)
Occasional or Isolated Sales

Section 212.02(2), F.S., define the term "business", in
pertinent part as follows:

"`Business' means any activity engaged in by any person, or
caused to be engaged in by him, with the object of private
or public gain, benefit, or advantage, either direct or
indirect...."

Section 212.02(16), F.S., defines the term "sale" as:

"Any transfer of title or possession, or both, exchange,
barter, license, lease, or rental, conditional or
otherwise, in any manner or by any means whatsoever of
tangible personal property for a consideration." (Emphasis
added).

As provided in the above statutory quote, the exchange of
tangible personal property is considered to be a sale, for sales
and use tax purposes. Thus, absent any exempting provisions,
the exchange of tangible personal property is subject to tax.

However, Rule 12A-1.037, F.A.C., provides in pertinent part
as follows:

"(1)(a) Occasional or isolated sales of tangible personal
property made by a person who does not hold himself out as
engaged in business are exempt. However, this exemption
never applies to occasional or isolated sales of aircraft,
boats, mobile homes, motor vehicles, or other vehicles in
this state of a class or type required to be registered,

licensed, titled, or documented in this state or by the
United States Government... or to sales made by those
persons who hold themselves out as engaged in a business,
notwithstanding the fact that their sales may be few and
infrequent.
"(b) An exempt occasional or isolated sale occurs when the
sale is made by the owner of tangible personal property
under the following circumstances:
"1. The seller does not hold himself out as engaged in
business and such sales or series of sales occur no more
frequently than 2 times during any 12 month period. The
third sale or series of sales of tangible items during any
12 month period makes that person engaged in that business,
and that person is required to register as a dealer and to
collect and remit tax on the third sale or series of sales
and on all subsequent sales."

Therefore, the sale of assets of a business, when such sale
is outside the normal course of trading, may not be subject to
sales tax when the owner of that tangible personal property
(excluding aircraft, boats, mobile homes, motor vehicles or
other vehicles in this state of a type or class required to be
registered, licensed, titled, or documented in this state or by
the United States Government), is also the seller, provided that
such owner has not held himself out as engaged in such business
activity, and as described in Rule 12A-1.037(1)(b)1., F.A.C.,
supra.

Accordingly, it is the Department's position that the
exchange of the themed elements of tangible personal property in
the Florida Property, from Taxpayer to Affiliate is an
occasional or isolated sale, exempt from sales and use tax since
Taxpayer is not in the business of selling themed tangible
personal property and has not made any individual sales of such
property within a 12 month period.

(2)
Aircraft, Boats, Mobile Homes and Vehicles, item (c), supra

As provided in Rule 12A-1.037, F.A.C., and the discussion
on occasional or isolated sales, supra, there is no specific

exemption for the sale or exchange of aircraft, boats, mobile
homes, motor vehicles, or any other vehicles of a class or type
required to be registered, licensed, titled, or documented in
this state or by the United States. Therefore, it is the
Department's position that any such items sold or exchanged are
not exempt from Florida sales tax.

(3)
Sale for Resale, item (b), supra

Rule 12A-1.038, F.A.C., provides, in pertinent part, as
follows:

"(1) It is the specific legislative intent that every
sale,... is taxable under Chapter 212, F.S., unless such
sale, admission, use, storage, consumption or rental is
specifically exempt. The exempt status of the transaction
must be established by the dealer. Unless the dealer shall
have taken from the purchaser a certificate to the effect
that the property or service was purchased for resale and
bearing the name and address of the purchaser, the
effective date of the certificate and the number of his
dealer's certificate of registration, or a certificate
bearing the number of his consumer's exemption certificate,
and the effective date of the certificate, the sale shall
be deemed to be a taxable sale at retail ..."
"(3) A resale certificate is required from every purchaser
who purchases tangible personal property or service for
resale,... Otherwise, the dealer will be required to
collect and remit the tax to the Department of Revenue... "

Rule 12A-1.038(3), F.A.C., provides that a completed resale
certificate is required from every purchaser who purchases
tangible personal property for resale, subject to the provisions
of subsection 12A-1.038(1), F.A.C.; otherwise the selling dealer
will be required to collect and remit the tax to the Department.
Taxpayer is required to obtain from Affiliate its blanket
exemption certificate at the time of purchase, as provided in
Rule 12A-1.039, F.A.C., in order to make sales to Affiliate tax
exempt.

The Florida Department of Revenue does not supply dealers
with preprinted forms which meet the standards of Rule
12A-1.038, F.A.C., and has therefore promulgated Rule 12A-1.039,
F.A.C., providing only a suggested form for a blanket resale and
exemption certificate, that meets the minimum requirements of
Rule 12A-1.038, F.A.C. (A copy of Rules 12A-1.038 and 12A-1.039
is enclosed for your review).

Please be advised that a blanket resale certificate does
not expire, as this is not a document issued by the Department.
It may continue to be used until the issuer, in this case
Affiliate, revokes it by written notice to the supplier, or
until such time as the Florida Department of Revenue cancels
Affiliate's sales tax registration, should such an event occur.

Therefore, it is the Department's position that, with
regards to the surplus merchandise, if Taxpayer does not take
from Affiliate, at the time of sale or exchange, a valid
certificate to the effect that the surplus merchandise is
purchased for resale, such sale or exchange shall be taxable.

(4)
Real Property - Part and Parcel

The sale of real property is not subject to the sales tax
imposed under Chapter 212, F.S. However, transfers of real
property may be subject to documentary stamp and intangible
personal property tax. You have specifically requested that a
ruling with regard to the applicability of either of these taxes
not be included in this letter; therefore, none has been
provided.

To the extent that the sale of real property is not subject
to sales tax, it has been the Department's longstanding position
that if the sale of real property encompasses the transfer of
certain items of tangible personal property as part of the real
estate deal, the presence of the tangible personal property
items does not change the nontaxable nature of the transaction,
so long as such items are not separately stated and priced in
the sales contract, bill of sale, or other tangible evidence
documenting the sale.

With regard to the cash payment from Affiliate to Taxpayer,
or the extension of a note from Taxpayer to Affiliate, in the
event the value of Florida Property exceeds the value of the
Out-of-State Property, the Department's position is that the
inclusion or exclusion of cash or a note does not affect the
determination of the applicability of the sales tax exemption
for occasional and isolated sales, or on the determination that
items of tangible personal property encompassed in the sale or
transfer of real property are not subject to tax as long as
there is not separate itemization and pricing of such items.

In sum, the Department concludes that:

• the exchange of the themed property is exempt from sales
  tax as an occasional or isolated sale;
• the sale of aircraft, boats, and vehicles is not exempt;
• the exchange of the surplus merchandise will be exempt
  only if at the time of the exchange Taxpayer obtains a valid
  resale certificate from Affiliate, in accordance with Rule
  12A-1.038, F.A.C.;
• the items of themed and non-themed tangible personal
  property, that are exchanged in conjunction with the real
  property, which are not itemized or otherwise separately stated
  or priced, are not taxable, since the sale is for a lump sum
  amount, as part of the real estate deal; and
• the inclusion of cash or a note does not affect the tax
  treatment of the occasional and isolated sales or the treatment
  of items of tangible personal property encompassed in the
  transfer as part of the real estate.

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 based 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 and your request
are public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of Section 213.22,
F.S. Your name, address, and any other details which might lead
to identification of the taxpayer must be deleted by the
Department before disclosure. In an effort to protect the
confidentiality of such information, we request you notify the
undersigned in writing within 15 days of any deletions you wish
made to the request or the response.

Sincerely,

Nydia Men‚ndez
Technical Assistant

NM/pb
Con. #8302