Did a motel avoid Florida sales and tourist development taxes by having guests sign agreements lasting slightly longer than six months?

Subject

Rental of Living Accommodations

Plain-English summary

The motel's rental agreements were subject to Florida sales tax and local tourist development tax. Although the agreement lasted 185 days, the full set of documents called the guest transient, rejected application of Florida's residential landlord-tenant law, required weekly rent, and imposed rules that could terminate the stay. In practice, 97% of the known guests stayed less than six months.

The Department explained that a genuine signed written lease granting occupancy for longer than six months can qualify as a bona fide lease, even if the tenant later defaults or leaves early, absent evidence that the parties never intended continuous occupancy. But these particular documents, read together, did not establish such a lease.

The motel's service to low-income individuals did not create an exemption. The ruling also explained that the more-than-half-of-units, longer-than-three-months facility test had been limited since October 1, 1989, to trailer camps, mobile-home parks, and recreational-vehicle parks.

What this means for you

Calling an agreement longer than six months does not control when its other terms and the parties' conduct show a transient arrangement. The Department looked at the entire agreement and occupancy pattern.

Common questions

Q: Is every signed lease longer than six months exempt? No. It must be a bona fide agreement made in good faith for continuous occupancy longer than six months.

Q: Does an early departure automatically make a genuine longer-term lease taxable? No, according to the ruling, unless evidence shows the original agreement was not made in good faith.

Q: Did serving low-income guests create an exemption? No.

Q: Did the trailer-park facility test apply to this motel? No. The ruling said that test was limited to trailer, mobile-home, and recreational-vehicle parks.

Citations and references

• Fla. Stat. § 125.0104(1), (2), (3)(a) — local tourist development tax
• Fla. Stat. § 212.03(1), (2), (4), (7)(c) — living-accommodation rentals and exemptions
• Fla. Stat. § 212.02(10)(f) — trailer, mobile-home, and recreational-vehicle parks
• Fla. Stat. §§ 212.08(13) and 212.21(2) — express exemptions and legislative intent
• Fla. Stat. § 509.013(4)(a) — public lodging establishment
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93A-046

Original ruling text

Jul 21, 1993

RE: TAA 93A-046
Rental of Living Accommodations
Sections 125.0104(1),(2) and (3)(a), 212.02(10)(f),
212.03(1), (2) and (7)(c), 212.08(13), 212.21(2),
509.013(4)(a), F.S.

Dear :

This is in response to your letter of May 24, 1993, in
which you requested the issuance of a technical assistance
advisement regarding the issues raised in your letter.

Your letter provides in part:

"The first issue concerns the XXX. During the first 6
months of XXX this motel had gross receipts of $102,000 from
room rentals. The motel has 29 available rooms. The motel
requires each guest to sign a 7 month lease. A copy of the
lease is enclosed. The lease specifically states that the XXX
is a motel operating under F.S. 509 and not Residential
Landlord/Tenant Law. The lease, also specifically states that
the guest is transient and the motel is not the guest's
permanent address. For the first 6 months of operation in XXX,
the motel had 101 available contracts/ guests stay at the 29
room motel. Only 3 of the contracts/guests stayed at the motel
for a period greater than 6 months. In other words, 97% of the
known contracts/guest's period of stay at the motel was less
than 6 months. We believe that the motel is subject to tourist
development tax and sales tax based on the above facts.

"The owner of the motel is opposed to paying the tourist
development tax and the sales and use tax. He believes that his
motel is providing a community service need to low income
individuals and families (The average weekly room rental is $150
or $600 a month). He has two main arguments:

"1) There is no definition of a `bona fide written lease'

in the Florida Statutes. Therefore, we either provide him a
definition of a bona fide written lease that fulfills the
requirements of Subsection 212.03(4), or drop the issue of the
lease terms.

"To the best of our knowledge, he is correct about the lack
of a definition in the Florida Statutes for a bona fide written
lease. We have approached this issue as substance vs. form and
the intent of both parties was short-term rental.

"Is there a definition of a bona fide written lease and
could you provide some legal guidance on how the Department of
Revenue would approach this issue as it applies to the XXX?

"2) The second issue is the applicability of Attorney
General Opinion 082-51-July 19, 1982, Sales Tax, Applicability
of Transient Rentals Tax to Rentals for Six Months or Less. The
XXX owner is addressing the second to the last paragraph:

The rental of facilities, including trailer lots, which are intended primarily for rental as a principal or permanent place of residence is exempt from the tax imposed by this chapter. The rental of facilities that primarily serve transient guests is not exempt by this subsection. In the application of this law, or in making any determination against the exemption, the department shall consider and be guided by, among other things:1) Whether or not a facility caters primarily to the
traveling public;
2) Whether less than half of the total rental units available are occupied by tenants who have a continuous residence in excess of 3 months; and3) The nature of the advertising of the facility
involved.'

"It is our understanding that number (2) above, if over
half of the total rental units available are occupied by tenants
who have continuous residence in excess of 3 months, exempts the
whole facility of a trailer/mobile home park and does not apply
to any other type of facility (i.e., condominium complex and
apartment complex).

"The owner of the XXX, who also manages apartment complexes
in XXX, believes that this law, (2) exempt facility, also
applies to apartment complexes and his motel.

"This issue may be significant as we believe there are
large number of apartment complexes that offer small blocks of
rooms (less than 50% of total available rooms are leased for
less than 6 months) to tourists and corporate renters on a
short-term basis. A sample advertisement is enclosed."

APPLICABLE AUTHORITY

Section 212.03(1), (2) and (4), F.S., provides in part:

"(1) 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, or letting any
living quarters or sleeping or housekeeping accommodations
in, from, or a part of, or in connection with any hotel,
apartment house, roominghouse, or tourist or trailer camp.
For the exercise of such privilege, a tax is hereby levied
in an amount equal to 6 percent of and on the total rental
charged for such living quarters or sleeping or
housekeeping accommodations by the person charging or
collecting the rental. Such tax shall apply to hotels,
apartment houses, roominghouses, or tourist or trailer
camps whether or not there is in connection with any of the
same any dining rooms, cafes, or other places where meals
or lunches are sold or served to quests.
"(2) The tax provided for herein shall be in addition to
the total amount of the rental, shall be charged by the
lessor or person receiving the rent in and by said rental
arrangement to the lessee or person paying the rental, and
shall be due and payable at the time of the receipt of such
rental payment by the lessor or person, as defined in this
chapter, who receives said rental or payment....
"(4) The tax levied by this section shall not apply to, be
imposed upon, or collected from any person who shall have
entered into a bona fide written lease for longer than 6
months in duration for continuous residence at any one

hotel, apartment house, roominghouse, tourist or trailer
camp, or condominium or to any person who shall reside
continuously longer than 6 months at any one hotel,
apartment house, roominghouse, tourist or trailer camp, or
condominium and shall have paid the tax levied by this
section for 6 months of residence in any one hotel,
roominghouse, apartment house, tourist or trailer camp, or
condominium...."

Section 125.0104(1), (2) and (3)(a), F.S., provides:

"(1) SHORT TITLE. This section shall be known and cited as
the `Local Option Tourist Development Act.'
"(2) APPLICATION. The provisions contained in Chapter 212
apply to the administration of any tax levied pursuant to
this section.
"(3) TAXABLE PRIVILEGES; EXEMPTIONS: LEVY; RATE.
"(a) It is declared to be the intent of the Legislature
that every person who rents, leases, or lets for
consideration any living quarters or accommodations in any
hotel, apartment motel, motel, resort motel, apartment,
apartment motel, roominghouse, mobile home park,
recreational vehicle park, or condominium for a term of 6
months or less is exercising a privilege which is subject
to taxation under this section, unless such person rents,
leases, or lets for consideration any living quarters or
accommodations which are exempt according to the provisions
of Chapter 212."

Section 212.03(7)(c), F.S., provides;

"(c) The rental of facilities, as defined in s.
212.02(10)(f), which are intended primarily for rental as a
principal or permanent place of residence is exempt from
the tax imposed by this chapter. The rental of such
facilities that primarily serve transient guests is not
exempt by this subsection. In the application of this law,
or in making any determination against the exemption, the
department shall consider the facility as primarily serving
transient guests unless more than half of the total rental
units available are occupied by tenants who have a

continuous residence in excess of 3 months."
Section 212.02(10)(f), F.S., provides:

"(f) A trailer camp',mobile home park,' or `recreational
vehicle park' is a place where space is offered with or
without service facilities, by any persons or municipality
to the public for the parking and accommodation of two or
more automobile trailers, mobile homes, or recreational
vehicles which are used for lodging, for either a direct
money consideration or an indirect benefit to the lessor or
owner in connection with a related business, such space
being hereby defined as living quarters, and the rental
price thereof shall include all service charges paid to the
lessor."

Section 212.08(13), F.S., provides in part:

"(13) No transactions shall be exempt from the tax imposed
by this chapter except those expressly exempted herein."

Section 212.21(2), F.S., provides in part:

"(2) It is hereby declared to be the specific legislative
intent to tax each and every sale, admission, use, storage,
consumption, or rental levied and set forth in this
chapter, except as to such sale, admission, use, storage,
consumption, or rental as shall be specifically exempted
therefrom by this chapter subject to the conditions
appertaining to such exemption."

Section 509.013(4)(a), F.S., provides in part:

"(4)(a) `Public lodging establishment' means any unit,
group of units, dwelling, building, or group of buildings
within a single complex of buildings which is rented more
than three times in a calendar year for periods of less
than 30 days or 1 calendar month, whichever is less."

DEPARTMENT RESPONSE

As outlined in the above quoted sections of Chapters 125

and 212, F.S., the rental of living quarters is subject to sales
tax and local option tourist development tax unless the tenant
has continuously resided at the hotel, motel, apartment house
roominghouse, condominium, or like place longer than six months
and has paid the tax due or has entered into a bona fide written
lease for longer than six months.

The construction of the sales and use tax law is to tax
specific sales and to provide specific exemptions from some of
those otherwise taxable transactions. In order for a taxpayer
to claim an exemption, he must clearly show he is entitled to
the exemption. The law is strictly construed against the
taxpayer in the application of exemptions. Presently, there is
no exemption from the taxes imposed under sections 125.0104 and
212.03, F.S., for motels which provide a community service by
renting to low income individuals.

The term "bona fide written lease" is not defined in the
Florida Statutes; therefore, we must look to its common and
ordinary meaning. Black's Law Dictionary, sixth edition,
provides the following definitions:

"Bona fide. In or with good faith; honestly, openly, and
sincerely; without deceit or fraud..."

"Lease. Any agreement which gives rise to relationship of
landlord and tenant... Contract wherein one lets to the
other a certain space, property or building for specified
unit of time..."

It is the position of the Department that when the lessee
and the landlord have in good faith executed a signed, written
agreement that provides for the tenant's right to occupy the
living accommodations for a period longer than six months, such
agreement is considered a "bona fide written lease for longer
than 6 months in duration" for purposes of the exemption granted
under s. 212.03(4), F.S.

It is further the position of the Department that tax does
not apply to any lease payments when a tenant, who signs a
written lease or agreement for occupancy of living

accommodations for longer than six months, does not occupy the
property for the full term of the lease since s. 212.03(4),
F.S., goes no further than to provide the exemption and does not
provide that rent amounts are subject to tax if there is a
default by a party to the lease. Absent an affidavit or sworn
statement by the lessee or lessor that it was not the intention
at the time the lease agreement was entered into to continuously
occupy the living accommodations for the duration of the lease,
the Department presumes that a landlord and tenant have entered
into the lease agreement in good faith and without the intent to
deceive or defraud the State of Florida, or any political
subdivision of the state of the tax due.

With the passage of Chapter 89-362, L.O.F., effective
October 1, 1989, the exempt facilities exemption under section
212.03(7)(c), F.S., became applicable to trailer camps, mobile
home parks or recreational vehicle parks only. It no longer
applied to hotels, motels, apartment houses, condominiums and
other structures used for human habitation. Unless more than 50
percent of the total rental units available at the trailer camp,
mobile home park or recreational vehicle park are occupied by
tenants who have continuously resided there for more than three
months, all rentals at the facility are subject to tax unless
such tenant has continuously occupied such space at the trailer
camp, mobile home park or recreational vehicle park and has paid
the tax due on the first six months or has entered into a bona
fide written lease for longer than six months.
We have reviewed the copies of the "Guest Registration",
"Transient Rental Agreement", and the motel "Rules and
Regulations" which govern the guests stay at the motel. The
"Guest Registration" states that the "Rules and Regulations" of
the motel are incorporated into the agreement between the motel
and the guest and the "Transient Rental Agreement" makes it
clear that breaking any of the rules automatically nullifies the
agreement and the guest will be required to vacate the property
immediately.

Both the "Guest Registration" and the "Transient Rental
Agreement' make it clear that the guest is considered to be
transient, and the motel is operated under section 509, F.S.
with the understanding that under no circumstances does

Florida's residential landlord/tenant statutes regulate or
pertain to the operation, management and enforcement of the
rules and regulations of the motel.

The "Guest Registration" further provides that the guest
agrees that the motel is not and will not become the guest's
sole place of residence without the guest paying an additional
deposit, putting the utilities in the guest's name and signing a
lease mutually agreeable to the guest and the motel, regardless
of the length of the guest's stay at the motel.

Although the "Transient Rental Agreement" is for a period
of 185 days, the guest is required to pay his rent on a weekly
basis based on the number of people living in the rental unit.

The rules of construction relating to contracts generally,
apply to the construction of a lease. Stemmler v. Moon Jewelry
Co. 139 So.2d 150 (Fla. App D1 1962). As in the case of
contracts, the intention of the parties as manifested by the
words used is paramount in the construction of a lease.
National Hotel Inc. v. Koretzky 96 So.2d 774 (1957 Fla.).

In interpreting the language used in leases, a person
should give language its ordinary meaning with reference to the
subject matter and circumstances. Ehrich v. Barbatsis Holding
Co., 63 So.2d 911 (Fla. 1953).

A lease must be construed to give meaning to all the
language it contains. Mann v. Thompson, 100 So.2d 634 (Fla.
1958). It is necessary to gather meaning of the parties from
the whole instrument and not from lines taken out of context,
and wherever possible to construe apparent conflicting
provisions of a lease contract so that the provisions do not
conflict. Berwick Corp. v. Kleinginna Invest. Corp., 143 So.2d
684 (Fla. App D3, 1962).

It is the Department's position that the "Guest
Registration, the "Transient Rental Agreement" and the "Rules
and Regulations" when read as one agreement between the motel
and the guest, represents a transient rental agreement which is
subject to tax under section 212.03, F.S., and is not a "bona

fide" written lease for longer than six months which is exempt
under section 212.03(4), F.S., in light of the fact that the
agreement states that a transient rental agreement under section
509, F.S., has been executed, there is no landlord and tenant
relationship, and the fact that 97% of the known contract/guests
period of stay at the motel was less than six months.
Therefore, as stated above, the agreements are subject to tax.

This response constitutes a Technical Assistance Advisement
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 and your request
are public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of s. 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,

Richard S. Harrod
Technical Assistant

RH/pb
Con. #8973