Were an airport advertising company's concession payments and the amounts advertisers paid to use its display units subject to Florida sales tax?

Subject

Airport Advertising, License to Use Real Property

Plain-English summary

Both payment streams were taxable. The advertising company's concession fee to the airport authority was consideration for a license to use real property. The Department said licenses to use realty had been taxable since July 1, 1986, and neither airport exemption discussed in the ruling covered this agreement.

Advertisers' payments to the company were also taxable, but for a different reason. The display cases and units were removable trade fixtures that remained the company's tangible personal property, and the advertisers prepared, installed, and removed their own displays. Their payments were therefore consideration for renting or licensing the display units, not for an exempt advertising service.

Because the company did not sublease the authority's real property to the advertisers, it could not claim a credit for the sales tax paid to the authority.

What this means for you

The labels "agent" and "advertising" did not control. The Department looked at the contracts, who furnished and removed the equipment, who contracted with and collected from advertisers, and what property each payment bought the right to use.

Common questions

Q: Was the concession fee to the airport authority taxable? Yes. It paid for the exclusive right to use airport realty.

Q: Were the display units treated as part of the real estate? No. The removal requirement showed that the parties intended them to remain personal property.

Q: Were advertiser payments exempt advertising-service fees? No. The ruling treated them as taxable payments to use tangible personal property.

Q: Could the company credit tax paid on the airport license against tax on advertiser rentals? No. They were separate transactions involving different property.

Citations and references

• Fla. Stat. § 212.031(1)(a), (c) — rentals and licenses to use real property
• Fla. Stat. § 212.031(1)(a)7., 10. — airport-related exemptions discussed in the ruling
• Fla. Stat. § 212.05(1)(c) — rental or license to use tangible personal property
• Fla. Admin. Code r. 12A-1.072 — advertising services
• Commercial Finance Co. v. Brooksville Hotel Co., 123 So. 814 (Fla. 1929)
• Strickland's Mayport, Inc. v. Kingsley Bank, 449 So. 2d 928 (Fla. 1st DCA 1984)
• Sweeting v. Hammons, 521 So. 2d 226 (Fla. 3d DCA 1988)
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93A-050

Original ruling text

Jul 27, 1993

RE: TAA 93A-050
Airport Advertising, License to Use Real Property
ss. 212.031(1)(a), (c), 212.05(1)(c), F.S.
Rule 12A-1.072, F.A.C.

Dear :

Your letter of April 4, 1991, requested a Technical
Assistance Advisement on the taxability of transactions, as
described in your letter, relating to advertising in an airport.
This response constitutes a Technical Assistance Advisement and
is issued to you under the authority of s. 213.22, Florida
Statutes.

As provided in your request, on February 20th, 1989, the
XXXX (hereinafter "Authority") granted XXXXX (hereinafter
"Company") the exclusive right to install (i.e., furnish and
equip) advertising display areas within the terminal. Company
was also granted the privilege of selling space within the
advertising display unit to qualified persons (hereinafter
"Advertisers") approved by the Authority. It is your contention
that since Company's revenues are derived solely from the sale
of advertising space there is no tax due on the revenue received
from Advertiser nor on the concession fee paid by Company to
Authority.

Transmitted with your letter was a copy of the "Concession
Agreement for Operation of Airport Terminal Advertising" between
Company and the Authority. The following excerpts of the
Agreement seem most pertinent to the issues raised in your
letter.

Article 2: "SPACE GRANTED. The Authority agrees to
designate and provide areas for advertising displays at the
Terminal Building. Agent [Company] agrees to furnish and equip
each advertising display area in a form acceptable to the

Authority..."

Article 3: "RENTAL. [Company] agrees to furnish and equip
each advertising display area in a form acceptable to the
Authority and to operate the display advertising concession at
the...Airport..., and to pay the...Authority for the privilege
of operating said concession a sum equal to the following: A
concession fee amounting to the following of the gross receipts
from all advertising space sold at the Airport:

"a) Fifty-seven percent (57%) of any advertising revenue
generated through the Airport:

Year 1: 57.0%

Year 2: 58.0%
Year 3: 59.0%
Year 4: 60.0%
Year 5: 61.0%
OR

"[Company] further agrees to pay the Authority a total
minimum guaranteed concession fee of... $15,084... for each
month during the term of the contract..."

Article 4: "RIGHTS TO BE GRANTED. [Company] shall have the
right to conduct the sale of advertising space and facilities
for rental purposes as set forth under this Concession Agreement
in the... Airport..."

Article 7: "FACILITIES. [Company] must provide all display
cases, poster boards, and wall displays, electrical connections
thereto, and maintenance of same. The Authority will provide
electric current and floor or wall space for such. Thirty (30)
days after termination or cancellation of this Agreement,
[Company] shall remove all of their display cases, poster
boards, wall displays, and reservation boards and return Airport
as close to original condition, wear and tear excepted."
(Emphasis Supplied)

Also transmitted with your letter was a copy of the
"Airport Advertising Space Contract", which Company enters into
with Advertisers. Advertisers are responsible for producing and
transporting the advertisement to Company. Pertinent excerpts

of the contract provide:

"WHEREAS, [Company] is engaged in the advertising business
and among other things leases display units and space in various
airports; and whereas, Advertiser is desirous of leasing the
display unit(s) in the airport indicated on this contract from
Company." (Emphasis Supplied)

Item 1: "CONTRACT LENGTH - The term of this lease and the
commencement date for all of Advertiser's obligations hereunder
are stated on the reverse side. This lease shall renew itself
for consecutive 90 days periods..."

Item 3: "PREPARATION AND APPROVAL OF DISPLAYS - Advertiser
shall at his or her own expense prepare and ship the display for
the appropriate designated unit..." (Emphasis Supplied)

Item 4: "MAINTENANCE OF DISPLAY CASES - [Company] is
authorized to open displays for the replacement of light bulbs,
and to otherwise clean, service and maintain the Company's
display case."

Item 5: "RESPONSIBILITY FOR DAMAGE - The Advertiser shall
be responsible and liable for any damages it causes to display
cases. [Company] shall not be responsible for any loss or
damages, however caused, to the property of the Advertiser which
is inserted in the display unit..."

Item 6: "...[Company] shall have the right at any time
during the term of this contract...to terminate the same and
remove Advertiser's display..."

DETERMINATION

Payments made by Company to Authority for the exclusive
right to use its realty are subject to sales tax. s. 212.031(1),
F.S., provides in part:

"(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...

"(c) For the exercise of such privilege, a tax is levied in
an amount equal to 6 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."
(Emphasis Supplied)

The language in paragraph (a) that is underlined above for
emphasis was inserted into that paragraph effective July 1,
1986. Both licenses to use and rentals or leases of real
property have been subject to sales tax since that date. Before
that date, payments under a transaction were taxable if it was a
rental or lease but not if it was only a license to use. The
declaratory statement issued by this department to Company on
August 15, 1985, may not be cited as evidence exempting
Company's license to use real property from tax, since the
statement was issued prior to July 1, 1986, when licenses to use
became taxable. The declaratory statement specifically stated
that Company was a licensee of the facilities in question,
rather than a lessee. Any similar arrangements became taxable
effective July 1, 1986.

Further, Company is not eligible for the exemption from tax
on rentals or licenses to use real property that is provided in
s. 212.031(1)(a)7., F.S., for the period July 1, 1990, through
June 30, 1991, when property is used at an airport to operate
advertising displays in any county as defined in s. 125.011(1).
The county in which this airport is located is not such a
county, but, of course, if Company had similar contracts in such
a county during that interval, payments under them were exempt
during that interval.

Also Company is not eligible for the exemption provided in
s. 212.031(1)(a)10., F.S., which exempts from tax licenses to
use real property within the premises of an airport for retail
concessionaire services involving the sale of food or drink or
other tangible personal property. The arrangement at issue is
not related in any way to the sale of food or drink within the
premises of the airport (the above statutory cite specifically
states that the term "sale" does not include the leasing of

tangible personal property).

Your letter further contends that the agreement between
Company and the Authority "granted to the Company... the right
to be the Authority's exclusive agent for the sale of
advertising within the terminals". Language in the agreement
refers to Company as "agent", but the agreement's substance
indicates to the contrary. In Article 2, the Authority agreed
to "designate and provide areas for advertising displays at the
Terminal Building", but made it clear that it would be the
responsibility of Company "to furnish and equip each advertising
display area", which is a responsibility of one who rents real
estate space or is given a license to use such space.
Furthermore, Company entered agreements with Advertisers as a
principal, without any indication that it was acting as agent
for the Authority, or that the contract was between the
Advertiser and the Authority. The payments by Advertisers were
required to be made to Company, not to the Authority or to
Company as agent for the Authority.

Another issue raised in your request concerns whether or
not sales tax is due on the revenue received by Company from its
Advertisers. In order to answer this question the character of
the advertising equipment in the display areas must first be
established as either personalty or realty. In Commercial
Finance Co. v. Brooksville Hotel Co., 123 So. 814 (Fla. 1929)
the court cited and quoted Seedhouse v. Broward, 16 So. 425, 429
(Fla. 1894), "'In establishing the fact whether a given thing is
or is not a fixture upon land, the intention of the owner in
placing it there, to be gathered from his declarations, and from
the character, relations, and purposes of the property, is an
important element, sometimes of controlling importance.'"
(Emphasis Supplied by the Court)

In Strickland's Mayport, Inc. and B.J. Strickland, Jr. v.
Kingsley Bank, 449 So.2d 928 (Fla. 1DCA 1984) the First District
Court of Appeal cited Commercial Finance Co. v. Brooksville
Hotel Co., supra, stating: "... the Florida Supreme Court set
out a three-part test for determining whether an object is a
fixture or personalty:
"1. Is there actual annexation to the realty or something

appurtenant thereto?
"2. Is the item in question appropriately applied to the
use or purpose of that part of the realty to which it is
connected?
"3. Did the party making the annexation intend the item to
be a permanent accession to the freehold?

"If the answer to these three questions is yes, the object
is a fixture."

The tests set out by the Supreme Court in Commercial
Finance were cited and followed in the matter of Sweeting v.
Hammons, 521 So.2d 226 (Fla. App. 3 Dist. 1988), wherein the
court held that it was the intention of the parties that certain
trade fixtures placed upon leased lands by the tenant remained
as property of the tenant and, therefore, retained their
identity as personalty in absence of any express provisions to
the contrary in the leasehold agreement.

Applying the tests set forth in Commercial Finance and
followed by the Sweeting court it is clear that the display
equipment in question must be classified as personalty. This is
evident from the express provisions set forth in Article 7:
"FACILITIES.", quoted above, wherein Company is responsible to
remove all "their" display equipment upon termination or
cancellation of the lease. This constitutes an expression of
the parties (Company and Authority) that the display equipment
is not to become a permanent accession to the freehold. As a
result, the items of display equipment brought upon or affixed
to the Authority's premises by Company represent trade fixtures
and as such retain their identity as personal property.

Company may not argue that it is providing an exempt
advertising service as found in Rule 12A-1.072, F.A.C., to
Advertiser since the "Airport Advertising Space Contract"
provides that Advertiser is responsible for producing and
transporting the advertisement to Company for approval. Item 5
of the contract further evidences that Advertiser has control
over the display unit since Advertiser will hold Company
harmless for any injury suffered by Advertiser, its agents,
servants, or employees resulting from Advertiser's use of the

display units, including the installation or removal of displays
by Advertiser. Company is limited to replacing light bulbs and
cleaning the display case. Therefore, the payments from
Advertisers to Company are taxable as consideration for the
rental or license to use tangible personal property under
Section 212.05(1)(c), F.S.

In summation, your request identifies two separate
transactions: Company's taxable license to use Authority's
realty and Company's taxable rental of tangible personal
property (i.e., display units) to Advertisers. Since Company
did not sublet or grant a license to use Authority's real
property to Advertisers, Company is not entitled to take a
credit for any portion of sales tax paid to Authority.

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 upon 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 from that
which is 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 that 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 this response.

Sincerely,

Melton H. McKown, Administrator
Statutory Compliance, Section A

MHM/bt
T/A # 81