Could a golf course avoid tax on its prime golf-cart lease when some carts were periodically used by employees?

Subject

Lease of Golf Carts for Re-lease and Periodic Use

Plain-English summary

Prime-lease payments were exempt only for carts used exclusively for rental to golf patrons with no incidental employee use. Florida construed “exclusively” strictly and approved the operator's proposal to identify and segregate carts used for inspections, maintenance, ranger patrols, housekeeping, refreshments, or other course work.

Prime rent allocated to those segregated employee-use carts was taxable. If the same segregated carts were also rented to golfers, those customer rental charges were taxable too. The remaining fleet could use resale treatment if it stayed exclusively in the customer rental pool.

What this means for you

Negligible or ordinary employee use still defeated exclusive re-lease treatment for an affected cart. Segregation and actual use, not fleet-wide intent alone, controlled.

Common questions

Did small incidental employee use preserve the exemption? No.

Could the course isolate the taxable portion? Yes, by segregating employee-use carts and allocating prime rent to them.

Were customer cart rentals taxable? Yes, including rentals of the segregated carts.

Citations and references

• Fla. Stat. § 213.22
• Fla. Admin. Code r. 12A-1.071(2), (7)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94A-007

Original ruling text

Jan 14, 1994

TAA 94A-007
Re: Technical Assistance Advisement
Sales Tax - The Lease of Golf Carts for Re-lease and
Periodic Use
Rule 12A-1.071(2), F.A.C.

Dear :

This response is in reply to your July 23, 1993, petition
for the Department's issuance of a Technical Assistance
Advisement ("TAA") pursuant to s. 213.22, F.S., and your
November 9, 1993, letter supplementing your petition concerning
the captioned matter and parties. Your petition and
supplemental information have been carefully examined by the
Department and have been found to be in compliance with the
requisite criteria set forth in Chapter 12-11, F.A.C.
Therefore, the Department is herewith granting your request for
the issuance of a TAA and the ensuing discourse shall embody
said ruling.

DISCUSSION OF FACTS

Your petition provides in part the following significant
information regarding the issue under advisement herein:

"The Taxpayer owns and operates a golf course in Florida
and, in connection with its golf course operations,
Taxpayer leases a fleet of golf carts from a leasing
company. The lessor is unrelated to the Taxpayer and is
engaged in the business of leasing equipment such as the
golf carts. The carts are typically leased by the Taxpayer
for periods of 3 or 4 years. At the end of the lease term,
the Taxpayer surrenders possession of the golf carts to the
lessor, and then enters into a new lease for new golf carts
with the lessor or other lessors. During the term of each
lease, the Taxpayer is responsible for the maintenance and

repair of the golf carts. The golf carts are battery
powered and every night the golf carts are recharged on the
Taxpayer's premises. The maintenance, repair and charging
operations are handled by the Taxpayer's personnel and the
lessor does not provide any operators or other personnel in
connection with the lease of the golf carts.

"The Taxpayer typically leases 80-100 golf carts and then
releases' the carts to individuals playing golf on the golf course. The golf fees charged to golfers include charges for golf cart usage. Sales tax is collected by the Taxpayer on the total amount of the golf fees for nonmembers and the cart rental fee alone for members (and other prepaid players). Taxpayer is a registered dealer and remits the collected sales tax to the Department in the normal course of its business. The Taxpayer leases the carts for the sole purpose of having them for leasing to itscustomers'. However, on occasion a golf cart from the
rental fleet may be used by an employee of the Taxpayer in
connection with the performance of the employee's services.
The amount of the usage, in terms of hours of use, is
negligible when compared to the hours of use by the
Taxpayer's customers when playing golf. No particular cart
is set aside or segregated from the golf cart fleet for use
by the Taxpayer's employees. The employee simply uses the
first cart available (normally one that has been recently
recharged and is at the front of a line of carts that are
recharged and available for use by the Taxpayer's
customers.)

"The amount of employee use of the carts is what might
normally be expected in connection with the operation of
any golf course and includes carrying out tasks such as
golf course inspection by the Taxpayer's course
superintendent and golf pros, incidental maintenance
activities (such as greens cup and tee marker placements
every few days, sand trap and bunker maintenance, sprinkler
operations and the like ---although it should be emphasized
Taxpayer has two of its own gas powered golf carts for
carrying out most of the courses maintenance operations).
The rental carts are also occasionally used for `patrols'

by the course rangers' that oversee the daily golf play by the Taxpayer's customers, housekeeping staff for the course's rest room facilities and to carry refreshments when the gas powered cart owned by the Taxpayer for this purpose is being repaired. A cart may also be used on an incidental basis when one of the Taxpayer's otherowned'
golf carts is being repaired or is otherwise
unavailable...."

In your November 9, 1993, letter supplementing your
petition, you submit the following proposal for consideration by
the Department:

"... [W]e would propose to identify and segregate a number
of the carts for the types of golf course activities
described in my prior letter. These would be set aside for
the incidental usage that occurs by the Taxpayer['s]
employees from time to time in respect of its golf course
activities. The use tax on the cart rental fee charged by
the lessor of the fleet would be paid with regard to these
carts alone (the rent paid to the lessor would be allocated
between segregated or taxable carts and the balance of the
rental fleet), and if the carts were also used in
connection with golfing activities (as part of the cart
rental pool for golf players, additional tax would be
collected and remitted for the cart fee applicable to the
secondary use). The `unsegregated' carts would still
qualify for exemption from use tax when taxpayer pays
lessor for their use in its rental fleet."

REQUESTED ADVISEMENT

You endeavor to elicit the Department's approval of the
above procedure as described in your November 9, 1993, letter
supplementing your petition.

DISCUSSION AND CONCLUSIONS OF LAW

The specific provisions of the Florida Administrative Code
which govern the transaction under advisement are provided in
Rule 12A-1.071, F.A.C., which states in part:

Rule 12A-1.071(2), F.A.C.: "(2)(a)1. Tangible personal
property purchased exclusively for leasing purposes may be
purchased tax exempt, providing the lessor is registered
with the Department as a dealer at the time of purchase and
issues the vendor a valid resale certificate in lieu of
tax. Any purchases made prior to the time of registration
as a dealer are subject to tax....
"(b)1. Any person who purchases tangible personal property
for the dual purpose of leasing it to others and also for
his own use, or who purchases tangible personal property
with the intention only of leasing it but in fact also uses
the property itself, shall pay the tax on the cost price of
such property and shall also collect and remit the tax on
all leases of such property.
"2. The subsequent conversion to one's own use, of tangible
personal property which has been purchased tax exempt for
exclusive lease, will be subject to use tax at the time of
conversion. The basis of the use tax will be `fair market
value' at the time of conversion. If the fair market value
of the tangible personal property cannot be determined,
then the use tax due at the time of conversion should be
based on the acquisition cost of the tangible personal
property. Under no circumstances will the aggregate amount
of sales tax, from leasing and the use tax at the time of
conversion, be less than the total sales tax that would
have been due on the original acquisition cost paid by the
lessor." (Emphasis Supplied)

Rule 12A-1.071(7), F.A.C.: "The lease payments on tangible
personal property which is leased solely for the purpose of
leasing it to a third party are exempt. The prime lessee is
required to register with the Department as a dealer and
issue the prime lessor a resale certificate in lieu of
tax."

In construing the resale (release) exemption designated in
Rule 12A-1.071(2)(a)1., F.A.C., above, the Department must
adhere to and be guided by the long-standing and fundamental
precept of statutory construction, established by the Florida
Supreme Court, which mandates that exemptions from or exceptions

to taxing statutes must be strictly construed against the
taxpayer. See Asphalt Pavers v. Dept. of Revenue, 584 So.2d 57
(Fla. 1st DCA 1991); Dade Cty. Taxing Auth. v. Cedars of
Lebanon, 355 So.2d 1205 (Fla. 1978), reh. den. April 5, 1978;
Williams v. Jones, 326 So.2d 425 (Fla. 1975), reh. den. March 4,
1976; Straughn v. Camp, 293 So.2d 689 (Fla. 1974); United States
Gypsum Company v. Green, 110 So.2d 409 (Fla. 1959).

Further, it is important to ascertain the meaning of the
term "exclusively" as used in Rule 12A-1.071(2)(a)1., F.A.C. To
this end it is prudent to enlist and apply the following
principles of statutory construction:

It is a fundamental principle of statutory construction
that legislative intent and policy concerns must control our
construction of statutes and that the determination as to the
intent of the legislature is based upon the plain and ordinary
meaning of the language in the statute itself. See Holly v.
Auld, 450 So.2d 217 (Fla. 1984).

In the matter of St. Petersburg Bank & Trust Co. v. Hamm,
414 So.2d 1071 (Fla. 1982), the Florida Supreme Court held that
while legislative intent controls construction of statutes, that
intent is determined primarily from language of the statute;
plain meaning of statutory language is first consideration.

In the matter of S.R.G. Corp. v. Department of Revenue, 365
So.2d 687 (Fla. 1978), the Florida Supreme Court held that
legislative intent must be determined primarily from language of
statute, as the legislature must be assumed to know the meaning
of the words and to have expressed its intent by the use of the
words found in the statute.

It therefore follows that the meaning ascribed to the term
"exclusively" as used in Rule 12A-1.071(2)(a)1., F.A.C., should
be its plain and ordinary meaning as opposed to any alternate
meaning.

The term "exclusively" is the adverbial form of the term
"exclusive" and the denotative meaning of the term "exclusive"
as given in the definitions below, taken in excerpt from two

widely recognized and used dictionaries, is representative of
the plain and ordinary meaning of said term.

Webster's New Collegiate Dictionary, Eighth Edition,
defines the term "exclusive" as: "1 a: excluding or having power
to exclude b: limiting or limited to possession, control, or use
by a single individual or group 2 a: excluding others from
participation b: snobbishly aloof 3 a: accepting or soliciting
only a socially restricted patronage (as of the upper class) b:
stylish, fashionable c: restricted in distribution, use or
appeal because of expense 4 a: single, sole... b: whole,
undivided." (Emphasis Supplied)

The American Heritage Dictionary, Second College Edition,
defines the term "exclusive" as: "1. Pertaining to or
characterized by exclusion. 2. Not divided or shared with
others; exclusive publishing rights. 3. Single or independent;
sole. 4. Complete; undivided...." (Emphasis Supplied)

Inasmuch as the above definitions represent the plain and
ordinary meaning ascribed to the term "exclusive" and keeping in
mind the Florida Supreme Court doctrine on strict construction
of exemptions against the taxpayer, it must, therefore, be
concluded that the resale (release) exemption specified in Rule
12A-1.071(2)(a)1., F.A.C., applies only when the single, sole,
whole, and undivided purpose of the purchase (including lease)
is for release. Consequently, with respect to the proposal
under advisement, the resale (release) exemption specified in
Rule 12A-1.071(2)(a)1., F.A.C., will specifically apply to the
prime lease of the carts which are leased by the Taxpayer for
exclusive release to its patrons provided the Taxpayer has no
incidental use of such carts. The prime lease of the number of
segregated carts which are set aside by the Taxpayer for use in
carrying out the various perfunctory activities described in
your petition is taxable. Moreover, if any of the segregated
carts set aside for use by the taxpayer are also leased or
rented to patrons, such lease or rental charges will also be
subject to tax consistent with the provisions of Rule 12A1.071(2)(b)1., F.A.C., above.

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 confidential
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,

Daniel M. Wagner, Jr.
Tax Law Specialist

DW/pb