When did deposits for executive suites, club seats, and multiyear season tickets become taxable admissions or license payments?

Subject

Admissions Tax-Deposits on Sky Box Seats

Plain-English summary

Refundable deposits for executive suites and club seats were not taxable admissions or real-property license payments when collected. The annual license fee was billed separately, and the deposits secured performance. They became taxable only if a breach or default caused the franchise to apply them to amounts due, provided the deposits remained liabilities on the books until that event and were then recorded as earned revenue.

The multiyear season-ticket deposit was also nontaxable while held as security and separately accounted for. It became taxable if the ticket holder did not renew after the final contract year and the deposit was applied to that year's ticket price, or if an early cancellation caused some or all of it to be forfeited. If the holder renewed and separately paid for the tickets, the deposit retained its nontaxable security-deposit status.

What this means for you

Calling an amount a deposit was not enough. The agreements had to make it genuinely refundable, separate it from current admission or license payments, deny present access based on the deposit alone, and keep it recorded as a liability until application or forfeiture.

Common questions

Were suite and club-seat deposits taxable when received? No, while refundable, separately charged, and carried as liabilities.

When did those deposits become taxable? When default or breach allowed the franchise to apply them to amounts due and recognize them as revenue.

What about the season-ticket deposit? It became taxable when applied to final-year tickets after nonrenewal or forfeited after early cancellation.

Did renewal itself trigger tax on the deposit? No. If the holder renewed and paid ticket charges separately, the deposit remained security.

Citations and references

• Fla. Stat. §§ 212.04(1) and (3), 212.06(1)(a), 212.15(1)-(2), 212.02(16)(a), 212.031(1)-(3), and 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94A-063

Original ruling text

Title:

Admissions Tax-Deposits on Sky Box Seats

Dec 05, 1994

Re: Technical Assistance Advisement 94(A)-063 Sales Tax - Applicability of the Admissions Tax to a Deposit for Reservation of a Particular Seat for the Home Games of a Sports Team XXX (herein the "Taxpayer") Address: XXX Sales Tax Number: XXX XXX (herein the "City") XXX (herein the "League") XXX (herein the "Bank")

Dear:

This response is in reply to your February 28, 1994, petition for the Department's issuance of a Technical Assistance Advisement ("TAA") pursuant to s. 213.22, F.S. Your petition regards the referenced matter and parties. The Department has carefully examined your petition and finds it to meet the criteria set forth in Chapter 12-11, F.A.C., requisite to issuance of a TAA. Therefore, the Department is by this response issuing the requested TAA.

DISCUSSION OF FACTS

Your petition and supporting documents impart the following significant information regarding the issues under advisement herein:

"The [Taxpayer] was organized for the purpose of purchasing one of the two available expansion [sport] teams of the
[League]. If awarded the franchise, the [Taxpayer] would play its regular season home games at the [Facility] in
[the City].

"The [City] and four other U.S. cities were in competition

for these two expansion teams. In order to show the [the League] that [the City] would be a viable choice and that there was ample fan support for the team; the [Taxpayer] began accepting deposits for the right to purchase stadium club seats and luxury executive suites if the [Taxpayer] were awarded an expansion team. All of these deposits were collected from prospective purchasers and held in escrow for each purchaser by [the Bank].

"On [certain date], the [Taxpayer] was awarded one of the expansion... teams by the [League]. The team will begin playing [League] games in [certain year], with all home games being played at the [Facility]. The [Taxpayer] will sell three types of seating: luxury executive suites, stadium club seats and season tickets.

"The relevant terms and conditions for purchasing Luxury Executive Suites for purposes of this request are as follows:

"The Executive Suites are licensed pursuant to an agreement (Exhibit A) between the suite holder and the
[Taxpayer] for a term of seven or ten seasons commencing with the [certain year] season. The purchaser pays a License Fee for access to the
[Facility] all [Taxpayer] events, as well as other events at the [Facility]. The purchaser was required to pay a portion of the security deposit in 1993 to show support to the [League] for the [City] to be awarded one of the expansion teams. The [Taxpayer was] not allowed access to these funds until January 1, 1994. All funds were deposited with [the Bank] with the interest earned from these funds credited to the individual suite holders through December 31, 1993. On January 1st of each year during the term of the agreement, the [Taxpayer] will bill the suite holder, for the succeeding season's license fee and related sales tax; plus any additional security deposit as a result of an increase in the license fee.

"Pursuant to the license agreement, the suite holder

is required to maintain a security deposit equal to one season's license fee. The security deposit will be refunded to the suite holder upon the occurrence of one of the following events:

"1. The suite holder defaults under the agreement, at which time the suite holder will be refunded the security deposit less any amount deemed by the
[Taxpayer] to be a loss or damage suffered as a result of the default. A suite holder will not be allowed access to the stadium in the event of a default; or "2. The suite holder does not renew the License Agreement at the end of its term, at which time the security deposit will be refunded to the suite holder.

"The relevant terms and conditions for purchasing Stadium Club Seats for purposes of this request are as follows:

"The Stadium Club Seats will be purchased pursuant to the terms of the agreement (Exhibit B) for a term of five or seven seasons. The Club Seat Holder will pay a License Fee which will provide for access to the
[Facility] for all home and pre-season... games of the
[the Taxpayer]. The Club Seat Holder was required to pay a portion of the security deposit to show support to the [League] for the [City] to be awarded one of the expansion teams. The [Taxpayer was] not allowed access to these funds until January 1, 1994. All funds were deposited with [the Bank], with the interest earned from these funds credited to the individual club seat holder through December 31, 1993.

"The [Taxpayer] require[s] the Club Seat Holder to maintain the equivalent of next season's License Fee as a security deposit. On January 1st of each year during the term of the agreement, the [Taxpayer] will bill the Club Seat Holder the succeeding season's License Fee and related sales tax; plus any additional security deposit as a result of an increase in the License Fee.

"The security deposit will be refunded to the Club Seat Holder upon the occurrence of one of the following events; "1. The club seat holder defaults under the agreement, at which time the club seat holder will be refunded the security deposit less any costs incurred by the
[Taxpayer] to enforce the agreement and relicense the club seats. The club seat holder cannot have use or possession of the seat while in default of the agreement; or "2. The club seat holder does not renew the license agreement at the end of its term, at which time the security deposit will be refunded to the club seat holder.

"On December 1, 1993, the [Taxpayer] began accepting deposits for the right to purchase season tickets for the home games of the [Taxpayer] for the [League] seasons commencing in 1995, 1996, and 1997.

"The relevant terms and conditions for purchasing season tickets for purposes of this request are as follows:

"All purchases of season tickets are for a three year period commencing with the season beginning in [Year One] and ending with the season beginning in [Year Three]. The purchaser may renew, at a future date, the season tickets for the [Year Four] and subsequent seasons. The purchaser is required to pay a deposit equal to one year's season ticket amount. Upon first requesting to purchase the season tickets via the order form, a $100 deposit was required. This deposit was refunded if the season tickets ordered were not available. If the season tickets were available, the remainder of the deposit would be payable by the purchaser on March 1, 1994[,] if the purchaser were on an annual payment plan; or payable monthly, beginning March 1, 1994, if the purchaser were on a monthly payment plan (Exhibit C).

"The deposit will be held by the [the Taxpayer] until

one of the following events occur: the purchaser decides not to renew his season tickets beyond [Year Three] or the purchaser wishes to cancel his season tickets prior to completion of the three year period. If the purchaser decides not to renew his tickets for
[Year Four] and beyond, the deposit will be applied to the purchase price of [Year Three] tickets. At that time, the [Taxpayer] will invoice the purchaser for the sales tax and other charges applicable to the
[Year Three] season. If the purchaser wishes to cancel his tickets prior to completion of the three year term, the purchaser will be refunded the deposit less a reselling charge if the [Taxpayer] can resell the tickets. If the [Taxpayer is] unable to resell the tickets, the purchaser will forfeit his deposit. At no time can the purchaser use the security deposit to gain access to the home games of the [Taxpayer]."

The following pertinent recitals are quoted from the terms and conditions embodied in "EXECUTIVE SUITE LICENSE AGREEMENT" (the "ESL Agreement") submitted as exhibit A to your petition:

"3. License Fee. The use and possession of the Suite shall be contingent upon payment to Licensor of the fee (the
`License Fee') in the amounts and at the times set forth in Exhibit One plus any sales, privilege, rental, use, property or other governmental taxes or surcharges due with respect to the License Fee or on account of the use and possession of the Suite. "11. Security Deposit. As security for the prompt and full payment of the License Fee and the full and faithful performance by Licensee of each and every other obligation of Licensee under this Agreement, Licensee shall maintain a security deposit in an amount equal to the next season's License Fee. Simultaneously with the execution of this Agreement, Licensee has deposited into the escrow account discussed below as the initial Security Deposit fifty percent (50%) of the sum set forth on Exhibit One as the License Fee. Within six (6) months of the award of a franchise to [the City], Licensee shall deposit as and when directed by Licensor an additional fifty percent (50%) of

the sum set forth on Exhibit One as the License Fee. On or about January 1st of each year during the term of this Agreement, Licensor shall furnish to Licensee written notice of the License Fee for the succeeding... season and the additional amount, if any, which Licensee must provide to Licensor to maintain Licensee's Security Deposit in an amount equal to such succeeding season's License Fee. Such additional amount shall be deposited with Licensor no later than January 31st of each year. Until the award of the Franchise, the security deposit shall be held in escrow and may not be commingled with other funds of Licensor. After the award of the Franchise, and the release of the escrow account by the [League], the security deposit may be commingled with other of Licensor's funds and may be used by Licensor for any business purpose. If, at any time during the term of this Agreement, any portion of the License Fee or any other amount payable by Licensee to Licensor pursuant to this Agreement is not promptly paid when due, then Licensor may, without waiving any other remedy which it may have under this Agreement, appropriate and apply all or any portion of the security deposit to the payment of such amount. Licensee shall, in such event and upon written demand of Licensor forthwith remit to Licensor an amount sufficient to restore the security deposit to the then applicable security deposit, and Licensee's failure to do so within ten (10) business days after receipt of such demand shall constitute a breach of this Agreement. If Licensee's right to the use and possession of the Suite is terminated pursuant to Paragraph 14 below, then Licensor may, at its option, appropriate and apply the security deposit, or so much thereof as may be necessary, to compensate Licensor for any loss or damage sustained or suffered by Licensor due to Licensee's breach. Otherwise, the security deposit shall be returned to Licensee at the expiration of the term of this Agreement or any renewal term, as applicable. Except as described in Paragraph 12 below, no interest shall be paid to Licensee on the security deposit. "12. Escrow Account and Refund of Security Deposit. Prior to the award of a franchise to [the City] the security deposit will be held in an escrow account at [the Bank].

If a franchise is not awarded to [the City], the security deposit will be returned to Licensee within ten (10) days of the [League's] expansion decision together with interest earned thereon from the day of deposit to the day of refund at not less than eighty percent (80%) of the applicable interest rate for ninety (90) day U.S. Treasury Bills. If a franchise is awarded to [the City], the security deposit will be paid to the Licensor upon such date as may be determined by the [League]. Any interest earned (at the rate specified above) from the date of deposit until such date will be applied to Licensee's first season License Fee. If the [League] has not awarded franchises by December 31, 1993, the security deposit will be promptly returned along with interest as specified above. Upon return of the security deposit together with the foregoing interest, this Agreement shall be terminated and the parties shall have no further liability or obligation to each other. An expansion decision must be evidenced by a written authorization of the [League]. "14. Default. In the event Licensee shall fail to pay when due any amounts (including without limitation the License Fee or any security deposit) to be paid by Licensee pursuant to this Agreement or if Licensee shall otherwise default in the performance or observation of its duties and obligations under this Agreement, Licensor may, at its option, terminate the rights of Licensee hereunder by giving Licensee ten (10) days prior written notice. In the event that Licensee shall not have cured the default or breach specified in said notice within said ten (10) day period, then Licensor may, without further demand or notice, terminate the right of Licensee to the use and possession of the suite and all other rights and privileges of Licensee under this Agreement and declare the entire unpaid balance of the License Fee immediately due and payable, whereupon Licensor shall have no further obligation of any kind to Licensee and may enter the Suite and remove all items of property of Licensee for storage at Licensee's expense. Licensor shall use reasonable efforts to relicense the right to the use and possession of the Suite to another party; provided that, if there are any other Suites in the Stadium available to be licensed,

Licensor may give priority to licensing such other suites. Licensee shall remain obligated to make all payments due or becoming due under this Agreement, but if Licensor licenses the right to the use and possession of the Suite to another party, then all amounts received from such other party applicable to any remaining period of this Agreement shall be applied first to the expense of relicensing and then to the reduction of any obligations of Licensee to Licensor under this Agreement. If the amounts collected by Licensor upon any such relicensing are not sufficient to pay the full amount of all such obligations of Licensee, Licensee shall promptly pay any such deficiency. The foregoing remedies of Licensor shall not be to the exclusion of any other right or remedy set forth herein or otherwise available to Licensor in law or in equity. Licensee shall be responsible for all attorney's fees and costs incurred by Licensor in the enforcement of this Agreement whether or not litigation is actually commenced and including any appellate proceedings. Licensee hereby waives trial by jury. No waiver by Licensor of any default or breach by Licensee of its obligations hereunder shall be construed to be a waiver or release of any other or subsequent default or breach by Licensee hereunder, and no failure or delay by Licensor in the exercise of any remedy provided for herein shall be construed to constitute a forfeiture or waiver thereof or of any other right or remedy available to Licensor."

The following pertinent recitals are quoted from the terms and conditions embodied in "Club Seats" license agreement (the "CSL Agreement") submitted as exhibit B to your petition:

"3. License Fee. Subject to the terms and conditions herein, the use and possession of the Seats and the club facilities shall be contingent upon payment to [Taxpayer's Affiliate] of the annual license fee (`License Fee') plus any sales, privilege, rental, use, property or other government taxes or surcharges due with respect to the License Fee or on account of the use and possession of the Seats. The License Fee for the use and possession of the Seats by Ticketholder for the initial... season..., shall

be $1,500.00 per seat and shall be due and payable on or before January 31, 1995. The License Fee shall be subject to a percentage increase, in [Taxpayer's Affiliate's] sole discretion, each year during the term hereof (including any renewal period), which percentage increase shall not exceed the greater of five percent (5.0%) or the increase in the Consumer Price Index for the preceding year. Such License Fee shall be due and payable on or before January 31st of each year. "8. Security Deposit. As security for the prompt and full payment of the License Fee and the full and faithful performance by Ticket holder of each and every obligation of Ticketholder under this Agreement, Ticketholder shall maintain a security deposit in an amount equal to the next season's License Fee. Simultaneously with the execution of this Agreement, Ticketholder has deposited into the escrow account discussed below an initial security deposit of $750 for each Seat. Within six (6) months of the award of a franchise to [the City], Ticketholder shall deposit as and when directed by [Taxpayer's Affiliate] an additional security deposit of $750 for each Seat to complete the security deposit with respect to the first season's License Fee. Until the award of the franchise, the initial security deposit shall be held in escrow and may not be commingled with other funds of [Taxpayer's Affiliate]. After the award of the franchise by the [League], the initial security deposit and any other security deposits may be commingled with other [Taxpayer's Affiliate] funds and may be used by [Taxpayer's Affiliate] for any business purpose. On or about January 1st of each year during the term of this Agreement, [Taxpayer's Affiliate] shall furnish to Ticketholder written notice of the License Fee for the succeeding ... season and the additional amount, if any, which ticketholder must provide to [Taxpayer's Affiliate] to maintain ticket holder's security deposit in an amount equal to such succeeding season's License Fee. Such additional amount shall be deposited with [Taxpayer's Affiliate] no later than January 31st of each year. If at any time during the term of this Agreement, any portion of the License Fee or any other amount payable by Ticketholder to [Taxpayer's Affiliate] pursuant to this Agreement is not

promptly paid when due, then [Taxpayer's Affiliate] may, without waiving any other remedy which it may have under this Agreement, appropriate and apply all or any portion of the security deposit to the payment of such amount. Ticketholder shall in such event and upon written demand of
[Taxpayer's Affiliate] forthwith remit to [Taxpayer's Affiliate] an amount sufficient to restore the security deposit to the then applicable security deposit and Ticketholder's failure to do so within ten (10) business days after receipt of such demand shall constitute a breach of this Agreement. If Ticketholder's right to the use and possession of the seats is terminated pursuant to the default provisions of this Agreement, then [Taxpayer's Affiliate] may, at its option, appropriate and apply the security deposit, or so much thereof as may be necessary, to compensate [Taxpayer's Affiliate] for any loss or damage sustained or suffered by [Taxpayer's Affiliate] due to Ticketholder's breach. Otherwise, the security deposit shall be returned to Ticketholder at the expiration of the term of this Agreement, or any renewal term. Except as described herein, no interest shall be paid to Ticketholder on the security deposit.

"10. Default. In the event Ticketholder shall fail to pay when due any amounts (including, without limitation, the License Fee or any security deposit) required to be paid by Ticketholder pursuant to this Agreement or if Ticketholder shall otherwise default in the performance or observation of its duties and obligations under this Agreement,
[Taxpayer's Affiliate] may, at its option, terminate the rights of Ticketholder hereunder by giving Ticketholder ten (10) days prior written notice. In the event that Ticketholder shall not have cured the default or breach specified in said notice within said ten (10) day period, then [Taxpayer's Affiliate] may, without further demand or notice, terminate the right of Ticketholder to the use and possession of the Seats and all other rights and privileges of Ticketholder under this Agreement and declare the entire unpaid balance of the License Fee immediately due and payable, whereupon [Taxpayer's Affiliate] shall have no further obligation of any kind to Ticketholder.

[Taxpayer's Affiliate] shall use reasonable efforts to relicense the right to the use and possession of the Seats to another party; provided that, if there are any other club seats in the Stadium available to be licensed,
[Taxpayer's Affiliate] may give priority to licensing such other club seats. Ticketholder shall remain obligated to make all payments due or becoming due under this Agreement, but if [Taxpayer's Affiliate] licenses the right to the use and possession of the Seats to another party, then all amounts received from such other party applicable to any remaining period of this Agreement shall be applied first to the expense of relicensing and then to the reduction of any obligations of Ticketholder to [Taxpayer's Affiliate] under this Agreement. If the amounts collected by
[Taxpayer's Affiliate] upon any such relicensing are not sufficient to pay the full amount of all such obligations of Ticketholder, Ticketholder shall promptly pay any such deficiency. The foregoing remedies of [Taxpayer's Affiliate] shall not be to the exclusion of any other right or remedy set forth herein or otherwise available to
[Taxpayer's Affiliate] in law or equity. Ticketholder shall be responsible for all attorney's fees and costs incurred by [Taxpayer's Affiliate] in the enforcement of this Agreement whether or not litigation is actually commenced and including any appellate proceedings. Ticketholder hereby waives trial by jury. No waiver by
[Taxpayer's Affiliate] of any default or breach by Ticketholder of its obligations hereunder shall be construed to be a waiver or release of any other or subsequent default or breach by Ticketholder hereunder, and no failure or delay by [Taxpayer's Affiliate] in the exercise of any remedy provided for herein shall be construed to constitute a forfeiture or waiver thereof or of any other right or remedy available to [Taxpayer's Affiliate]."

The following pertinent recitals are quoted from the terms and conditions embodied in season tickets "Payment Plan Agreement" (the "STPP Agreement") submitted as exhibit C to your petition:

"MONTHLY PAYMENT PLAN (A or B)

"You begin monthly payments of $30.00 in March 1994. The first $100.00 of your monthly payments will complete your
$300.00 deposit, and the balance of the payments will cover 30 games at $30.00, sale tax and $2.50 per game per seat City surcharge for the three-year term. If you do not wish to renew your seats for [Year Four] and beyond, you pay only sales tax and City surcharge for the 1997 season, and use your deposit for your [Year Three] tickets.

"A. Enclosed is a voided check. Please automatically withdraw my payment to the [Taxpayer] from this account on the first business day of every month beginning on March 1, 1994. Social Security number/Tax ID: (for transfer confirmation purposes only) "B. Enclosed is a check for $55.00 payable to the
[Taxpayer] which includes my March 1 payment and $25 to partially defray processing costs for physical checks. Please send me a payment book with monthly coupons and I will mail you a check for receipt by the first of every month.

"ANNUAL PAYMENT PLAN
"You send in $100.00 for receipt by March 1, 1994 to complete your $300.00 deposit. In March 1995, March 1996, and March 1997 you pay upon invoice $300.00 plus sales tax and $2.50 per game per seat City surcharge for the upcoming season. If you do not wish to renew your seats for [Year Four] and beyond, you pay only sales tax and City surcharge for the [Year Three] season and use your deposit to pay for your [Year Three] tickets.

"C. I will pay the enclosed invoice by March 1. Invoice me annually in 1995 and 1996 and I will pay by March 1 each year.

"If you wish to renew for the [Year Four] season and beyond you will be offered the right to retain your seats by entering into a new contract on renewal terms offered at that time for [Year Four] and beyond.

"I agree to abide by the terms of the payment plan indicated above and the enclosed Terms and Conditions."

REQUESTED ADVISEMENT

You endeavor to elicit the Department's advice regarding the following specific issue:

"Based on the facts presented herein, the [Taxpayer] respectfully requests a ruling as follows:

"No sale has occurred at the time the [Taxpayer] receives any portion of the deposit since there is no transfer of title or possession of the executive suites, stadium club seats, or season tickets. The purchaser has only the right to use the seating at the Stadium upon payment of the Licensing Fees and ticket amounts at a future date. Thus, no sales tax is due at the time the deposit is collected since no sale has occurred."

DISCUSSION OF LAW

Resolution of the issue under advisement turns on whether the Taxpayer's charge of the security deposits pursuant to the ESL, CSL, and STPP Agreements respectively constitutes payment of an advance admission or a prepaid license fee for the right or privilege to use real property at the point in time that such amounts are initially charged or received. In deliberation of this issue we consult the following pertinent statutory provisions:

Section 212.04, F.S., Admissions tax; rate, procedure, enforcement: "(1)(a) It is hereby declared to be the legislative intent that every person is exercising a taxable privilege who sells or receives anything of value by way of admissions. "(b) For the exercise of such privilege, a tax is levied at the rate of 6 percent of sales price, or the actual value received from such admissions, which 6 percent shall be added to and collected with all such admissions from the

purchaser thereof, and such tax shall be paid for the exercise of the privilege as defined in the preceding paragraph.... "(3) Such taxes shall be paid and remitted at the same time and in the same manner as provided for remitting taxes on sales of tangible personal property, as hereinafter provided.... (Emphasis Supplied)

Section 212.06(1)(a), F.S.: "The aforesaid tax at the rate of 6 percent of the retail sales price as of the moment of sale, 6 percent of the cost price as of the moment of purchase, or 6 percent of the cost price as of the moment of commingling with the general mass of property in this state, as the case may be, shall be collectible from all dealers as herein defined on the sale at retail, the use, the consumption, the distribution, and the storage for use or consumption in this state of tangible personal property or services taxable under this part. The full amount of the tax on a credit sale, installment sale, or sale made on any kind of deferred payment plan shall be due at the moment of the transaction in the same manner as on a cash sale." (E.S.)

Section 212.15, F.S.: "(1) The taxes imposed by this chapter shall, except as provided in s. 212.06(5)(a)2.e., become state funds at the moment of collection and shall for each month be due to the department on the first day of the succeeding month and be delinquent on the 21st day of such month. All returns postmarked after the 20th day of such month are delinquent. "(2) Any person who, with intent to unlawfully deprive or defraud the state of its moneys or the use or benefit thereof, fails to remit taxes collected under this part is guilty of theft of state funds...."

Section 212.02(16)(a), F.S.: "'Sale' means and includes: "(a) 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 Supplied)

Section 212.031, F.S.: "(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.... "(2)(a) The tenant or person actually occupying, using, or entitled to the use of any property from which the rental or license fee is subject to taxation under this section shall pay the tax to his immediate landlord or other person granting the right to such tenant or person to occupy or use such real property. "(3) The tax imposed by this section shall be in addition to the total amount of the rental or license fee, shall be charged by the lessor or person receiving the rent or payment in and by a rental or license fee arrangement with the lessee or person paying the rental or license fee, and shall be due and payable at the time of the receipt of such rental or license fee payment by the lessor or other person who receives the rental or payment. The owner, lessor, or person receiving the rent or license fee shall remit the tax to the department at the times and in the manner hereinafter provided for dealers to remit taxes under this chapter. The same duties imposed by this chapter upon dealers in tangible personal property respecting the collection and remission of the tax; the making of returns; the keeping of books, records, and accounts; and the compliance with the rules and regulations of the department in the administration of this chapter shall apply to and be binding upon all persons who manage any leases or operate real property, hotels, apartment houses, roominghouses, or tourist and trailer camps and all persons who collect or receive rents or license fees taxable under this chapter on behalf of owners or lessors...." (Emphasis Supplied)

It is essential to consider the legal definition and attributes of a "security deposit" in addressing the issue under

advisement. To this end, we consult the following definition of the term "security deposit" quoted from Black's Law Dictionary, Sixth Edition:

"Security deposit. Money deposited by tenant with landlord as security for full and faithful performance by tenant of terms of lease, including damages to premises. It is refundable unless the tenant has caused damage or injury to the property or has breached the terms of the tenancy or the law governing the tenancy. Such deposits are regulated by statute in most states...."

Additionally, 34 Fla Jur 2d s. 41, provides in relevant part the following:

"The term `security deposit' means any money held by the landlord as security for the performance of the rental agreement, including, but not limited to, amounts held by the landlord for damages caused by the tenant's breach of lease prior to its expiration period...."

CONCLUSIONS OF LAW

Hence, in order to establish that the security deposits required under the terms and conditions of the ESL, CSL, and STPP Agreements (collectively the "Agreements") are subject to sales tax it must be shown that such amounts are in substance the advance payment of admissions or the prepayment of license fees for the use of real property. The terms and conditions embodied in the Agreements fail to support that the security deposits required thereunder constitute in substance the advance payment of admissions or the prepayment of license fees for the use of real property.

Specifically, with respect to the ESL and CSL Agreements, articles 11 and 8 respectively provide that the security deposit is refundable upon expiration of the term of such agreements. The provisions of these articles go on to specify that only upon the future occurrence of the event of a default or breach of the Agreements either by nonpayment of any amount payable under the terms of such Agreements or by nonperformance or observation of

any other duty or obligation under such Agreements is the Taxpayer or the Taxpayer's Affiliate allowed to appropriate and apply the security deposits in curing the default or breach. Moreover, under article 3 of both the ESL and CSL Agreements, the license fee is payable separate and apart from the security deposit required by both agreements. Therefore, the substance of the ESL and CSL Agreements supports that the security deposits required under articles 11 and 8 of said agreements respectively are in fact just that, "security deposits" and not advance payments of admissions or the prepayment of license fees for the use of real property. Therefore, we find that the security deposits required under articles 11 and 8 of the ESL and CSL Agreements respectively are not subject to sales or use tax unless and until such time there occurs a breach or act of default which leads to all or a portion of the security deposit being appropriated and applied to amounts due and payable by the Licensee under such agreements. This is conditioned upon the security deposits required under the ESL and CSL Agreements being recorded as liabilities on the books of the Taxpayer or the Taxpayer's Affiliate respectively until such time as there occurs a breach or default under such agreements and the security deposit(s) are appropriated and recorded as earned revenue through the accounts of the Taxpayer (ESL Agreement) or the Taxpayer's Affiliate (CSL Agreement).

Considering now the security deposit required under the STPP Agreement, such amount is not appropriated and applied as payment for season tickets unless and until the Ticketholder decides in the final year of the three year STPP Agreement not to renew his or her season tickets. In other words, appropriation of the security deposit as payment for season tickets is a contingency conditioned upon the occurrence of a future event (nonrenewal of season tickets in the final year of the STPP Agreement). If in the final year of the contract the Ticketholder decides not to renew his or her tickets, then the Taxpayer can appropriate and apply the security deposit to the payment for season tickets for the final year of the STPP Agreement. As with the license fees and security deposits under the ESL and CSL Agreements, the STPP Agreement requires a separate payment(s) for the season tickets each year separate and apart from the required security deposit. Therefore, we

find that the security deposit required under the STPP Agreement is not subject to sales or use tax unless and until: (i) the final year of the STPP Agreement in those cases where the Ticketholder decides not to renew his or her season tickets and, thus, frees the deposit for application toward payment of the season ticket price for the final year of the STPP Agreement or (ii) the Ticketholder cancels the STPP Agreement early and thereby forfeits all or a portion of security deposit. If the Ticketholder chooses to renew his or her season tickets and pays the charge for the season tickets according to the STPP Agreement, then the "security deposit" would retain the identity of a "security deposit" and, hence, would remain at that juncture a nontaxable amount. This is conditioned upon the security deposit required under the STPP Agreement being recorded as a liability on the books of the Taxpayer until the event of an early cancellation of the STPP Agreement or the final year of the STPP Agreement where the Ticketholder decides not to renew his or her season tickets either of which results in all or a portion of the security deposit being appropriated and recorded as earned revenue through the accounts of the Taxpayer.

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/
Control No. 14500