Was a Florida commercial landlord liable when it failed to collect sales tax from a tenant that refused to pay rent tax?

Plain-English summary

The landlord was responsible for collecting rent tax and became liable when it failed to do so.

The tenant refused to pay tax, arguing that an earlier letter of intent made taxes part of the rent, while the executed lease required payment of “all taxes” in addition to rent. The Department did not decide that private contract dispute.

Instead, it applied the tax statutes. The landlord had to collect the stated 6% sales tax plus any applicable local surtax on the rent. Because the landlord admitted that it had not collected the tax, it was liable for the tax, interest, and penalties.

The ruling also noted that a tenant unable to prove payment to the lessor could be directly liable to the state.

What this means for you

A tenant's refusal to pay did not transfer the landlord's collection responsibility to the Department. Contract remedies between the parties were separate from the tax-collection duty.

Common questions

Q: Was the tenant supposed to bear the tax?
A: The ruling described the lessee's payment obligation, but the landlord still had the statutory duty to collect.

Q: Did the Department interpret the lease or letter of intent?
A: No.

Q: What happened when the landlord did not collect?
A: It became liable for the tax, applicable interest, and penalties.

Q: Could the tenant also be liable?
A: Yes, if it could not prove the tax had been paid to the lessor.

Citations and references

• Fla. Stat. § 212.031(1)(a) and (c) — tax on the privilege of leasing real property
• Fla. Stat. § 212.07(3) and (9) — lessor collection liability and lessee direct liability
• Fla. Admin. Code r. 12A-1.070(4)(a) and (16) — real-property rental tax
• Schnurmacher Holding, Inc. v. Noriega, 542 So. 2d 1327 (Fla. 1989) — collection duty cited in the ruling
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 95A-020

Original ruling text

Title:

Collection on Lease of Real Property

May 05, 1995

Re: TAA 95A-020
Lessor's duty to collect sales tax on lease of real
property
Sections 212.031(1)(a), (1)(c), 212.07(3), (9), F.S.
Rule 12A-1.070(4)(a), (16), F.A.C.

Dear :

This is a response, styled a Technical Assistance Advisement, to
your letter dated February 22, 1995, wherein you asked whether,
as a lessor of real property, you are required to collect sales
tax from a lessee, XXXXX (herein Lessee), when, as you argue,
such a duty is not mandated by either a statute or an
administrative rule. You assert that this issue is present in
all your sales and use tax returns commencing with, as you
describe, "... return #11 for 1994 forward." You admit that you
have "... not paid tax on [Lessee's] lease payments."

In support of your argument you cite Rule 12A-1.070(4)(a) and
(16), F.A.C., as requiring only the lessee to pay the tax. You
emphasize that these administrative rule provisions do not
include any mandate that the lessor shall be liable for the tax
if such lessor fails to collect the tax from the lessee.

Consequently, you conclude "... that it is solely the Florida
Department of Revenue and not [yourself] who is responsible for
collecting the rent tax from [Lessee]".

You also state that you have attempted unsuccessfully to collect
the applicable sales tax from Lessee. Lessee, evidently refuses
to pay the tax to you, asserting that a provision in a letter of
intent, written by the lessee prior to the execution of the
lease, states that the lease payment, at least for the first
year, includes "taxes and insurance."

Thus, Lessee appears to assert, that this provision means that
you must pay the sales tax out of the lease payment. You may
not ask Lessee to pay the lease payment plus sales tax.

In reply, you point out that a provision in the executed lease
agreement requires the lessee to pay "all taxes" in addition to
the lease payment. Lessee takes the position that these words
are not intended to include the payment of sales tax.

Department response

The Department first alerts you that it is not necessary to
adjudicate the dispute between you and Lessee as to meaning of
the above cited provision in the letter of intent which involves
the issue of the parol evidence rule and the attempt to vary or
alter the writing in an executed contract. Neither must the
Department interpret the lease provision that Lessee is
obligated to pay "all taxes" which Lessee argues does not
include sales taxes.

Rather, the Department relies on the provision in s.
212.031(1)(a), F.S., which is in concert with other provisions
of the sales tax statutes included within Part I, of Chapter
212, Florida Statutes. This statutory provision levies sales tax
on the privilege (with some enumerated exceptions not pertinent
to your inquiry) to engage in the "...business of renting,
leasing, letting, or granting a license for the use of any real
property."

The sales tax levy is on the "privilege" to engage in the
designated activities with respect to real property. You are
engaged in the business of leasing real property. Section
212.031(1)(c), F.S., specifies that "[f]or the exercise of such
a 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."

Thus, the tax is on the privilege, but the obligation to collect
the tax falls on the lessor. While the Florida Supreme Court,

in dicta, has said that s. 212.031, F.S., "... places the
obligation to pay the sales tax on the lessee..." the lessor has
a duty "... to collect the tax from the lessee `in addition' to
the rent." Schnurmacher Holding, Inc. v. Noriega, 542 So. 2d
1327, 1329 (Fla. 1989).

However, s. 212.07(3), F.S., provides that when "... any
dealer...fails, neglects, or refuses to collect the tax herein
provided..." that such a dealer is, "... in addition to the
penalty of being liable for and paying the tax himself, guilty
of a misdemeanor of the first degree, punishable as provided in
s. 775.082 or s. 775.083."

Similarly, with respect to the lessee, s. 212.07(9), F.S.,
requires that such lessee if unable to "... prove that the tax
levied by this chapter has been paid to his vendor, lessor, or
other person is directly liable to the state for any tax,
interest, or penalty due on any such taxable transactions."

Consequently, the Department denies the validity of your
statement at the conclusion of your letter, on page 2, wherein
you state "... that it is solely the Florida Department of
Revenue and not [yourself] who is responsible for collecting
rent tax from [Lessee]."

It is the Department's position that you are obligated to
collect sales tax from Lessee, at the rate of 6 percent, (plus
any applicable local surtax) computed on the lease payments you
have collected from Lessee, as such payments are required to be
made, pursuant to the provisions of paragraph 3 of the lease
agreement. Since you concede that you have failed to collect
such tax, then under provisions of s. 212.07(3), F.S., you are
liable for such tax, and applicable interest and penalties.

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,

Robert G. Parsons
Senior Tax Specialist

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