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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