Could a Florida landlord stop collecting rent tax after a production-company tenant supplied a blanket exemption certificate?

Plain-English summary

The landlord could rely on the tenant's properly executed blanket exemption certificate and stop collecting sales tax.

Once the landlord received the certificate in good faith, the tenant became directly responsible to the Department if the claimed exemption later proved invalid. The landlord had to retain the certificate with the lease for audit purposes.

The exemption covered only space used directly and exclusively for qualified motion-picture production services. If food testing was unrelated to production, its square footage did not qualify. Office and administrative space also remained taxable, and the tenant had to remit tax directly on the nonexempt portion.

For tax paid after the tenant delivered the certificate, the landlord should reimburse the tenant. The landlord could claim a return credit within 36 months or apply for a refund within three years after payment.

What this means for you

The certificate shifted collection responsibility, but it did not make mixed-use premises fully exempt. Accurate square-footage and activity records remained essential.

Common questions

Q: Did the Department have to preapprove the exemption? A: No.

Q: Was the landlord protected after accepting the certificate? A: Yes, if it received a properly executed certificate in good faith.

Q: Did ordinary office space qualify? A: No.

Q: What if only part of the premises supported production? A: The exemption was limited to the qualifying square-footage percentage.

Q: Who refunded previously collected tax? A: The landlord reimbursed the tenant and then claimed a credit or Department refund.

Citations and references

• Fla. Stat. §§ 212.031(1)(a)9. and 212.06(1)(b) — qualified-production-services real-property exemption
• Fla. Admin. Code r. 12A-1.070(1) — production-services rental exemption
• Fla. Stat. § 215.26 — refund limitation
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 95A-021

Original ruling text

May 10, 1995

Re: Technical Assistance Advisement (TAA) 95(A)-021 Sales Tax - Motion Picture and Recording Exemption - Real Property Sections 212.031(1)(a)9. and 212.06(1)(b), Florida Statutes (1994 Supplement), [F.S.]; and Rule 12A-1.070(1), Florida Administrative Code (F.A.C.)

Dear :

This response is in reply to your letter of March 16, 1995, referring to your letter of February 13, 1995, in which you requested a Technical Assistance Advisement ("TAA") on the subject indicated above. In my letter of March 9, 1995, I responded that your request of February 13, 1995, did not meet the requirements for a "TAA" specified in s. 213.22, F.S. Your letter of March 16, 1995, enclosed sufficient documentation for issuance of a "TAA" on this matter.

DISCUSSION OF FACTS

The term "Landlord" will hereinafter be used to apply to "XXX" or "XXX"; the term "Tenant" will be used in lieu of "XXX" or "XXX." Your letter of February 13, 1995, provides the following:

"The undersigned serves as legal counsel for [Landlord].
[Landlord] leases commercial real property to [Tenant] under a written Lease dated June 10, 1994.

"By letter dated January 10, 1995, [Tenant] claimed an exemption from the payment of sales tax on rental payments under Section 212.031(1)(a)(9) of the Florida Statutes and provided [Landlord] an original "Blanket Exemption Certificate." In this aforesaid correspondence, [Tenant] requested a refund from [Landlord] for sales tax paid from August, 1994 through January, 1995 in the amount of
$1,312.56. This letter and the Certificate are enclosed

herein for your reference.

"We have undertaken review of Florida Statute 212.031, as well as Sections 12A-1.070 and 12A-[1].085 of the Florida Administrative Code in order to determine the procedural mechanism under which this exemption may be claimed, exercised, and administrated. Unfortunately, these authorities are not specific about the respective responsibilities of the landlord or the tenant in regard to this exemption, and lend themselves to varying subjective interpretation[s].

"Therefore, we request that your Division provide us with a technical assistance advisement regarding how this exemption works."

Your letter poses eight queries which are reproduced below under "Conclusions of Law" with responses to each.

The following documents were enclosed with your letter of March 16, 1995: a letter from Tenant dated January 10, 1995; a Lessee/Licensee/Tenant Blanket Exemption Certificate; and an office lease between Landlord and Tenant. Of note in the Lease Agreement is Section 1. Summary of Lease Provision, 1.1 Basic Data, paragraph j. Permitted Use of Premises. This paragraph provides the following permitted use of premises: food testing, office and television production facility. The letterhead on the letter from Tenant, dated January 10, 1995, says, "XXX."

The blanket exemption certificate provided by the Tenant reads as follows:

"LESSEE/LICENSEE/TENANT
BLANKET EXEMPTION CERTIFICATE

"This is to certify that all real property leased, licensed or rented on or after August 1, 1994 from [Landlord] is or was leased, licensed or rented to be used as an integral part of the performance of qualified production services, exempt from sales or use tax under the provisions of Section 212.031(1)(a)9., F.S.

"This certificate is to continue in force until revoked by written notice to the lessor, licensor or landlord.

"Lessee/Licensee/Tenant [Tenant's name] Address By

[Tenant's address]
[signed by Tenant]

January 10,

1995"

During our conversation of April 6, 1995, you indicated that your question 4. should read as follows: "If your response to number 2 [rather than 4] is `no'...."

DISCUSSION OF LAW

Subparagraph 9. of s. 212.031(1)(a), F.S., provides the statutory basis for the exemption of real property used in qualified production services. It provides:

"(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 unless such property is: "9. Property used as an integral part of the performance of qualified production services. As used in this subparagraph, the term `qualified production services' means any activity or service performed directly in connection with the production of a qualified motion picture, as defined in s. 212.06(1)(b), and includes: "a. Photography, sound and recording, casting, location managing and scouting, shooting, creation of special and optical effects, animation, adaptation (language, media, electronic, or otherwise), technological modifications, computer graphics, set and stage support (such as electricians, lighting designers and operators, greensmen, prop managers and assistants, and grips), wardrobe (design, preparation, and management), hair and makeup (design, production, and application), performing (such as acting, dancing, and playing), designing and executing stunts, coaching, consulting, writing, scoring, composing,

choreographing, script supervising, directing, producing, transmitting dailies, dubbing, mixing, editing, cutting, looping, printing, processing, duplicating, storing, and distributing; "b. The design, planning, engineering, construction, alteration, repair, and maintenance of real or personal property including stages, sets, props, models, paintings, and facilities principally required for the performance of those services listed in sub-subparagraph a.; and "c. Property management services directly related to property used in connection with the services described in sub-subparagraphs a. and b."(Emphasis Supplied)

Section 212.06(1)(b), F.S. (1994 Supp.), defines the term "qualified motion picture" as follows:

"... all or any part of a series of related images, either on film, tape, or other embodiment, including, but not limited to, all items comprising part of the original work and film-related products derived therefrom as well as duplicates and prints thereof and all sound recordings created to accompany a motion picture, which is produced, adapted, or altered for exploitation in, on, or through any medium or device and at any location, primarily for entertainment, commercial, industrial, or educational purposes..."

Rule 12A-1.070(1), F.A.C., provides further detail on this exemption. It provides in part:

"(1)(a) Every person who rents or leases any real property or who grants a license to use, occupy, or enter upon any real property is exercising a taxable privilege unless such real property is:... "(c) Effective July 1, 1987, property used as an integral part of the performance of qualified production services is not subject to tax. The term `qualified production services' for purposes of this paragraph means all or any part of a series of related images, either on film, tape, or other embodiment, including, but not limited to, all items comprising part of the original work and film-related

products derived therefrom as well as duplicates and prints thereof and all sound recordings created to accompany a motion picture, which is produced, adapted, or altered for exploitation in, on, or through any medium or device and at any location, primarily for entertainment, commercial, industrial, or educational purposes and includes: "1. Photography, sound and recording, casting, location managing and scouting, shooting, creation of special and optical effects, animation, adaptation (language, media, electronic or otherwise), technological modifications, computer graphics, set and stage support (such as electricians, lighting designers and operators, greensmen, prop managers and assistants, and grips), wardrobe (design, preparation, and management), hair and make-up (design, production, and application), performing (such as acting, dancing, and playing), designing and executing stunts, coaching, consulting, writing, scoring, composing, choreographing, script supervising, directing, producing, transmitting dailies, dubbing, mixing, editing, cutting, looping, printing, processing, duplicating, storing, and distributing; "2. The design, planning, engineering, construction, alteration, repair, and maintenance of real or personal property including stages, sets, props, models, paintings, and facilities principally required for the performance of those services listed in subparagraph 1.; and "3. Property management services directly related to property used in connection with the services described in subparagraphs 1. and 2."

CONCLUSIONS OF LAW

"1. Of what effect is the Blanket Exemption Certificate submitted by [Tenant]?"

Response: The Landlord may accept the Blanket Exemption Certificate submitted by the Tenant in lieu of paying sales tax. The Blanket Exemption Certificate provided by the Tenant utilizes the format recommended by the Department for this exemption with one minor exception. The lessee's sales tax number (if registered) should be included on the blanket

certificate of exemption. The exemption provided for by the law quoted above is applicable to any lessee, licensee or tenant engaged exclusively and directly in qualified production services [s. 212.031(1)(a)9., F.S.]. Upon receipt by the Landlord of a properly executed Certificate of Exemption, the Tenant will be directly responsible to the Department for payment of any tax due in the lease, license or rental of such property if it is later determined that the exemption does not apply to some or all of the Tenant's activities. It is the responsibility of the Tenant to maintain accurate accounting records to support computation of the sales tax exemption.

If, however, the Tenant is not, as a Tenant, engaged exclusively and directly in the performance of qualified motion picture activity as indicated in s. 212.06(1)(b), F.S., only a partial exemption shall be granted on the lease, license or rental payment equal to the percentage of square footage used for the activities specifically enumerated in the aforementioned section. It was not clear, nor were you able to determine, whether the "food testing" specified under permitted use of premises was an integral part of qualified motion picture activity. If it is not, the square footage allocated to the food testing would not qualify for the exemption. Please also note, that office or administrative space connected with the performance of a qualified production service is not included under the exemption. Any tax owed by the Tenant on the portion of the consideration not subject to the exemption shall be remitted by the Tenant directly to the Department of Revenue. If the Tenant is not registered with the Department to remit this tax, it is required to register.

"2. Can the [Landlord] rely upon the mere receipt of this Certificate to cease collecting sales tax?"

Response: As indicated in response 1., yes.

"3. Must the Department of Revenue determine entitlement to this exemption before collection of sales tax may cease?"

Response: No. As indicated in response 1., the Tenant is responsible to the Department for payment of any tax due once

the properly executed Certificate of Exemption is received by the Landlord.

"4. If your response to number [2] is `no', what is
[Landlord's] liability if (i) the exemption is claimed erroneously; or (ii) [Tenant] subsequently uses the demised premiss [sic] for other than the purpose of a producing qualified motion pictures (or is not [sic] longer a qualified producer)?"

Response: As indicated above, once the properly executed Certificate of Exemption is received by the Landlord, the Landlord is absolved of any sales tax liability on this transaction.

"5. What steps must be taken and by whom for the [Landlord] to cease collecting sales tax from [Tenant]?"

Response: No particular steps need to be undertaken. When the Landlord receives the Blanket Certificate, it may simply cease collecting tax. For audit purposes, the properly executed Blanket Certificate should be maintained with the lease agreement.

"6. Should [Landlord] collect the tax (notwithstanding the receipt of the Certificate and the claimed exemption) and remit same the Department?"

Response: No. See above responses.

"7. If the response to number 6 is `yes', who should apply for a refund with the Department, [Tenant], [Landlord], or both?"

Response: As previously indicated, tax should not be collected if a properly executed Blanket Certificate is received in good faith by the Landlord. I understand, however, that the Landlord has been collecting tax in this situation.

"8. Is [Tenant] entitled to reimbursement from [Landlord] for paid sales tax? If so, should it seek reimbursement

from the Department via a request for refund, or should
[Landlord] repay [Tenant] and request a refund on its behalf?"

Response: The Landlord should reimburse the Tenant for sales tax paid on the lease agreement from the time the Tenant gave the Landlord the blanket exemption certificate. The Landlord may claim credit on the sales tax return if such credit is claimed within 36 months from the date of remitting the tax. The Landlord shall retain records in its files of the sales tax paid in error. If the Landlord does not remit any additional sales tax for the property in question, it may apply for a refund on the form enclosed with this letter, "Application for Refund From the State of Florida Department of Revenue," Form DR-26. Pursuant to Section 215.26, F.S. (1994 Supp.), the "Application for Refund" must be filed within three (3) years after the date of payment of the tax.

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,

Carol Schwarz
Senior Tax Specialist

Enclosure
Control No. 20420