Which payments under nationwide touring-bus leases were subject to Florida sales tax when the buses moved in and out of the state?

Plain-English summary

Florida required tax on touring-bus lease payments for periods when the bus was located in Florida.

The Florida lessor leased customized buses to entertainers for nationwide tours. The entertainers employed and paid the drivers, and the buses could travel directly between lease customers without returning to Florida. The lessor's offices and facilities were in Florida, but the buses were said to spend only a few days per year there.

The Department focused on the bus's location during the lease period rather than where the lease was signed or the payment was sent. Amounts attributable to Florida periods were taxable. Consideration contracted to be paid after removal from Florida could be excluded when the lessee furnished the required signed certificate and the records substantiated removal.

Because transportation equipment moves frequently and the drivers were not the lessor's agents, the lessor needed timely, reliable documentation. The ruling required bus logs accompanied by sworn affidavits that corroborated each bus's location.

What this means for you

• Lease tax followed the periods when the bus was in Florida.
• Out-of-state periods required documented removal and location evidence.
• A lease clause charging tax only for Florida dates was not enough without supporting records.

Common questions

Q: Were all nationwide lease payments taxable in Florida?
A: No. Florida taxed payments attributable to periods when the bus was in Florida.

Q: What documentation did the Department require?
A: Bus logs with sworn affidavits, plus the applicable removal certificate or self-accrual records.

Q: Did the lease signing location control?
A: No. The Department focused on where the bus was used during the paid lease period.

Citations and references

• Fla. Stat. § 212.05 — tax on leases of tangible personal property
• Fla. Admin. Code r. 12A-1.071(1)(a), (4)(a) — tangible-property leases and removal from Florida
• Fla. Admin. Code r. 12A-1.0911 — self-accrual authority referenced by the rule
• Kirk v. Western Contracting Corp., 216 So. 2d 503 (Fla. 1st DCA 1968) — location-based lease taxation cited by the Department
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96A-038

Original ruling text

45ú

Jul 30, 1996

Re: Technical Assistance Advisement 96A-038
Sales & Use Tax - Bus Leases
Sections: 212.05(1)(c), F.S.
Rules: 12A-1.071(4)(a), 12A-1.007(14)(e), F.A.C.
Petitioner: XXXX
FEI: XXX

Dear :

This is a response to your petition received March 21, 1996 for
the Department's issuance of a Technical Assistance Advisement
("TAA") concerning the above referenced party and matter. Your
petition has been carefully examined and the Department finds it
to be in compliance with the requisite criteria set forth in
Chapter 12-11, F.A.C. This response to your request constitutes
a TAA and is issued to you under the authority of s. 213.22,
F.S.

DISCUSSION OF FACTS

XXXX and related entities (referred to collectively as XXX) own
a series of customized buses. These buses are generally leased
to entertainers for their touring purposes. The lessees are
responsible for employing and paying the bus drivers. XXXX
offices and facilities are located in Florida. You indicate
that the buses are used for tours of the United States.
Accordingly, you assert that these buses are only in Florida for
a few days each year. You state:

Taxpayer's offices and other facilities are currently
located in Florida. However, the buses themselves are
typically present in Florida only for a few days each year
since the buses transport the entertainers across the
country and they may travel from one lease termination
point directly to the next lease commencement point without

returning to Florida. Taxpayers keep a record of the
location of the buses at all times by requiring each bus
driver to keep a log.

You provided a proposed lease agreement which provides for
rental payment instructions to the lessee. The agreement
provides in part the following:

2.1 LESSEE agrees to pay LESSOR the sum of the DAILY RATE
per Coach as listed in the above schedule as rental payment
for each week during the Lease term as set forth in Section
1 without deduction or offset, together with all other
charges as provided for in this Agreement.

2.2 All rental payments shall be due at LESSOR's offices in
the amounts and on the dates set forth in Attachment a. A
7% sales tax will be added to the coach rate on all Florida
dates for each week in which there are Florida dates.

2.3 Rental payments shall be remitted to XXXX. ALL
PAYMENTS MUST BE REMITTED BY OVERNIGHT DELIVERY SERVICE.

The submitted lease agreement also provides that in the event of
default, only accrued obligations are due to the lessor from the
lessee.

REQUESTED ADVISEMENT

A determination is requested as to whether bus leases should be
subject to Rule 12A-1.071(4)(a), F.A.C., or Rule 12A1.007(14)(d), F.A.C.

DISCUSSION AND ANALYSIS OF LAW

Section 212.05, F.S. (1995), provides in part:

It is hereby declared to be the legislative intent that
every person is exercising a taxable privilege who engages
in the business of selling tangible personal property at
retail in this state, including the business of making mail
order sales, or who rents or furnishes any of the things or

services taxable under this chapter, or who stores for use
or consumption in this state any item or article of
tangible personal property as defined herein and who leases
or rents such property within the state.

(1) For the exercise of such privilege, a tax is levied on
each taxable transaction or incident, which tax is due and
payable as follows:...

(d) At the rate of 6 percent of the lease or rental price
paid by a lessee or rentee, or contracted or agreed to be
paid by a lessee or rentee, to the owner of the tangible
personal property.

Rule 12A-1.071(1)(a), F.A.C. (1995), provides in pertinent part:

Rentals, Leases, or License to Use Tangible Personal
Property.

(1)(a) For the purpose of this rule, the term "lease"
includes any rental or license to use tangible personal
property, unless a different meaning is clearly indicated
by the context in which it is used. The term refers to all
transactions that are not bailments in which there is a
transfer of possession of tangible personal property,
without regard to limitations upon the use, for a
consideration, without a transfer of title to the property.
It is not essential for a transfer of possession of
tangible personal property to include the right to move the
tangible personal property. It includes a transaction
under which a person secures for a consideration the
temporary use of tangible personal property which, although
not on his premises, is operated by or under the direction
or control of the person or his employees....

Paragraph (4)(a), of this rule provides:

If the lessee of tangible personal property removes the
property from the State of Florida, the consideration
contracted to be paid subsequent to such removal is not
taxable, provided the lessee furnishes the lessor with a

signed certificate identifying the property, and the date
the property was or will be removed from this state. If
the lessee has obtained self-accrual authority from the
Department of Revenue, as provided in Rule 12A-1.0911,
F.A.C., then the lessee's records must substantiate when
the property was removed from this state. Rental amounts
charged or paid while the property is in Florida are
taxable, even though the property is moved from the state
immediately after the lessee takes possession of it....

In Kirk v. Western Contracting Corp., 216 So.2d 503 (Fla. 1st
DCA 1968), it was held that the consummation date and the
property location date at the time of a contract for the lease
of tangible property would not control the taxing ramifications.
The court stated:

It must be held that the privilege of conducting such
business by both the leasing corporation and plaintiff was
a privilege being exercised in this state so long as rental
was being paid on the dredges working here.

The statute, rules and Kirk, supra, are all consistent with
regard to the taxability of any payments made while the property
is situated in Florida. There can be no doubt that the entire
payment made for the lease term while the bus is in Florida is
subject to tax. With regard to payments that are made while the
subject buses are operating out of the State of Florida, we must
turn to the conclusion drawn in Kirk, supra. In Kirk the taxing
authority was faced with the question of taxing the leasing of
dredges. The leases were executed out of state with the intent
of using dredges wherever plaintiff's business required such
equipment. The dredges were subsequently brought into this
State and used here. The State of Florida taxed the rental
payments made while the dredges were in Florida. The court
agreed with this tax treatment. Property location can easily be
determined with regard to movement of non-vehicular property
such as the dredges, as they were used in the performance of a
Florida contract. However, verification of property location
becomes a difficult task with regard to property used in
transportation. The control of the vehicle is transferred to
the lessee and movement of the buses in and out of Florida

cannot readily be ascertained. You assert that drivers are
required to maintain logs, however, as the drivers are not
agents of the lessor, it will be necessary for your to insure
that this information is conveyed to Coach in a timely manner so
as to provide for timely payment of taxes due.

CONCLUSIONS OF LAW

The holding in Kirk is controlling in the application of tax to
the instant transactions. Documentation, such as bus logs
accompanied by sworn affidavits, must be maintained by Coach
which can corroborate bus locations during the lease terms. Tax
must be collected and remitted to the Department on all lease
payments made with respect to a period for which the bus in is
in Florida.

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 upon 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 from that
which is 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 that 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 this response.

Should you have any further questions concerning this matter,
please do not hesitate to contact me.

Sincerely,

R. Clay Brower
Tax Law Specialist
Tax Policy & Dispute Resolution
904-922-4837

RCB/
Control #: 25087