How much of a marina's $20,000 monthly master-lease payment was taxable when parts of the property were subleased or used for separately taxed boat storage?

Plain-English summary

Florida calculated $165.11 in monthly tax on the marina's $20,000 master-lease payment, rather than the marina's proposed $27.12.

The marina leased 4.53 acres containing boat-storage buildings and racks, a subleased repair-business area, office and retail space, ramps, decks, parking, landscaping, water and docks, and undeveloped mangrove land. It already collected tax on customer boat-storage charges and on its sublease.

The Department corrected the total leased area to 197,326 square feet. It treated the 21,780 square feet of undeveloped mangrove land as taxable because no statute exempted unused leased land. Eleven percent of the $20,000 rent, or $2,200, was allocated there, producing $132 of tax at the ruling's six-percent rate.

Of the remaining $17,800, the Department allocated 3.1 percent, or $551.80, to the marina's own office, restroom, and retail use. That produced another $33.11. The total was $165.11.

Areas subleased or used for boat storage were not taxed again under the master lease because Florida law intended only one tax on the property use. Ramps, decks, parking, landscaping, underwater access, and docks were treated as part of the marina operation rather than ignored.

What this means for you

• A mixed-use master lease required a supported allocation among taxable own-use, subleased, and separately taxed storage areas.
• Undeveloped land remained part of the taxable lease payment because there was no unused-land exemption.
• The Department used the property's actual acreage and its own corrected square-foot allocations rather than the taxpayer's calculation.

Common questions

Q: Why were boat-storage and subleased areas excluded from the master-lease tax?
A: They were already subject to tax through the storage charges or sublease, and the statute barred pyramiding the same rental tax.

Q: Was the mangrove area exempt because it was undeveloped?
A: No.

Q: What monthly tax did the Department calculate?
A: $165.11 on the stated $20,000 monthly lease payment under the historical six-percent rate used in the ruling.

Citations and references

• Fla. Stat. § 212.02(10)(h) — real property definition
• Fla. Stat. § 212.03(6) — tax on boat storage at marinas
• Fla. Stat. § 212.031(1)(a), (b), (c), (2)(b) — real-property lease tax, allocation, and anti-pyramiding rule
• Fla. Admin. Code r. 12A-1.070 — real property rentals and licenses
• Fla. Admin. Code r. 12A-1.073 — parking, docking, and storage spaces
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96A-044

Original ruling text

Aug 12, 1996

Re: TAA 96A-044
Allocation of Real Property Lease Payment
Sections 212.02(10)(h), 212.03(6), 212.031(1)(a), (1)(a)3.,
(1)(b), and (2)(b), F.S.
Rules 12A-1.070, 12A-1.073, F.A.C.

Dear:

This is a response, styled a Technical Assistance Advisement, to
your brief letter dated December 5, 1995, referring to and
providing a copy of an earlier, more detailed, letter you sent
to the Department dated June 30, 1995. The Department has no
record of the receipt of the June 30, 1995 letter. In both
pieces of correspondence you seek the Department's determination
as to the imposition of sales or use taxes on payments made in
exchange for various uses of real property.

In the June 30, 1995 letter you describe the real property as
comprising approximately 4.53 acres of land, the owner and
lessor of which is XXX (herein Lessor), which is leased to XXX
(herein Taxpayer), on which Taxpayer operates, as you describe
on the first page of your letter, a "... dry storage marina...."
Taxpayer also maintains an office, and operates a small retail
store from premises located on the property.

You provided the Department with a copy of the lease between
Lessor and Taxpayer which contract is styled Lease Agreement,
executed on April 26, 1984, and requires from the Taxpayer a
monthly lease payment of $20,000. You also attached to the
lease a copy of the boundary survey which depicts the property
under lease and the uses to which the property is put.

You state, as also noted in more detail in several following
paragraphs of this letter, that in the operation of the marina
Taxpayer rents space to customers for the storage of their boats
in what you describe as a "primary" building, as well as in
"outside storage racks" which are separate from the "primary"

building.

You also provide the information that Taxpayer subleases "...
approximately 7,000 square feet of land... to a boat and motor
repair business known as XXX [herein Tenant], which is
independently owned and operated by a business entity not
related to the Taxpayer."

As to the sales tax imposed on such boat storage space, you
state that Taxpayer collects and remits the applicable sales tax
as imposed by s. 212.03(6), F.S., "... on the leases applicable
to its boat storage rental spaces plus the sales tax... on
retail sales by the Taxpayer of miscellaneous marina related
supplies and equipment."

As to the sublease of space to Tenant, you assure the Department
that Taxpayer reports and remits "... the appropriate sale
[sic]/use tax applicable under Section 212.031, F.S., to this
rental income from said sublease."

In describing all the land and its uses in more detail, which is
leased to Taxpayer by Lessor, you provide the following
description:

The primary structure located upon the premises... consists
of a 100 ft. x 300 ft. four story in/out dry storage marina
facility plus a small enclosed area approximately 30 ft. x
50 ft. attached thereto containing men and women's
restrooms plus a small ships' store and office space. A
portion of the remaining land included in the Lease,
approximately .50 acres, is occupied by mangrove trees;
1.43 acres of the total area cover [sic] by the Lease is
under water with portions thereof containing rock ric-rap,
piers and four wooden docks used by the Taxpayer's marina
storage customers; additionally 4,500 square feet is
occupied by outside storage racks which are also rented by
the Taxpayer to its customers."

You add that, "[t]he remaining land of approximately 1.61629
acres or 70,257 square feet of land under said Lease is
principally occupied with asphalt and concrete ramp and deck

space...; paved parking lot[s]...; small landscaped areas...;
and other uses related to the Taxpayer's in/out dry storage
business."

You state that the area leased by Taxpayer from Lessor,
including the principal structure plus the land, "... represents
a total of 287,327 square feet of rented space." Then you
assert that, "... at the most 75 percent of the 1,500 square
feet of office/ships store/restroom space is used for the
carrying on activities which are not totally in/out storage
space rental in nature." You add that "... an estimated 5,000
square feet of land has, from time to time been used for the
boat and motor sales activity which has occurred periodically
during the terms of the Taxpayer's operating the in/out dry
storage marina business."

You conclude, in an effort to limit the square footage which is
subject to the tax imposed by s. 212.031(1)(a), F.S., that, "...
only a total of no more than 6,500 square feet of space,
excluding the space sublet to the [Tenant], was used for
activities which were not totally directly involved with the
Taxpayer's principal business [of operating the dry storage
marina]."

This square footage you compute as representing, "... 2.26
percent of the 287,327 square feet under lease." Then you
compute the monthly amount of sales tax applicable to this lease
as $27.12, which is the product of the sales tax rate of 6
percent times .0226, times the monthly lease payment of $20,000.

You state on page 3 of your June 30, 1995 letter, that
"[t]axpayer has recently settled an audit assessment with the
[Department] for the period ended May 31, 1990." You bottom the
request for a Technical Assistance Advisement on the desire,
"... to facilitate a settlement with the [Department] prior to
audit and/or assignment of additional Florida sales and use tax
for the period April 1, 1990 through June 30, 1995...."

Department Response

The ultimate question presented here is the standard to be used

for delimiting the imposition of the tax on the lease or license
of real property under s. 212.031(1)(c), F.S., when a portion of
the property is not taxable as provided by s. 212.031(1)(a)3.,
F.S., because it is used for parking, docking, or storage spaces
which use is taxable as mandated by s. 212.03(6), Florida
Statutes.

Real property is defined in s. 212.02(10)(h), F.S., as the
surface land, improvements thereto, and fixtures, and is
synonymous with "realty" and "real estate."

Sales tax is imposed by s. 212.031(1)(c), F.S., on the privilege
of engaging in the business of leasing, or granting a license to
use, real property, except that the tax under that statute does
not extend to the privilege of leasing or licensing real
property used for parking, docking or storage spaces when taxed
for such uses under s. 212.03(6), Florida Statutes. This
statute imposes tax, among other uses, on the storage of boats
at marinas. Rule 12A-1.070, F.A.C., and Rule 12A-1.073, F.A.C.,
interpret these statutes.

In sum, the Taxpayer has leased real property, a portion of
which the Taxpayer subleases to Tenant. The Taxpayer uses a
portion of the real property for dry storage of boats for which
Taxpayer receives rental payment from the boat owners. Taxpayer
also uses part of the property for its own uses including office
and restroom spaces and a site on which a retail store is
operated.

Other portions of the property are covered by asphalt, concrete
ramps and deck space, parking lots, and landscaped areas, all
connected, as the Taxpayer asserts, with the conduct of the boat
dry storage business. Also included within this class of
property is the area identified by you as "... under water with
portions thereof containing rock ric-rap, piers and four wooden
docks used by the Taxpayer's marina storage customers...." Such
under water area is as much used in the conduct of the business
as are the ramps, deck space, parking lots and landscaped areas.
A clarifying note is made that it is understood that there is no
charge made for the use of the four docks. The sole remaining
portion of the property is that of the mangrove tree growth,

that is undeveloped land.

Thus, the property is taxed under s. 212.031(1)(c), F.S., as to
the lease payments made by the Taxpayer to the Lessor and by the
payments received by the Taxpayer from the Tenant. The space
used for boat storage is exempted from the tax imposed under s.
212.031, F.S., but such storage is subject to tax by operation
of s. 212.03(6), Florida Statutes.

However, s. 212.031(2)(b), F.S., expresses the intention of the
Legislature "... that only one tax be collected on the rental or
license fee payable for the occupancy or use of any such
property, [and] that the tax so collected shall not be pyramided
by a progression of transactions...."

Section 212.031(1)(b), F.S., grants to the Department, in the
instance of real property also subject to s. 212.03(6), F.S.,
the authority to "... determine, from the lease or license and
such other information as may be available, that portion of the
total rental charge which is exempt from the tax imposed by [s.
212.031, Florida Statutes.]

You will find, in the following discussion, both that this
allocation has been made, and the basis for such allocation.

The Department first must correct the figure which is provided
by the Taxpayer as the total square footage under lease. The
Taxpayer gives that figure on page 2 of the June 30, 1995 letter
as 287,327 square feet.

However, according to the boundary survey, the leased property
is approximately rectangular. The length of the longer parallel
boundary lines is 600 feet. The length of the shorter parallel
boundary lines is approximately 350 feet. Thus, the square
footage under lease cannot total 287,327 square feet as asserted
in the June, 1995 letter.

Consequently, the Department shall use the figure of 4.53 acres
as provided by the Taxpayer as the total area under lease. This
measure, 4.53 acres, when multiplied by 43,560, the number of
square feet per acre, equals 197,326 square feet. This figure

will be used by the Department as the total square footage under
lease.

You are also alerted that the Department has altered some of the
square footage assigned by the Taxpayer to the various uses of
the leased land. These changes were necessary because it
appears that the Taxpayer incorrectly computed some of the
square footage allocations.

The following table provides information as to the use of each
portion of the property and the area of each such use in square
footage and by acre measurement:

Subleased to Tenant (XXX)

6,970 sq. ft. - .16 ac.

Rented to customers-boat storage:
primary building

30,056 sq. ft. - .69 ac.

outside racks

4,356 sq. ft. - .10 ac.

Used by Taxpayer for retail space and
for rest rooms (30x50 building) 1,307 sq. ft. - .03 ac.
Area of mangrove trees

21,780 sq. ft. - .50 ac.

Area covered by ramps, deck space,
parking lots, landscaped areas, and
the under water portion used for
dockage and boat travel

132,857 sq. ft. 3.05 ac.

Total area under lease

197,326 sq. ft. 4.53 ac.

The allocation of the lease payment made by the Taxpayer to the
Lessor is computed in the following manner:

Total area under lease is 197,326 square feet, or 4.53 acres.
Of this area 21,780 (.50 acres) is undeveloped in that it is the
site of mangrove tree growth. This area is still subject to
sales tax because there is no exemption granted by statute which
exempts land from the tax on real property because such land is
not utilized by the Taxpayer. This land is considered leased to
the Taxpayer and is not used by the Tenant or by the Tenant's
customers.

Thus, 11 percent (21,780 divided by 197,326) of the total
monthly lease payment of $20,000 is allocated to this portion of
the leased parcel. This allocation equals $2,200. Sales tax on

this amount equals $132.

The remaining portion of the lease payment, $17,800 ($20,000
minus $2,200), must be allocated over the other uses of the
property.

The other uses include the subleased space to the Tenant, two
locations used for rental to customers for the storage of boats,
and the space used by the Taxpayer for office and retail space.
All of the improvements which are subleased, rented or used by
the Taxpayer equal 42,679 square feet. This figure is computed
by adding 6,970 square feet subleased to Tenant; 34,402 square
feet utilized for dry storage of boats; and 1,307 square feet
used by the Taxpayer for office area and a retail store.

Since the improvements located on the land total 42,679 square
feet of which 41,382 square feet is used for the purpose of
rental to customers for boat storage, and for sublease to
Tenant, the computation reveals that 96.9 percent of the
improvements are used for such purposes. Thus, 3.1 percent of
the improvements are used by the Taxpayer for its own use. This
percent when multiplied by $17,800 equals $551.80 which is the
portion of the remaining lease payment allocated to the square
footage utilized by the Taxpayer for its own purposes. The tax
of 6 percent of this allocated lease payment equals $33.11.

The total sales or use tax owed by the Taxpayer on the entire
area under lease equals $165.11 which is the tax of $132 on the
lease payment allocated to the undeveloped portion of the leased
area plus the tax of $33.11 on the portion of the improvements
utilized by the Taxpayer for its own uses.

In the above computation process the area undeveloped is an
element of the taxable portion of the lease payment. The
improvements which are subleased or otherwise taxed under s.
212.03(6), F.S., are not subject to tax under s. 212.031, F.S.,
except that portion used by the Taxpayer. In this instance the
Taxpayer uses an office, restrooms, and a retail space.
Consequently, the total square footage of the improvements is
divided into that area used by the Taxpayer. The percent
derived from this calculation is applied to the remainder of the

lease payment after the undeveloped area is removed.

The determination expressed herein is that the land covered by
asphalt, concrete ramps and deck space, parking lots, landscaped
areas, and that portion which is underwater but available for
docking and water travel purposes, is all used in connection
with the operation of the marina. As a consequence, this land
is subject to tax to the extent that the square footage utilized
for those purposes is included within the lease allocation of
$17,800 against which the 3.1 percent is applied as explained in
a previous paragraph.

Therefore, the Department does not accept, as posited by the
Taxpayer, that the space "... occupied by mangrove trees; [and]
1.43 acres" which is "under water with portions thereof
containing rock ric-rap, piers and four wooden docks..." are
excluded from the tax imposed by s. 212.031(1)(c), Florida
Statutes.

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
Tax Law Specialist
Tax Policy and Dispute resolution

Ctrl. No. 24205