Were payments under a bona fide one-year resident-hotel lease exempt from Florida transient rentals tax, including when unforeseen events ended the lease within six months?

Plain-English summary

Florida ruled that payments under the submitted one-year resident-hotel lease were exempt from transient rentals tax when the lease was bona fide and entered in good faith.

The corporation planned to convert a traditional short-stay hotel into long-term resident accommodations. Its written agreement ran for one year and automatically renewed for additional one-year terms unless either side gave 60 days' notice. Other termination provisions addressed death, disability, and unforeseen circumstances approved by the corporation.

The Department found objective evidence of a genuine long-term landlord-tenant relationship: automatic annual renewals, default remedies, and provisions anticipating that a resident might later need extended care. Because the agreement was for continuous residence longer than six months and was intended to be honored, section 212.03 did not tax the payments.

The Department also ruled that an unforeseen later event such as death or disability could end a lease within six months without retroactively making the payments taxable. The ruling did not approve a lease designed from the start for a shorter stay.

What this means for you

• The written term alone was not enough; the parties had to enter the lease honestly and intend to follow it.
• Unforeseen post-signing events could support an early termination without destroying the exemption.
• The hotel had to maintain records adequate to establish why each lease and payment was taxable or exempt.

Common questions

Q: Were payments under the one-year lease taxable?
A: No, provided the lease was entered in good faith with intent to honor its terms.

Q: Did every termination within six months preserve the exemption?
A: The ruling specifically protected early termination caused by unforeseen later events, such as death or disability.

Q: What records were required?
A: The corporation had to keep suitable records proving the taxable or nontaxable status of its lease transactions.

Citations and references

• Fla. Stat. § 212.03(1), (4) — transient rentals tax and bona fide written leases longer than six months
• Fla. Stat. § 212.12(6) — records of taxable sales, leases, and rentals
• Fla. Stat. § 212.13(2) — dealer books and records
• Fla. Stat. § 213.35 — retention of tax records
• Fla. Admin. Code r. 12A-1.061 — transient accommodations
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96A-047

Original ruling text

Aug 14, 1996

Re: Technical Assistance Advisement 96A-047
Sales and Use Tax and Transient Rentals Tax
Section 212.03, F.S.
Petitioner: XXXXX (the Corporation)
XXXX (the Hotel)
FEI#: XXXX

Dear Sir:

This is a response to your petition received May 16, 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.

STATED FACTS

You state, as follows:

... (the "Corporation")... was formed on October 30, 1995
for the purpose of acquiring... (the "... Hotel"). Prior
to its acquisition by the Corporation, the... Hotel was
operated as a traditional transient rental hotel, renting
rooms to tourists on a short stay basis. The Corporation
intends to convert the hotel into a resident hotel
accommodating residents on a long-term basis pursuant to
written "Occupancy Agreements" (the "Lease"). A draft copy
of the Lease is attached hereto as Exhibit A. Section VII.
A. of the Lease provides that it will run for an initial
period of one year and be automatically extended for
additional one year terms unless either the Corporation or
the resident has given sixty (60) days notice of their
intention not to extend the Lease. The Lease may otherwise

be terminated upon the death of the resident, the
disability of the resident in accordance with the standards
set forth in Section VIII. A. of the lease, or by the
resident, upon the occurrence of unforeseen circumstances
but only with the prior approval of the Corporation.

REQUESTED ADVISEMENT

You request an advisement on the following:

(i) Payments made by residents under the Lease are exempt
from the Transient Rentals [t]ax set forth in Section
212.03, Florida Statutes, in accordance with the exemption
from the tax for bona fide written leases longer that 6
[six] months in duration as set forth in Section 212.03(4),
Florida Statutes; and

(ii) Termination of a Lease by a resident within six(6)
months of its commencement in contravention of the Lease
will not render the Lease retroactively taxable under
Section 212.03(4), Florida Statutes.

LAW AND ANALYSIS

The tax on transient rentals is authorized under section 212.03,
F.S.,(FN 1) which provides, in part:

212.03 Transient rentals tax; rate, procedure, enforcement,
exemptions.-(1) It is hereby 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 to use any living quarters or sleeping or
housekeeping accommodations in, from, or a part of, or in
connection with any hotel, apartment house, roominghouse,
or tourist or trailer camp. However, any person who rents,
leases, lets, or grants a license to others to use, occupy,
or enter upon any living quarters or sleeping or
housekeeping accommodations in apartment houses,
roominghouses, tourist camps, or trailer camps, and who
exclusively enters into a bona fide written agreement for

continuous residence for longer than 6 months in duration
at such property is not exercising a taxable privilege. For
the exercise of such taxable privilege, a tax is hereby
levied in an amount equal to 6 percent of and on the total
rental charged for such living quarters or sleeping or
housekeeping accommodations by the person charging or
collecting the rental. Such tax shall apply to hotels,
apartment houses, roominghouses, or tourist or trailer
camps whether or not there is in connection with any of the
same any dining rooms, cafes, or other places where meals
or lunches are sold or served to guests....

(4) The tax levied by this section shall not apply to, be
imposed upon, or collected from any person who shall have
entered into a bona fide written lease for longer than 6
months in duration for continuous residence at any one
hotel, apartment house, roominghouse, tourist or trailer
camp, or condominium, or to any person who shall reside
continuously longer than 6 months at any one hotel,
apartment house, roominghouse, tourist or trailer camp, or
condominium and shall have paid the tax levied by this
section for 6 months of residence in any one hotel,
roominghouse, apartment house, tourist or trailer camp, or
condominium. Notwithstanding other provisions of this
chapter, no tax shall be imposed upon rooms provided guests
when there is no consideration involved between the guest
and the public lodging establishment. Further, any person
who, on the effective date of this act, has resided
continuously for 6 months at any one hotel, apartment
house, roominghouse, tourist or trailer camp, or
condominium, or, if less than 6 months, has paid the tax
imposed herein until he or she shall have resided
continuously for 6 months, shall thereafter be exempt, so
long as such person shall continuously reside at such
location. The Department of Revenue shall have the power
to reform the rental contract for the purposes of this
chapter if the rental payments are collected in other than
equal daily, weekly, or monthly amounts so as to reflect
the actual consideration to be paid in the future for the
right of occupancy during the first 6 months. (E.S.)

The term "bona fide" is not defined in the Florida
Statutes; therefore, we must look to its plain and ordinary
meaning. Black's Law Dictionary, sixth edition, defines that
term as follows:

Bona fide. In or with good faith; honestly, openly, and
sincerely; without deceit or fraud.... (E.S.)

Accordingly, with regard to your specific questions, and in
light of the above statute and definition:

(1) In answer to inquiry (i), above, tax imposed under s.
212.03, F.S., is not applicable to the payments made by
residents under the lease you have submitted, which lease
is in writing and has a lease term of one year, provided
the lease is entered into in good faith, with the intent to
honor the lease terms. In this situation, there are
factors which objectively demonstrate such an intent, where
a tenant agrees to be subject to all the lease's terms.
These factors demonstrate that a long-term relationship
(not only longer than six months, but probably longer than
one year) between the corporation and its guests is being
established. They include the fact that the lease is
automatically renewed for successive one year periods; the
lease contemplates a landlord-tenant relationship and
provides remedies for default; and the lease contemplates
that the physical condition of the tenant may deteriorate
during the existence of that lease, thereby necessitating
the moving of the tenant to an extended care facility.

(2) With respect to your inquiry number "(ii)" tax will not
apply to any lease payments made under a particular subject
lease in the case of early termination of such lease,
provided that the lease was executed containing the initial
lease term of one year, and early lease termination
occurred due to subsequent events (such as death or
disability) that were unforeseen at the time of the lease's
execution. There is no express indication in the statute
that the legislature intended to impose a tax on bona fide
written leases entered into for more than six months, which
later are terminated for reasons not foreseen at the time

of the leases's execution.

RECORD KEEPING

According to Florida law, every taxpayer has the legal
obligation to maintain adequate books and records.

Section 212.13(2), F.S., provides in part:

(2) Each dealer, as defined in this chapter, shall secure,
maintain, and keep as long as required by s. 213.35 a
complete record of tangible personal property or services
received, used, sold at retail, distributed or stored,
leased or rented by said dealer, together with invoices,
bills of lading, gross receipts from such sales, and other
pertinent records and papers as may be required by the
department for the reasonable administration of this
chapter; all such records which are located or maintained
in this state shall be open for inspection by the
department at all reasonable hours at such dealer's store,
sales office, general office, warehouse, or place of
business located in this state.... Any dealer subject to
the provisions of this chapter who violates these
provisions is guilty of a misdemeanor of the first degree,
punishable as provided in s. 775.082 or s. 775.083. (E.S.)

Section 213.35, F.S., provides, in part:

Each person required by law to perform any act in the
administration of any tax enumerated in s. 72.011 shall
keep suitable books and records relating to that tax, such
as invoices, bills of lading, and other pertinent records
and papers, and shall preserve such books and records until
expiration of the time within which the department may make
an assessment with respect to that tax pursuant to s.
95.091(3). (E.S.)

Section 212.12(6), F.S., expressly provides, in part:

(6)(a) ... It shall be the duty of every person required to
make a report and pay any tax under this chapter,... to

keep and preserve suitable records of the sales, leases,
rentals, license fees, admissions, or purchases, as the
case may be, taxable under this chapter; such other books
of account as may be necessary to determine the amount of
the tax due hereunder; and other information as may be
required by the department.... (E.S.)

As clearly provided by the above law, here, the Corporation must
maintain records adequate to establish the taxable or non
taxable status of its lease transactions.

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.

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

Sincerely,

Eric A. de Moya, Esq.
Tax Law Specialist
Tax Policy and Dispute Resolution

(904) 922-4714

NOTICE UNDER THE AMERICANS WITH DISABILITIES ACT

Persons needing an accommodation to participate in any
proceeding before the Department of Revenue, should contact the
Department at (904)488-0717 (voice), or 1-800-DOR-8331 (TDD), at
least five working days before such proceeding. You may also
call via the Florida Relay System at 1-800-955-8770.

FOOTNOTE 1 See also Rule 12A-1.061, F.A.C.