Did Florida transient rentals tax apply when DOT charged former occupants rent for two or three months after acquiring their homes through eminent domain?

Plain-English summary

The Florida Department of Revenue concluded that transient rentals tax did not apply when the Department of Transportation let displaced occupants remain briefly in homes DOT had acquired through eminent domain for a road-widening project.

One tenant would remain for two months after surrendering a leasehold interest, and one former homeowner would remain for three months after the state acquired the home. DOT required written leases at the existing or market rent so the occupants could find replacement housing and DOT could secure their departure afterward.

Ordinarily, the ruling said, the occupants' prior residence alone would not satisfy the statutory exemption because they had not also paid transient rentals tax for six months. The decisive point was instead that section 212.03 taxed a person engaged in the business of renting transient accommodations. DOT took the property for a public highway purpose and was constitutionally unable to use eminent domain to enter a private rental business. The short leases supported relocation rather than a rental enterprise.

What this means for you

Displaced owners and tenants

The Department did not tax these specific short-term arrangements merely because the post-acquisition leases lasted six months or less. The public-purpose acquisition and DOT's limited relocation role controlled the result.

Government property managers

The ruling rested on the stated eminent-domain facts: acquisition for road widening, brief occupancy while people relocated, and no purpose of operating rental property.

Tax professionals

Do not read the result as a general exemption for any short lease by a government owner. The advisement distinguished these transactions because DOT was not engaged in the rental business within section 212.03.

Common questions

Q: Had the occupants lived at the properties for more than six months?
A: Yes, but the ruling said they had not also paid the transient rentals tax for six months, so the ordinary continuous-residence exemption would not have resolved the issue.

Q: Why did DOT require leases?
A: The leases gave the occupants time to relocate and helped DOT remove them promptly if they stayed beyond the allowed period.

Q: Why was no tax due?
A: DOT acquired the property for a public road project and was not engaged in the business of renting transient accommodations.

Citations and references

• Fla. Stat. §§ 212.03(1), (4), (7)(b), 213.22, and 337.27
• Fla. Admin. Code r. 12A-1.061(5)(a)-(b)
• Fla. Const. art. I, § 9, and art. X, § 6(a)
• U.S. Const. amend. XIV

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 97A-008

Original ruling text

SUMMARY

Since constitutional provisions prevent DOT from using
eminent domain proceedings to enter the rental business,
DOT's transactions with the occupants of the condemned
properties are not subject to tax under s. 212.03, F.S.

Feb 05, 1997

Re: TAA 97A-008
Transient Rentals Tax
Property Acquired by Eminent Domain
Section 212.03, Florida Statutes
XXX (Representative)

Dear :

This is in response to your letter dated September 16, 1996, in
which you request, as representative for the Florida Department
of Transportation, the issuance of a Technical Assistance
Advisement pursuant to s. 213.22, F.S., concerning the
taxability of certain specified transactions involving property
acquired by the Florida Department of Transportation (DOT)
through eminent domain proceedings. On September 13, 1996, a
Letter of Technical Advice was issued regarding the same issue.
Your request 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. Therefore, the Department is
herewith granting your request for the issuance of a TAA and the
ensuing discourse shall embody said ruling.

STATED FACTS

The facts of your request, as you provide them, are as follows:

[Representative] represents the Florida Department of
Transportation for land acquisition, relocation and
property management in District IV. As we discussed on the
telephone today, I am requesting specific information on

whether or not to charge State Sales Tax on the following
two scenarios;

1. Property is needed by the State of Florida Department of
   Transportation (Department) for a road widening project.
   The subject property is a residential rental property
   currently occupied by a tenant with a lease for one year.
   The eminent domain action by the Department requires the
   current tenant to quit claim deed his leasehold interest
   back to the owner of the property so a closing can take
   place and the State can take unencumbered title to this
   property. The tenant is allowed by the Department to
   remain in the property as a lessee for two months until he
   finds suitable housing. The Department requires a lease
   for these two months at the same or market rent....

2. Residential Property owner (single family) is required
   to sell his property to the State of Florida for a road
   widening project. Said property owner has resided in the
   property for, say, two years. Upon the State acquiring his
   property, he is allowed by the State to remain for three
   months to allow him time to relocate. The State (now the
   new owner) requires a written lease, at market rent, for
   the former owner to stay during this time....

REQUESTED ADVISEMENT

With regard to paragraph 1 above you ask: "Is the tenant
required to pay State Sales Tax on this lease since it is six
months or less even though he can prove he has occupied same
property for well over six months?"

With regard to paragraph 2 above you ask: "Since the lease is
now less that six months, but the owner has resided in the same
property for two years, clearly establishing residency, is he
required to pay sales tax?"

LAW AND ANALYSIS

Section 212.03(1), (4), (7)(b), F.S., 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.... 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....

(4) The tax levied by this section shall not apply 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.... 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....

(7)(b) It is the intent of the Legislature that this
subsection provide tax relief for persons who rent living
accommodations rather than own their own homes, while still
providing a tax on the rental of lodging facilities that
primarily serve transient guests.... (E.S.)(FN 1)

Under the above law, for the tax to not be due a tenant must
fulfill two requirements. First, the tenant must have resided
continuously longer than 6 months at any one location. Under
the facts you have provided both tenants have fulfilled this

requirement. Secondly, that tenant must also have paid the tax
under section 212.03, F.S., for 6 months of the residence.

In the two fact scenarios you provide it is clear that the
tenants have not fulfilled the above, second requirement.
Consequently, under ordinary circumstances, tax would be due
under s. 212.03, F.S., above, until such a time as the tenants
shall have paid the tax for a six month period, while
continuously residing at their respective locations.

We would note, however, that under section 212.03, F.S., tax is
imposed on a person engaged in the business of renting, leasing,
letting, or granting a license to use transient facilities. As
will be explained below, the fact that the subject properties
were acquired by DOT via eminent domain proceedings prevents DOT
from being able to be engaged "in the business of" renting
transient rental accommodations for periods of six months or
less. Consequently, DOT's transactions with its lessees are not
subject to the tax imposed by section 212.03, Florida Statutes.
Sections 212.03(1) and (7)(b), F.S.

The purpose behind eminent domain is to allow a sovereign to
take private property for public use, without the owner's
consent, on the payment of just compensation. See 21 Fla Jur
2d, Eminent Domain, s. 1. The power of eminent domain is
constitutionally limited. The chief limitations are: (1)
Article X, s. 6(a) of the Florida Constitution, which provides
that no private property can be taken except for a public
purpose, and upon payment of full compensation; and (2) the Due
Process clauses set forth in Article I, s. 9 of the Florida
Constitution and Amendment 14 of the U.S. Constitution, both of
which provide that no person shall be deprived of property
without due process of law.

In the instant situation, the entire purpose for which DOT is
acquiring the two properties at issue is for a road widening
project, which is a "public purpose." [Section 337.27, Florida
Statutes, specifically allows the Department of Transportation
to utilize the power of eminent domain to acquire lands related
to the establishment and maintenance of a state highway system.]
DOT is not trying to acquire the properties for purposes of

rental to tenants. In fact, DOT is constitutionally prohibited
from utilizing the power of eminent domain to acquire properties
to engage in the rental business, as the rental of transient
rental facilities to private individuals would clearly be a
private, and not a public, purpose.

When there is a taking of private property for a public purpose,
there must be a payment of full and just compensation. See 21
Fla Jur 2d, Eminent Domain, s. 84. What constitutes "just
compensation" is determined by equitable principles, and varies
with the facts of each situation. Id. In the case of living
quarters, while the receipt of fair market value for the
property by the displaced homeowner would be the receipt of
adequate compensation for the property taken, the property owner
still suffers an additional loss, as he or she must go through
the time of packing, finding new living accommodations, and
moving. These activities can consume several weeks or months.
Thus, it may not be equitable to that individual to order him to
vacate immediately once the state acquires title to the property
after an eminent domain proceeding. In the instant situation,
DOT, recognizing the need for some time for the occupants of the
condemned properties to find new housing, has provided for
leases having a short duration (2 or 3 months). This very short
duration of the leases further evidences the fact that DOT is
not interested in being in the business of renting property -it merely wants to be fair to those individuals who lost their
dwellings because of public necessity.

It is the case that DOT has required the occupants of the
condemned premises to enter into lease agreements. Doing so,
however, helps DOT to have the ability to remove the occupants
quickly if they do not wish to leave after the period of time
DOT has given them. For example, if there is a landlord-tenant
relationship, summary dispossessory proceedings provided by
Chapter 51, F.S., may be available.

Since constitutional provisions prevent DOT from using eminent
domain proceedings to enter the rental business, DOT's
transactions with the occupants of the condemned properties are
not subject to tax under s. 212.03, F.S.

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,

Bonnie Everton
Senior Tax Specialist

/e
Cont. #26502

FOOTNOTE 1. Please see also, Rule 12A-1.061(5)(a) and (b),
F.A.C.