Were a Florida property owners' association's mandatory annual assessments taxable as club admissions or membership fees?

Plain-English summary

The association's regular annual general assessments were not taxable as admissions or club fees. They met all four requirements in the Department's rule: the assessments were mandatory, paid to a homeowners' association, required as a condition of owning property, and related to club facilities that were part of the community's common areas.

Every parcel owner had to be a member and pay the assessments even if the owner did not use the facilities. Unpaid assessments, late fees, interest, and collection costs became a lien that the association could foreclose. The association maintained common recreational property including a clubhouse, golf course, tennis courts, swimming pool, and beach-club facilities.

The ruling listed optional charges such as golf-cart and locker rentals, food and beverages, lessons, shop purchases, and guest fees, but it did not decide their tax treatment.

What this means for you

The result depended on the connection between the assessment and real-property ownership. Mandatory HOA charges tied to ownership and common-area facilities were different from ordinary voluntary private-club dues.

Associations should not extend this conclusion automatically to every amount billed to an owner or guest. Optional purchases and usage charges require their own analysis.

Common questions

Q: Could an owner avoid the assessment by not using the facilities? No. The declaration required payment regardless of use or abandonment of the parcel.

Q: Why did the common-area status matter? The rule excluded mandatory HOA dues and fees only when the club facilities were part of the real property's common elements or common areas.

Q: Could the association enforce nonpayment against the parcel? Yes. The assessments and related charges became a lien and could be foreclosed.

Q: Did the TAA exempt optional golf, food, lesson, shop, or guest charges? It did not decide those separately listed charges.

Citations and references

• Fla. Stat. § 212.02(1) — definition of admissions, including private-club dues and fees
• Fla. Stat. § 212.04(1) — tax on admissions
• Fla. Admin. Code r. 12A-1.005(5)(d)2.d. — mandatory HOA dues and fees tied to ownership and common areas
• Fla. Stat. § 617.301(2), (7) — common-area and homeowners' association definitions
• Downey v. Jungle Den Villas Recreational Ass'n, Inc., 525 So. 2d 438 (Fla. 5th DCA 1988) — recreation property owned by the managing entity treated as a common element
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 97A-080

Original ruling text

Nov 19, 1997

Re: Technical Assistance Advisement 97A-080
Sales and Use Tax
Property Owner's Association, Mandatory Assessments
Rule 12A-1.005(5)(d)2.d., F.A.C.
XXX (the "Original Association")
XXX (the "Club")
XXX ("Association")
XXX ("Beach Club")

Dear :

This is in response to your letter of June 12, 1997,
requesting a technical assistance advisement (TAA) concerning
the applicability of sales tax to mandatory assessments paid by
a homeowner to a property owners association.

FACTS

The Original Association was incorporated in the State of
Florida under Chapter 617 of the Florida Not-For-Profit
Corporation Act. Pursuant to Section 617.1105 of the Florida
Business Corporation Act, the Original Association merged with
the Club upon approval of the Board of Directors of the Club and
the members of the Original Association on December 10, 1996.
Both the Club and the Original Association community are one and
the same. It was and remains a mandatory requirement that all
individuals who purchase real property in said community are
required to be members of both the Club and the Original
Association. For this and other reasons, the two entities were
appropriately merged with a single entity remaining as the
surviving corporation under the new name of the Association.

No changes in the Articles of Incorporation or Bylaws of
the corporations have been made, except for those changes made
pursuant to law in the surviving corporation's (Association)
Articles of Incorporation and Bylaws. You attached a copy of
the Third Amended and Restated Declaration of Easements,

Covenants, Conditions, Restrictions, and Limitations (the
"Declaration").

The Association owns, operates, maintains, and administers
all recreational facilities and all of the other common
properties. The Association formed and created a subsidiary,
Beach Club, which will operate, maintain and administer the
Beach Club property. The Association has the power and duty,
with respect to the properties it owns, to administer and
enforce the easements, covenants, conditions, restrictions, and
other limitations, to maintain and administer the respective
properties, and to collect and disburse the assessments. The
purpose of the Association is (1) to provide for the
maintenance, preservation, and architectural control of the
development, (2) to promote the health, safety, and welfare of
the residents within the Association property and (3) to
acquire, construct, improve, equip, manage, and maintain, solely
for the benefit, pleasure and recreation of the members of the
Association, all aspects thereof on the Association property.
Such Association property includes the clubhouse, other
appropriate buildings and structures, golf course, tennis
courts, swimming pool, and other facilities and amenities for
the private and sole use by the members of the Association,
members of their families and their guests and such other
persons as may be permitted to use the beach club facility
pursuant to the declaration.

All property owners of the Association are entitled to vote
in the affairs of the Association. Again, all individuals who
purchase homes (real property) within the community are required
to become a member of the Association. The Association member's
membership is appurtenant to and may not be separated from title
to any parcel owned by the member.

The Board of Directors of the Association adopts an annual
budget sufficient to maintain and operate the Association and to
fulfill the obligations of the Association. Upon such adoption
of the annual budget, the Board of Directors sets forth the
annual general assessment charged to each member of the
Association. At any time the Board of Directors deems it
necessary, the Board has the right and power, during any fiscal

year, to adopt and levy an increase to such annual general
assessment for the purpose of meeting its expenses and operating
costs on a current basis. Each member is obligated to pay the
annual general assessment. No member may waive or otherwise
escape liablility for the assessments by non-use of the common
areas or facilities or abandonment of his or her parcel.

Optional charges include golf cart rentals, locker rentals,
food and beverage charges, meeting room rentals, fees for golf
and tennis lessons, masseur and physical therapy fees, charges
for purchases in golf and tennis pro shops, guest fees and any
other fees and charges which are customarily charged directly to
members of organizations.

Each member's parcel is subject to annual general
assessments by the Association for the improvement, maintenance,
and operation of the Association property. The amount is set at
a level sufficient to meet the Association's obligations and may
be increased for the purpose of meeting its expenses and
operating costs on a current basis. The general assessments
against each member's parcel together with late fees, interest,
and costs of collection shall become a lien on the member's
parcel, which may be foreclosed upon by the Association.

QUESTION

Are the annual regular assessments subject to state sales
tax?

YOUR POSITION

You argue that the membership fees along with the common
area maintenance assessment are not a taxable admission
pursuant to Rule 12A-1.005(5)(d)2.d., F.A.C., because the fee is
mandatory, the fee is paid to a homeowner's association, the fee
is required to be paid as a condition of ownership, and the club
facilities are part of the common elements or common areas of
the real property.

STATUTORY AND REGULATORY AUTHORITY

Section 212.04(1), F.S., states in part:

(1)(a) It is hereby declared to be the legislative intent
that every person is exercising a taxable privilege who
sells or receives anything of value by way of admissions.

(b) For the exercise of such privilege, a tax is levied at
the rate of 6 percent of sales price, or the actual value
received from such admissions, which 6 percent shall be
added to and collected with all such admissions from the
purchaser thereof, and such tax shall be paid for the
exercise of the privilege as defined in the preceding
paragraph....

Section 212.02(1), F.S., states:

(1) The term "admissions" means and includes the net sum of
money after deduction of any federal taxes for admitting a
person or vehicle or persons to any place of amusement,
sport, or recreation or for the privilege of entering or
staying in any place of amusement, sport, or recreation,
including, but not limited to, theaters, outdoor theaters,
shows, exhibitions, games, races, or any place where charge
is made by way of sale of tickets, gate charges, seat
charges, box charges, season pass charges, cover charges,
greens fees, participation fees, entrance fees, or other
fees or receipts of anything of value measured on an
admission or entrance or length of stay or seat box
accommodations in any place where there is any exhibition,
amusement, sport, or recreation, and all dues and fees paid
to private clubs and membership clubs providing
recreational or physical fitness facilities, including, but
not limited to, golf, tennis, swimming, yachting, boating,
athletic, exercise, and fitness facilities, except physical
fitness facilities owned or operated by any hospital
licensed under chapter 395.

Rule 12A-1.005(5)(d)2.d., F.A.C., states:

2. The following payments made to private clubs or
   membership clubs are not "fees" which are subject to tax on

admissions.

d. Mandatory dues and fees paid to a... homeowners'
association... when they are required to be paid as a
condition of ownership or occupancy of real property and
the club facilities are part of the common elements or
common areas of the real property.

Section 617.301, F.S., states in part:

(2) "Common area" means all real property within a
community which is owned or leased by an association or
dedicated for use or maintenance by the association or its
members, including, regardless of whether title has been
conveyed to the association:

(a) Real property the use of which is dedicated to the
association or its members by a recorded plat....

(7) "Homeowners' association" or "association" means a
Florida corporation responsible for the operation of a
community in which the voting membership is made up of
parcel owners or their agents, or a combination thereof,
and in which membership is a mandatory condition of parcel
ownership, and which is authorized to impose assessments
that, if unpaid, may become a lien on the parcel....

DISCUSSION

Rule 12A-1.005(5)(d)2.d., F.A.C., provides four criteria
that must be satisfied for a fee not to be taxable. The fee
must be (1) mandatory, (2) paid to a homeowner's association,
(3) required to be paid as a condition of ownership of real
property, and (4) must be for club facilities that are part of
the common elements or common areas of the real property.

The annual general assessments are mandatory, because the
members are required to pay the fees regardless of whether they
used the common areas or not. Article VII, Section 6(b), of the
Declaration provides that all charges against any parcel
pursuant to the Declaration, together with such late fees,

interest thereon, and costs of collection thereof shall become a
lien on the parcel. The assessments are imposed as a condition
of ownership of a house.

Here, the fees were paid to a homeowner's association. The
Association was organized as a not-for-profit homeowners'
association pursuant to section 617.301(7), F.S. The
Declaration provides that the Association is responsible for the
common areas. The Association is authorized by the Declaration
to impose assessments and collect the assessments. The
Association may foreclose for nonpayment.

The third criterion is also a requirement under section
617.301(7), F.S. The Declaration required the dwelling owners
to obtain a membership as a condition of ownership. Here, the
parcel owners, or the residential owners, are required to be
members as a condition of parcel ownership. Article VII,
Section 2, provides that each parcel is subject to annual
general assessments by the Association for the improvement,
maintenance and operation of the Association property, including
the management and administration of the Association and
furnishing of services as set forth in the Declaration.

The fourth criterion requires that the club facilities to
which the fees relate are a part of the common elements or
common areas. The Declaration provides that the property
maintained by the Association is common areas for the use of
Association members. In Downey v. Jungle Den Villas Recreational
Assn., Inc., 525 So.2d 438 (Fla 5th DCA 1988), the Fifth
District Court of Appeal found that the real property to be used
for the recreation facilities the legal title of which was in
the entity created to own, operate and manage the recreation
facilities, was actually a "common element."

DETERMINATION

Based on a review of the Declaration and other
documentation provided, the regular annual general assessments
are not taxable pursuant to the criteria established in Rule
12A-1.005(5)(d)2.d., F.A.C.

This response constitutes a Technical Assistance Advisement
under Section 213.22, F.S., which is binding on the Department
only under the facts and circumstances described in the request
for this advise as specified in Section 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 advise 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 Section 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 response.

Sincerely,

Charles Wallace
Senior Tax Specialist
Technical Assistance and Dispute Resolution

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