Would transferring title to an art collection or extending its loan to an educational institution end Florida's works-of-art sales and use tax exemption?

Plain-English summary

Transferring title to the art collection from the donor to the university foundation would not, by itself, trigger Florida sales or use tax, and extending the existing loan would not trigger tax either. The exemption could continue even though the foundation would become both the lender and the corporate parent of the borrowing museum organization.

The condition was continued compliance with the works-of-art exemption. The collection had to remain on loan to or in the possession of a qualified educational institution, with the required affidavits and other documentation. If the qualifying loan ceased, tax based on the owner's purchase price would become due.

The Department identified real risks in the existing agreements. A clause ending the loan and returning the collection to the donor's estate at death would trigger tax. A clause allowing the donor to take temporary custody also conflicted with the possession requirement; the Department recommended allowing transfers only to other qualified educational institutions.

What this means for you

Ownership and possession were treated separately. Title could change hands without ending the exemption, but continued qualifying educational use and custody were essential.

The ruling also required item-level compliance: works had to be loaned or placed in storage for loan within the stated 90-day period, each exempt item needed the required affidavit on file, and the displaying entity needed a valid consumer's certificate of exemption as an educational institution.

Private indemnity language did not change who the Department would pursue. If the loan ended, the ruling said the Department would look to the donor for the tax, leaving the donor to seek contractual relief from the foundation if appropriate.

Common questions

Q: Was the collection currently exempt? Yes, based on the corporation's status as a qualified educational institution and the donor's apparent compliance with section 212.08(7)(dd).

Q: Did donating title to the foundation end the exemption? No, not by itself, so long as the qualifying loan remained in effect and the other requirements continued to be met.

Q: Could the parties extend the loan for a long or indefinite period? Yes. The mere extension was not a taxable event.

Q: What events threatened the exemption? Termination of the loan, reversion to the donor's estate, donor custody inconsistent with the possession requirement, display or possession by a nonqualifying entity, or missing required affidavits.

Q: Who would owe tax if the loan ceased? The Department said it would look to the donor, regardless of the gift agreement's indemnity provisions.

Citations and references

• Fla. Stat. § 212.08(7)(dd) — exemption for qualifying works of art loaned to educational institutions
• Fla. Stat. § 212.08(7)(o)2.d. — definition of educational institutions
• Fla. Admin. Code r. 12A-1.001(3)(f)3. — loan, affidavit, possession, notice, and documentation requirements
• Fla. Stat. § 95.091 — limitations period referenced when exempt possession ends
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 97A-64

Original ruling text

SUMMARY

The sale or use of works of art purchased for the purpose
of loaning to an educational institution is exempt from
sales and use tax pursuant to s. 212.08(7)(dd), F.S. Title
to the works of art on loan to an educational institution
may be transferred without triggering tax, as long as the
original loan agreement remains in place. Tax becomes due
from the donor when the art ceases to be on loan to the
original educational institution.

Oct 02, 1997

Re: Technical Assistance Advisement - 97(A)-64
Sales and Use Tax
Works of Art for Educational Institutions
Paragraphs (o) and (dd) of section 212.08(7), Florida
Statutes (F.S.) (1996 Supp.)
Rule 12A-1.001(3), Florida Administrative Code (F.A.C.)
XXX ("UNIVERSITY")
Consumer's Certificate of Exemption Number XX
XXX ("Foundation")
XXX ("Donor" or "the Donor")
XXX ("Corporation")
Consumer's Certificate of Exemption Number XX
XXX ("Board")
XXX ["Collection"]

Dear :

This response is to your petition of July 21, 1997, requesting
the Department's issuance of a Technical Assistance Advisement
(TAA) pursuant to s. 213.22, F.S., and Ch. 12-11, F.A.C.,
regarding the referenced Taxpayers and matter. The Department
has carefully examined your petition and finds it to meet the
criteria set forth in Chapter 12-11, F.A.C., requisite to
issuance of a TAA. Therefore, the Department is by this response
issuing the requested TAA.

Facts Presented

The [Foundation] is a University direct-support
organization authorized by [s.] 240.299, F.S.(1995), and a
Florida not for profit corporation under Chapter 617, F.S.
(1995). It is, as noted in the statute, "[a]n organization
which the [Board], after review, has certified to be
operating in a manner consistent with the goals of the
university and in the best interests of the state." See
240.299 subd.(1)(a)3., F.S. (1995)....

The [Foundation] is exempt from the payment of sales or use
tax and has been issued [a] State of Florida Department of
Revenue Consumer's Certificate of Exemption, Certificate
Number [XX], as an educational organization. A copy of the
Consumer's Certificate of Exemption is attached hereto as
"Exhibit 2."...

[The University] and the [Foundation] [have] been offered a
generous gift by [the Donor], and the [Corporation], a
Florida not for profit foundation. The gift consists of
the [Donor's] [Collection] and all of the assets of the
[Corporation], consisting principally of two building[s] in
the City of [...]....

By action of the [Board] of January 24, 1997, the [Board]
authorized "the [Foundation] to accept a gift from [the
Donor] and the [Corporation], contingent upon an
appropriation of State funds sufficient to operate and
maintain the museum building and related programs of a
(sic) "[University Center] for Research and Education on
Material Culture...".

Subsequently, on April 28, 1997, the State of Florida
authorized specific appropriation [...], including general
revenue funding for, among other things, "$2,000,000 for
the [Donor] Museum-[University]"....

Thereafter, an agreement was negotiated among [Donor],
[Corporation], [University], and [Foundation], regarding

the gift. In the course of the gift negotiations with
representatives of the [Donor] and [Corporation], it was
learned that the Collection was the subject of a certain
loan agreement entered into in 1991 between [Donor] and
[Corporation]. Attached hereto as "Exhibit 6" is a copy of
the Amended and Restated Articles of Incorporation of the
[Corporation] and Revised Bylaws, both dated November 29,
1996, provided to the [Foundation] by counsel for the
[Corporation]. A copy of the loan agreement provided by
counsel for the [Corporation] is attached hereto as
"Exhibit 7". Attached hereto as "Exhibit 8" is a copy of
the Gift Agreement among [Donor], [Corporation],
[University], and [University], Inc. (hereinafter "Gift
Agreement").

Under the terms of the loan agreement between [Donor] and
the [Corporation], the Collection, which is to be the
subject of the gift to [University] and the [Foundation],
has been loaned to the [Corporation]. It has been
represented on behalf of [Donor] and the [Corporation] that
the loan agreement between [Donor] and the [Corporation]
provides a Florida use and/or sales tax exemption under
Section [2]12.08(7)(dd)[2.], F.S. (1995)[.] The loan
agreement by its terms runs through July of the year 2001,
and is subject to an automatic extension for an additional
ten years to the year 2011, assuming the lender and the
borrower agree.

In an effort to preserve this exemption, the Gift Agreement
has been structured to preserve the loan of the Collection
to the [Corporation], and thereby avoid triggering a use or
sales tax on the Collection becoming due and payable.
Moreover, the gift offer as presently constituted includes
the provision that the [Foundation] would agree "to pay any
Florida sale or use tax, interest and penalties thereon,
becoming due and payable after the date of this Agreement
as a result of any action or inaction taken after the date
of the Agreement with respect to the Collection or any part
thereof by the [Foundation], the University or the
[Corporation]." Under the terms of the provision, the
[Foundation] would assume the liability of a "taxpayer" as

defined in 12 F.A.C[.] Section 12-11.002(4).

The gift has now been proffered to [University] and the
[Foundation] with the signing of the Gift Agreement by
[Donor] and the [Foundation]. The University and the
[Foundation] have not yet accepted the gift and have not
yet signed the Gift Agreement. The University and the
[Foundation] are willing to accept the gift with this
contingent liability only with the certain assurance that
the liability will never come to fruition.

It has been represented to the University and the
[Foundation] that the loan of the Collection from [Donor]
to the [Corporation] exempts [Donor] and/or the
[Corporation] from the payment of any Florida use or sales
tax on the Collection. It has been further represented
that the Department of Revenue interprets the exemption
provision, Section [2]12.08(7)(dd), F.S. (1995), as
providing an exemption only so long as the loan of the
Collection to the [Corporation] remains in effect. In
other words, it has been represented that, were the loan of
the Collection to be terminated in any way, in whole or in
part, either by transfer of objects in the Collection out
of the loan agreement, or by transfer of the loan agreement
itself to the [Foundation] or [University] or anyone else,
a Florida sales or use tax would become due and payable.
It has been further represented that transfer of title of
the Collection from [Donor] to the [Foundation], however,
will not trigger the tax liability so long as the loan of
the Collection to the [Corporation] remains in effect.

As the terms of the Gift Agreement, specifically "Exhibit
8" paragraph A.2., would transfer any tax liability of
[Donor] to the [Foundation], the [Foundation] and
[University] are reluctant to accept the gift absent
absolute assurance that this liability will not materialize
so long as the [Foundation] does not terminate, in whole or
part, the Collection loan agreement, and so long as it
receives similar assurance that the loan agreement could be
extended indefinitely beyond its current expiration
date(s).

It should be noted that under the terms of the loan
agreement, specifically "Exhibit 7"[,] paragraph 3. "TERM",
page 4, "the term of the Agreement shall automatically be
renewed for an additional ten years unless either party
gives written notice to the other that same (sic) shall not
be renewed,..." It should be noted that under paragraph

21. "GENERAL TERMS", subparagraph (b) on page 16 of the
    loan agreement, the loan agreement may be amended by the
    mutual written consent of the lender and the [Corporation].

If the gift is accepted, under the terms of paragraphs A.1.
and A.2. of the Gift Agreement, the [Foundation] would,
following execution of the Gift Agreement, effectively
control the [Corporation], and would hold title to the
Collection. Accordingly, the [Foundation] would, in effect,
be in the position of being both the lender and in control
of the borrower of the Collection under the loan agreement.
The [Foundation] then could assure that any sales or use
tax obligation resulting through termination of the loan
agreement, in whole or in part, would never occur, assuming
the loan agreement were amended to extend its term
indefinitely. Consequently, the tax liability for which it
could conceivably be responsible under the terms of the
Gift Agreement would not arise.

[University] and the [Foundation] would very much like to
accept this generous gift on behalf of the University, the
State University System, and the people of the State of
Florida. However, in order to do so, they seek assurance
that any contingent Florida sales and/or use tax liability
which they would be accepting under the Gift Agreement,
will never become due and payable....

Requested Advisement

... [T]he [Foundation] seeks a Technical Assistance
Advisement to the effect that:

1. The Collection is currently exempt from sales or use
   taxation, and no tax is due and payable on the Collection.

2. If title to the Collection is transferred to the
[Foundation], no sales or use tax liability is triggered.

3. So long as the loan agreement between the lender of the
   Collection and the [Corporation] remains in existence, no
   sales or use tax will become due and payable (with the
   understanding that the [Foundation], upon execution of the
   Gift Agreement, will become the lender and the corporate
   parent of the borrower).

4. The Department of Revenue is in agreement that an
   extension of the existent loan agreement by amendment for
   some additional period of time, either indefinite or
   substantial (such as 99 years) is possible and extension of
   the loan agreement will not result in a sales or use tax
   becoming due and payable....

Exhibits

The following provides a discussion of the pertinent
Exhibits included with the request.

Exhibit 1 provides the "Amended and Restated Articles of
Incorporation [for the] [Foundation]", as amended and restated
March 23, 1994.
Exhibit 2 provides a copy of the Foundation's Consumer's
Certificate of Exemption, showing an expiration date of November
6, 1999.
Exhibit 6 provides the Articles of Incorporation of
[Corporation], Amended and Restated November 29, 1996. Article
III of this document provides that Corporation is organized
exclusively for a list of one or more purposes. One of the
listed purposes is educational.
Exhibit 7 is a copy of the Loan Agreement between the Donor
and the Corporation which was executed on July 29, 1991.
Sections of this Agreement pertinent to our discussion include:

1. LOAN OF OBJECTS
   (a) The Lender grants, transfers, conveys, and assigns (the
   "Loan") to the [Corporation] the right of immediate

possession and physical custody of the "Objects" on the
terms and subject to the conditions set forth hereinbelow.
As used in this Agreement, the capitalized term "Objects"
shall mean those items of the Lender's collection of
decorative and propaganda art which the [Corporation] has
requested to borrow from the Lender and the Lender has
agreed to loan to the [Corporation] subject to the terms
hereof. The Lender's collection of decorative and
propaganda art consists of this collection of items of
tangible personal property dating from the late nineteenth
to the mid-twentieth centuries, encompassing art objects,
paintings, fine art prints,... located presently at the
sites set forth in Exhibit I hereto, together with
subsequent replacements and additions to said collection,
also to be located at said sites (the "Collection"). The
term Objects, consisting of items of the Collection which
the [Corporation] has asked for and the Lender has agreed
to loan, shall be taken to include and refer to those items
actually delivered into the possession of the
[Corporation], and those still in the possession of the
Lender but to be delivered to the [Corporation]. From time
to time, as the site or sites of the Collection change, the
parties will mutually agree on amending Exhibit I so as
take into consideration those changes.

(b) The Lender shall retain legal title and ownership of
the Objects notwithstanding any term of this Agreement.

2. DELIVERY
   (a) Subject to Paragraph 6 hereof (regarding Retention
   Notices), the Lender shall deliver each Object into the
   possession and custody of the [Corporation] pursuant to a
   written request (a "Delivery Request") to the Lender from
   the [Corporation], substantially in the form of the
   attached Exhibit II, that the Lender deliver such Object to
   the [Corporation]. Each such delivery shall be made, with
   respect to Objects located in North America, at the
   [Corporation's] premises at... and, with respect to Object
   located in [foreign country] at those locations and sites
   listed as part of Exhibit I....

3. TERM
The provisions of this Agreement and the Loan of the
Objects hereby granted to the [Corporation] shall continue
in full force and effect for a period of ten (10) years
from the date of this Agreement; the term of the Agreement
shall automatically be renewed for an additional ten years
unless either party gives written notice to the other that
same shall not be renewed, the notice to be given not less
than one year before the expiration of the prior term. If,
however, the Lender dies during the initial term or the
extended term of this Agreement, this Agreement and the
Loan shall terminate on the date of [this] death, and all
Objects subject to the Loan shall immediately revert to the
Lender's estate.
...

5. ADDITIONS
   (a) Any item contained in the Collection which is not
   already included in the Objects subject to this Agreement
   shall, subject to Paragraph 1(a), become an Object on Loan
   to the [Corporation] hereunder upon the Lender's receipt
   from the [Corporation] of a Delivery Request for such
   items, provided that the Lender, in [Lender's] sole
   discretion, agrees to have such item become an Object on
   Loan to the [Corporation] hereunder....

6. RETENTION NOTICES
   Notwithstanding the receipt by the Lender of a Delivery
   Request with respect to an item in the Collection, the
   Lender may retain possession and custody of such item upon
   delivery by the Lender to the [Corporation] of a written
   notice (a "Retention Notice") of the Lender's desire to
   retain possession and custody of the item referenced in the
   Delivery Request. Items which are referenced in Retention
   Notices shall not be considered on Loan to the
   [Corporation] or otherwise subject to the terms of this
   Agreement while in the possession and custody of the
   Lender.

7. GRANT BACKS
   (a) Notwithstanding any other term of this Agreement,
   custody and possession of an Object may be returned to the

Lender for a limited period of time, by mutual agreement of
the Lender and the [Corporation], pursuant to the execution
of a notice (a "Temporary Custody Notice") substantially in
the form of the attached Exhibit IV. Objects which are
referenced in Temporary Custody Notices shall remain
subject to the terms of this Agreement while in the
possession and custody of the Lender. All such Objects
shall be returned to the [Corporation] by the Lender upon
expiration of the period of time set forth in the Temporary
Custody Notice with respect thereto. All costs associated
with the return of an Object to the Lender, and redelivery
of the Object to the [Corporation], shall be borne by the
Lender.

(b) At no time shall the Objects subject to Temporary
Custody Notices exceed 3 percent of the number of Objects
subject to this Agreement....

15. EXHIBITIONS
    ...
    (b) The [Corporation] may, upon giving prior notice to the
    Lender, grant to third parties the right to exhibit the
    Objects and deliver custody and possession of the Object to
    such third persons, in each case on such terms and
    conditions as the [Corporation] deems appropriate....

Exhibit 8 is a copy of the Gift Agreement between the Donor
and the Corporation and the University and the Foundation.
Sections pertinent to our discussion read:

This Agreement (the "Agreement") is made and entered into
as of the ____ day of July, 1997, by and among [the Donor],
[the Corporation], [the Foundation], and [the University],
a component unit of the State University System of Florida.

In consideration of the following gifts to be made by the
[Corporation] and [the Donor] to the [Foundation] and the
University, and the covenants provided herein, the parties,
intending to be legally bound hereby, agree as follows:

A. [Donor] and the [Corporation] agree to make the gifts

described in the following paragraphs 1. through 2.:

1. The [Corporation] will amend its articles of
   incorporation and bylaws to provide that all of its
   directors may be appointed and removed at any time with or
   without cause by the [Foundation], with the intention to
   effect a transfer of complete control of the [Corporation],
   all of its assets, interests and obligations, specifically
   including, but not limited to, The [...] building[s],
   located at..., legal descriptions of which properties are
   provided....

2. [The Donor] will donate to the [Foundation] all of
   [Donor's] right title[,] and interest in and to all objects
   constituting [the Collection] subject to that certain Loan
   Agreement made and entered into by the [Corporation] and
   [the Donor] dated July 29, 1991, and the University and the
   [Foundation] agree to indemnify and hold the directors of
   the [Corporation] harmless from all liabilities arising out
   of or related to their service as such directors to the
   full extent permitted by Florida law, and the [Foundation]
   agrees to pay any Florida sales or use tax, interest and
   penalties thereon, becoming due and payable after the date
   of the Agreement as a result of any action or inaction
   taken after the date of this Agreement with respect to the
   Collection or any part thereof by the [Foundation], the
   University or the [Corporation].

B. The gifts described above are accepted by the University
and the [Foundation] subject to the following paragraphs 1.
through 21. beginning on the date of closing of the gifts
described above. The University and the [Foundation] will:

1. Continue the museum and educational activities and
   operations conducted to the date of the Agreement by the
   [Corporation], which continuing operations are referred to
   herein as the [Corporation]....

C.1. This Agreement shall be governed by and construed in
accordance with laws of the State of Florida without regard
to the conflicts of law principles thereof, and this

Agreement may not be amended except by an instrument in
writing signed by all of the parties hereto. This
Agreement shall be binding upon and shall inure to the
benefit of the parties and their respective
representatives, successors and assigns....

5. It is contemplated that the gifts described in the
   Agreement to be made by [the Donor] and the [Corporation]
   shall be made, and thereby closed for purposes of this
   Agreement on July 1, 1997, or as soon thereafter as
   reasonably practical. It is also the intention of the
   parties hereto that neither [the Donor] nor the
   [Corporation] shall be subject to taxation by reason of
   these gifts under any of the sales and use tax law of
   Florida, the federal gift tax imposed by s. 2501 of the
   Code, the excise taxes imposed by any of the provisions of
   Chapter 42 of the Code, or any interest or penalties
   related thereto. Therefore, this Agreement shall be
   construed and all provisions shall be applied consistent
   with such intent....

Discussion of Law

Section 212.08(7)(o)2.d., F.S. (1996 Supp.), provides in
pertinent part:

d. "Educational institutions"... The term "educational
institutions" includes private nonprofit organizations the
purpose of which is to raise funds for schools teaching
grades kindergarten through high school, colleges, and
universities.... The term "educational institutions" also
includes state, district, or other governing or
administrative offices the function of which is to assist
or regulate the customary activities of educational
organizations or members....

Section 212.08(7)(dd), F.S. (1996 Supp.), provides:

(dd) Works of art.-1. Also exempt are works of art sold to or used by an
educational institution, as defined in sub-subparagraph

(o)2.d.

2. This exemption also applies to the sale to or use in
   this state of any work of art by any person if it was
   purchased or imported exclusively for the purpose of being
   loaned to and made available for display by any educational
   institution, provided that the term of the loan agreement
   is for at least 10 years.

3. A work of art is presumed to have been purchased in or
   imported into this state exclusively for loan as provided
   in subparagraph 2., if it is so loaned or placed in storage
   in preparation for such a loan within 90 days after
   purchase or importation, whichever is later; but a work of
   art is not deemed to be placed in storage for purposes of
   this exemption if it is displayed at any place other than
   an educational institution.

4. The exemptions provided by this paragraph are allowed
   only if the person who purchased the work of art gives to
   the vendor an affidavit meeting the requirements,
   established by rule, to document entitlement to the
   exemption. The person who purchased the work of art shall
   forward a copy of such affidavit to the Department of
   Revenue at the time it is issued to the vendor.

5. The exemption provided by subparagraph 2. applies only
   for the period during which a work of art is in the
   possession of the educational institution or is in storage
   before transfer of possession to that institution; and when
   it ceases to be so possessed or held, tax based upon the
   sales price paid by the owner is payable, and the statute
   of limitations provided in s. 95.091 shall begin to run at
   that time. Any educational institution which has received
   a work of art pursuant to this paragraph shall make
   available to the department information relating to the
   work of art. Any educational institution that transfers
   from its possession a work of art as defined by this
   paragraph must notify the Department of Revenue within 60
   days after the transfer.

6. For purposes of the exemptions provided by this
paragraph, the term "work of art" includes pictorial
representations, sculpture, jewelry, antiques, stamp
collections and coin collections, and other tangible
personal property, the value of which is attributable
predominantly to its artistic, historical, political,
cultural, or social importance.

7. This paragraph is a remedial clarification of
   legislative intent and applies to all taxes that remain
   open to assessment or contest on July 1, 1992.

Rule 12A-1.001(3)(f)3., F.A.C., provides:

3.a. A "work of art" is exempt from sales and use tax if
the work of art is sold to or used by an educational
institution, as defined in subparagraph 2., or if sold to
or used by any person under all of the following conditions
specified in sub-subparagraphs b. through i.:

b. The work of art must have been purchased in Florida or
imported into Florida within six months from the date of
purchase exclusively for the purpose of being loaned to and
made available for display by an educational institution.
A work of art is presumed to have been purchased in or
imported into this state exclusively for loan to an
educational institution if it is so loaned or placed in
storage in preparation for such a loan within 90 days after
purchase or importation, whichever is later. A work of art
will not be deemed to be "in storage" for purposes of this
subparagraph if it is displayed at any place other than an
educational institution.

c. The purchaser or his authorized agent must complete an
affidavit documenting entitlement to the exemption provided
in s. 212.08(7)(dd), F.S., by stating that the purchaser
has or will enter into a written loan agreement with an
educational institution, which is or will be identified by
its name and address, for a period of at least ten years,
present the affidavit to the seller of the work or works of
art, and forward a copy of the affidavit to the Department

of Revenue when it is presented to the vendor. A purchaser
may authorize his agent to execute such affidavit by a
documented Power of Attorney filed with the Department.
The Department prescribes Form DR-835, Power of Attorney
(incorporated by reference in Rule 12A-1.097, F.A.C.), as
the form to be used for such purposes.
...
e. The exemption of the purchaser or owner from sales and
use tax applies only for the period during which the work
of art is in the possession of the educational institution
or is in storage before transfer of possession to the
educational institution. The exemption provided to the
purchaser is not terminated if the educational institution,
which entered into a loan agreement with the purchaser of
the work of art, loans a work of art which is exempt under
this subparagraph to another educational institution(s) and
the physical custody of such work of art is returned to the
lending educational institution at the termination of the
loan agreement(s). Any educational institution which
transfers possession of a work of art that is exempt under
this subparagraph to other educational institutions is
required to notify the Department within 60 days of such
transfers. The notification shall include a description of
the work of art, the name and address of the purchaser who
loaned it, the names and addresses of each of the
educational institutions receiving the work of art for
display, and the time periods that the work of art will be
displayed at each identified educational institution. Tax
is due to the Department from the owner when the work of
art ceases to be so possessed or held based on the cost
price paid by the owner. The statute of limitations
provided in s. 95.091, F.S., shall begin to run at the time
the work of art is no longer so possessed or held.

f. Any educational institution in this state that has
received from a purchaser a work of art which is exempt
under this subparagraph is required to notify the
Department within 60 days that it has received the work of
art. The notification to the Department shall include a
description of the work of art, the name and address of the
purchaser who loaned it, and the date on which the transfer

of possession occurred.

g. Any educational institution which displays a work of art
exempt under this subparagraph is required to maintain any
written agreements, notifications, affidavits, and any
other documentation which substantiates the educational
institution's right to display the work of art until tax
imposed by Part I, Chapter 212, F.S., may no longer be
determined and assessed under s. 95.091(3), F.S., and such
documentation shall be made available to the Department
upon request.

h. Any educational institution that transfers from its
possession a work of art that is exempt under this
subparagraph is required to notify the Department within 60
days after the transfer, except for transfers which do not
terminate the exemption provided in this subparagraph for
purposes such as storage, repairs, conservation and
restoration, authentication, insurance examination,
valuation, appraisal, research, photography and
reproduction, or fumigation during which the work of art is
not displayed and the educational institution maintains
documentation to substantiate that such transfers do not
constitute a transfer of possession for purposes of display
of such work of art. The notification to the Department
shall include a description of the work of art, the name
and address of the purchaser who loaned it, the name and
address to which the work of art is transferred, and the
date on which the transfer of possession occurred.

i. For purposes of the exemption described in this
subparagraph, the term "work of art" includes pictorial
representations, sculpture, jewelry, antiques, stamp
collections and coin collections, and other tangible
personal property, the value of which is attributable
predominantly to its artistic, historical, political,
cultural, or social importance....

A suggested format for the affidavit to be provided by the
purchaser to the vendor of the work of art, as provided by Rule
12A-1.001(3)(f)3.d., F.A.C., is enclosed.

Department's Response

Pursuant to the requested advisement, the Department
responds to each numbered request as follows:

1. Based upon the information provided, the Collection is
   currently exempt from sales or use tax. This conclusion is
   based upon the fact that the Corporation is a qualified
   educational institution and that the Donor appears to have
   otherwise complied with the provisions of Section 212.08(7)(dd),
   Florida Statutes.
2. The mere act of transferring title to the Collection
   from the Donor to the Foundation does not, in and of itself,
   trigger any sales or use tax liability. However, as discussed
   below, there are certain aspects of the existing and proposed
   agreements that could trigger liability if not resolved.
3. So long as the loan agreement remains in existence, no
   sales or use tax will become due and payable. This remains so
   even though the Foundation, upon execution of the Gift
   Agreement, will essentially become both lender and corporate
   parent of the borrower. Again, however, please see the
   discussion below regarding potential concerns with the subject
   agreements.
4. The mere extension of the loan agreement for some
   additional period of time will not trigger a taxable event.

Potential Concerns

1. The Foundation should be forewarned that the Department
   will continue to require compliance, to the fullest extent, with
   the provisions of Section 212.08(7)(dd), F.S., including but not
   limited to, the requirements that the works of art have been
   loaned or placed in storage for loan within 90 days of their
   purchase and, that items of the Collection are only exempt if
   they are on display at or in the possession of an entity that
   holds a valid Consumer's Certificate of Exemption as an
   educational institution. Further, in order to maintain the
   exemption, each item in the Collection must have a completed
   Affidavit in accordance with the specifications of Rule 12A1.001(3)(f)3., F.A.C., on file with the Department.

2. Paragraph B.1. of the Gift Agreement between the Donor
and the Corporation and the University and the Foundation
provides that the University and the Foundation will "[c]ontinue
the museum and educational activities and operations conducted
to the date of the Agreement...." The University and the
Foundation will assume control of the Corporation and the Loan
Agreement between the Donor and the Corporation. Even if all of
the criteria of the law discussed above are in place, the
Department finds certain provisions of the Loan Agreement to be
inconsistent with the provisions of s. 212.08(7)(dd), F.S., and
Rule 12A-1.001(3)(f)3., F.A.C. Although the following noted
inconsistencies are not currently sufficient to void the
exemption, unless the Loan Agreement is modified, certain events
may trigger tax becoming due on the Collection:
a. Paragraph 3. of the Loan Agreement discusses the Term of
this instrument. It contains a provision that the Collection
would revert to the Donor's estate upon his death. As indicated
in your letter, the mere transfer of title of the Collection to
the Foundation will not trigger the tax liability so long as the
Collection remains on loan to the Corporation under the terms of
the Loan Agreement. However, as currently written, if the
Collection reverts to the Donor's estate upon his demise, the
loan will cease and tax will become due at that time.
Accordingly, to ensure that tax liability would not be
triggered, it is suggested that paragraph 3. of the Loan
Agreement be amended to delete the provision that the Collection
revert to the Donor's estate and, rather, reflect an indefinite
term for the loan.
b. As set forth above, the exempt status of the Collection
is contingent upon the extension of an affidavit to the vendor
in lieu of paying sales and use tax. Copies of these affidavits
are to be provided to the Department. This being the case, it
is recommended that language relating to the affidavit
requirement be included in the Loan Agreement, and that the Gift
Agreement require that the Donor provide copies of all previous
affidavits to the Foundation.
c. Paragraph 7. of the Loan Agreement allows the Donor to
assume temporary custody of items in the Collection which are in
the possession of the Corporation. Pursuant to the provisions
of s. 212.08(7)(dd), F.S. (1996 Supp.), and Rule 12A1.001(3)(f)3., F.A.C., quoted above, tax is due when the items

in the Collection cease to be in the possession of the
Corporation. It is, therefore, recommended that the provisions
of the Loan Agreement be amended to allow only for loans of the
Collection to other qualified educational institutions.

Conclusion

To reiterate, so long as all other provisions of the law
are complied with, sales or use tax will not be due as long as
the Collection remains on loan to the Corporation. Neither the
transfer of title of the Collection to the Foundation nor the
extension of the Loan Agreement will trigger a taxable event.
However, under the provisions of s. 212.08(7)(dd), F.S. (1996
Supp.), use "... tax based upon the sales price paid by the
owner...," will be due, if, and when, the loan ceases.
Regardless of any contractual arrangement between the Donor and
the Foundation, if the loan should cease, the Department will
look to the Donor for payment of the tax. If appropriate, the
Donor would have to seek relief from the Foundation.

This response constitutes a revised 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.

Sincerely,

Carol Schwarz
Senior Tax Specialist
Tax Policy and Dispute Resolution

Enclosure
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