Were dues paid to a mobile-home park homeowners' association subject to Florida sales tax?

Subject

Membership Dues

Plain-English summary

The mobile-home park homeowners' association did not have to collect Florida sales tax on its annual membership dues. The association charged $10 per unit for membership, voting, special functions, a monthly activity calendar, and general expenses, but it did not own, lease, maintain, or provide recreational or physical-fitness facilities.

The park owners—not the association—provided the clubhouse, furniture, billiard table, pool, and shuffleboard courts as part of lot rent. Every tenant could use those facilities whether or not the tenant joined the association. That allowed the association to use the exemption for clubs that provide no recreational, physical-fitness, or other facilities to members.

The association failed two other possible exemptions. It was not exempt under section 501(c)(3), and its dues were not required as a condition of owning or occupying property. The park facilities also were not association common areas. Those failures did not matter because the separate no-facilities exemption applied.

What this means for you

Association dues do not become taxable club admissions merely because members take part in social activities when the association itself provides no facility. Who owns, maintains, and grants access to the physical amenities is central.

The ruling was limited to dues. It reminded the association that separately charged event admissions, food or tangible-property sales, and the association's own purchases could still be taxable.

Common questions

Q: Did the association qualify as a section 501(c)(3) organization? No, so it could not use that nonprofit admission exemption.

Q: Were the dues required to live in the park? No. A tenant could rent a lot and use park facilities without joining the association.

Q: Why were the dues exempt anyway? The association itself provided no recreational or physical-fitness facilities; the park owners provided them to all tenants.

Q: Did the exemption cover separately charged events or sales? No. The ruling expressly distinguished event admissions, food, tangible-property sales, and association purchases.

Q: Could the association seek a refund of tax collected on dues? The source described a historical refund process requiring customer refunds first and a timely state claim. Current forms and deadlines should be verified.

Citations and references

• Fla. Stat. §§ 212.02(1), 212.04(1)(a) — admissions and club membership dues
• Fla. Stat. § 617.301(2) — common-area definition
• Fla. Admin. Code r. 12A-1.005(3)(g), (5)(d)2.d., (5)(e) — nonprofit, mandatory-association, and no-facilities exemptions
• Fla. Admin. Code rr. 12A-1.014(6), 12-26.002, 12-26.003 — refund procedure described in the advisement
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98A-032

Original ruling text

SUMMARY

A mobile home community homeowners' association requested a ruling on whether their homeowners' association dues were taxable. The homeowners' association did not qualify for the homeowners' association exemption in Rule 12A1.005(5)(d)2.d., F.A.C. However, the association did qualify under Rule 12A-1.005(5)(e), F.A.C., because it does not provide any recreational or physical fitness facilities. All of the recreational or physical fitness facilities are provided, owned, and maintained by the Park owners. Therefore, sales tax is not due on their membership dues. If sales tax was collected and remitted, a refund can be requested for the improperly paid taxes.

May 04, 1998

Re: Technical Assistance Advisement 98A-032 XXX ("the Association") Membership Dues Section 212.04(1)(a), 212.02(1), and 617.301(2),F.S. Rule 12A-1.005(3)(g), (5)(d)2.d., and (5)(e), F.A.C.

Dear :

This is in response to your letters of February 18, 1998 and November 24, 1997, requesting a Technical Assistance Advisement (TAA) regarding the applicability of sales tax to homeowners' association dues paid by your members. This response to your request constitutes a TAA under Chapter 12-11, Florida Administrative Code (F.A.C.), and is issued to you under the authority of s. 213.22, Florida Statutes (F.S.). The Association has requested a ruling on whether sales tax must be paid on its membership dues from tenants situated in River Estates ("the Park").

REQUESTED ADVISEMENT

Is this homeowners' association required to collect and remit sales tax on its membership dues?

STATED FACTS

Your letters provided the following:

1) The Association is a Not-for-Profit Corporation organized pursuant to Chapter 617 of the Florida Statutes; 2) The organization became an association in 1984 for social gatherings; 3) On July 2, 1985, the Association incorporated to take advantage of the benefits and protection in Chapter 723, Florida Statutes; 4) The Association has a federal tax identification number and a Florida sales tax certificate number; however, it does not qualify as an organization exempt from federal income tax under s. 501(c)(3) of the United States Internal Revenue Code of 1986, as amended; 5) The Association was organized for the residents of the Park and is not open to the general public. The members pay yearly dues to attend special functions, to vote on issues of association business, and to cover general expenses. The payment of membership dues is not mandatory to use Park owned facilities; 6) The Park owners maintain and provide the club house and furniture, billiard table, swimming pool, and shuffleboard courts. Tenants rent land from the Park owners and pay quarterly rent to the Park owners; so they do not own any real property, but do own their mobile homes. Tenants and their guests may use the Park facilities; 7) Members in good standing may vote on issues at the monthly business meetings and may also participate in the social activities (such as: dinners, cards, bingo, shuffleboard, and horseshoes) provided by the Activity Committee; and 8) In early November 1997, the Association was told that its dues, $10.00 per year per unit, were taxable.

The accompanying Articles of Incorporation and by-laws provided additional information.

The Articles of Incorporation, in Article III, state that "The members... shall consist only of bona fide owners of mobile homes situated on lots in [the Park] who have paid all dues, assessments and charges required to be a member of the Corporation;..."

The by-laws, in Article III section 3.1, state that "Membership... shall be limited to bona fide owners of mobile homes in [the Park].... Each applicant for membership shall be approved by the board and shall pay any fees required by these by-laws...."

Also, per a telephone conversation with the Association's Treasurer, on April 13, 1998, these additional facts were established:

1) The Association does not own any facilities, nor does it rent any facilities from the Park owners; 2) The Association does not provide any recreational or physical fitness facilities for their members; 3) The Park owners provide all facilities, and any tenant may use the Park facilities; 4) The use of Park facilities by tenants is provided as a part of the tenants' rent which is paid to the Park owners; and 5) Dues paid to the Association allow members to vote at meetings and receive a monthly calendar of activities.

APPLICABLE LAW
The following statutory and administrative law is relevant to the issue under advisement:

Section 212.04(1)(a), F.S. provides:

(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.

Section 212.02(1), F.S., defining "admissions", provides in part:

(1) The term "admissions" means and includes... 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,....

Rule 12A-1.005, F.A.C., provides in pertinent part:

(3) EXEMPT ADMISSIONS....

(g) Dues, membership fees, and admission charges imposed by not-for-profit sponsoring organizations or community or recreational facilities are exempt. To receive this exemption, the organization making any such charges must qualify as a not-for-profit entity under the provisions of s. 501(c)(3) of the United States Internal Revenue Code of 1986, as amended.

(5) DUES AND INITIATION FEES...
(d)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 condominium association, homeowners' association, or cooperative 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.

(e) Dues paid by persons for membership in clubs such as sewing clubs, bowling clubs, square dancing clubs, bridge clubs, and gun clubs, which provide no recreational or physical fitness or other facilities for their members, are exempt. Any charge made by any such club for admission to any event conducted or sponsored by the club is taxable, except as provided in paragraphs (3)(g) and (j) of this rule....

Section 617.301(2), F.S., defining "common area", provides in pertinent 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; or

(b) Real property committed by a declaration of covenants to be leased or conveyed to the association.

DETERMINATION

Pursuant to the above referenced authorities, all admissions are taxable unless specifically exempted. Additionally, Section 212.02(1), F.S., specifically provides that dues and fees paid to private clubs and membership clubs providing recreational or physical fitness facilities are taxable admissions. The Association is charging a fee for membership. Sales tax will be due if recreational or physical fitness facilities are provided, unless there is a specific exemption for this type of admission.

There are three exemptions allowed by Section 212.04, F.S., and interpreted by Rule 12A-1.005, F.A.C., which must be examined to determine if these membership dues are exempt. The first possible exemption is detailed in Rule 12A-1.005(3)(g), F.A.C., which provides that the organization must qualify as a nonprofit organization under s. 501(c)(3) of the United States Internal Revenue Code of 1986, as amended, to be eligible for the exemption. However, the stated facts indicate that the Association does not qualify for s. 501(c)(3) I.R.C., status. Therefore, the Association does not meet the requirement for this exemption.

The second possible exemption is described in Rule 12A1.005(5)(d)2.d., F.A.C., which specifically provides that membership dues that meet four (4) requirements are exempt. The requirements are: (1) the dues are mandatory; (2) the dues are

paid to a condominium association, homeowners' association, or cooperative association; (3) the dues are required to be paid as a condition of ownership or occupancy of real property; and (4) the club facilities are part of the common elements or common areas of the real property. The first criterion appears to be satisfied, because the membership dues are mandatory for membership. The facts and accompanying documents indicate that the members are required to pay membership dues. The second criterion is satisfied, because the stated facts indicate that the dues are paid to the homeowners' association. However, the stated facts clearly indicate that the third and fourth criteria are not met. The third criterion is not satisfied, because the payment of dues is not a condition of property occupancy. A tenant may lease a lot from the Park owners without becoming a member of the Association.

Additionally, the by-laws specifically provide that the Association's board is required to approve all applications for membership. Thus, the board may, in its discretion, decide to exclude a tenant from membership. This ability to exclude certain tenants may be in recognition of the fact that, pursuant to Section 723.075, F.S., a homeowners' association need only have two-thirds of the mobile home owners as members in order to take advantage of the protections of Chapter 723, F.S. However, any tenant excluded from membership in the Association is not prevented from renting a lot in the Park.

The fourth criterion is not satisfied, because the Park facilities do not comply with the definition of "common areas" found in s. 617.301(2), F.S. Such property is owned and maintained by the Park owners, and thus, is not owned, leased, or dedicated for use or maintenance by the Association or its members. Moreover, the provided information indicates that the use of these facilities is not limited to members only; in fact, any tenant of the Park, whether an Association member or not, can use the facilities. Since the membership dues, paid to the Association fail to satisfy all of the requirements for this exemption, the dues under consideration are not eligible for this exemption.

The third possible exemption is described in Rule 12A-

1.005(5)(e), F.A.C., which states that dues paid for membership in clubs which provide no recreational or physical fitness or other facilities for their members are exempt. This Association meets the requirements of this exemption, because it does not provide any recreational or physical facilities. All recreational or physical fitness facilities are, according to your letter, provided, owned, and maintained by the Park owners. The facts here establish that no dues paid to the Association are for the provision of admission to any place of amusement, sport, or recreation. Thus, the dues paid to this Association are exempt from sales tax.

In summary, sales tax should not be collected for payments of these dues regardless of whether the payment is for the renewal of a current membership or the establishment of a new membership. If sales tax has been collected and/or remitted for these dues, a refund can be requested for the improperly paid taxes. You are reminded that even though admissions are exempt, sales (food, tangible personal property) and purchases by the Association are still taxable.

To apply for a refund, the Association should complete and submit Form DR-26, Application for Refund from the State of Florida Department of Revenue, with any applicable supporting documentation. However, if the Association collected taxes from the members and remitted those taxes, the association must first issue tax refunds to the members from whom tax was collected. Under Rule 12A-1.014(6), F.A.C., the dealer must refund the tax to the customer before the dealer's claim to the State for credit or refund will be approved. Under Rule 12-26.002(1)(b), F.A.C., the Comptroller is authorized to refund moneys paid into the State treasury if a payment was made when no tax was due. However, pursuant to Rule 12-26.003(1)(b), F.A.C., the application for refund must be filed with the Department within five (5) years of the taxes being paid. Copies of these rules and Form DR-26 are enclosed.

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 requests for this advice, 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 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 Section 213.22, F.S. Your name, address, and any other details that 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,

Jennifer J. Silvey
Attorney
Technical Assistance &
Dispute Resolution

JJS/
Enclosures
Control #: 33036