Were condominium assessments taxable when they included the master association's cost of employing security personnel?

Plain-English summary

Florida did not tax periodic condominium assessments merely because they included the master association's cost of employing security personnel.

The guards were employees providing services to their employer, the association, so the association's wage payments were not taxable security-service purchases. The owners' coupons described only a general association assessment and did not itemize security or sell a package of services.

Owners were required by the governing covenants to pay fixed proportional shares of the complex's common expenses. Those assessments supported maintenance, repairs, insurance, debt service, construction, taxes, management, and services connected with common areas. On those facts, the assessment was not a charge for security services.

What this means for you

Condominium and homeowners associations

How the charge is structured and documented matters. This ruling involved broad common-expense assessments, not a separate security line item or optional service package.

Property managers and accountants

Distinguish employee services to the association from security services sold to owners. A separately identified or packaged security charge may trigger a different rule.

Common questions

Were the association's payments to its guard employees taxable? No. Employee services to the employer were excluded.

Were the owners' assessments taxable? No, because they were proportionate common-expense assessments rather than security-service charges.

Would an itemized security fee receive the same result? This TAA did not approve that structure. The rule treated expressly invoiced security charges differently.

Citations and references

• Fla. Stat. § 212.05(1)(j)
• Fla. Admin. Code R. 12A-1.0092(2)(d), (e)
• Fla. Admin. Code R. 12A-1.0161(3), (7)(a)
• Fla. Stat. § 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99A-015

Original ruling text

SUMMARY

Taxpayer is a master condominium association and makes
periodic assessments of expenses to the individual
condominium unit owners for common expenses. Taxpayer is
proposing to include its costs of employing security
personnel in its periodic assessments to individual
condominium onwers. Rule 12A-1.0092(2)(d)2., F.A.C.,
provides that a "charge for services" is considered to be
made either when a charge for security services is
expressly noted on an invoice given to the purchaser or
when a charge is made for a package of services that
includes security services. Taxpayer has specifically
stated that its charges are identified solely as
"assessments." Taxpayer is merely periodically assessing
its individual unit owners for a proportionate share of the
total common expenses relating to the operation and
maintenance, and for management fees, of the Complex. The
individual condominium unit owners are required to pay
these common expenses pursuant to the Second Amended and
Restated Declaration of Covenants Restrictions and
Easements for the Complex ("Covenants"). The covenants set
forth the specific proportion each owner is to be assessed,
based on the number of units owned divided by the total
units in the Complex. The amounts paid go to maintenance,
repair, insurance, debt service, construction, taxes, and
services connected to Complex common areas. Based upon the
above, no sales tax is due on charges made as periodic
assessments to the Complex's individual condominium unit
owners.

Apr 01, 1999

Re: Technical Assistance Advisement 99A-015
XXX (hereinafter "taxpayer")
XXX (hereinafter "the Complex")
XXX (hereinafter "one of the building associations")
XXX (hereinafter "Covenants")
Sales and Use Tax - Provision of Security Services by the

Property Owners Association
Section: 212.05(1)(j)1.a., F.S.
Rules: 12A-1.0092, F.A.C.

Dear :

This is a response to your letter dated September 16, 1998,
requesting a Technical Assistance Advisement (TAA) regarding the
taxability of charges made to the taxpayer's individual
condominium unit owners for maintenance charges that include
security services. 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 section 213.22,
Florida Statutes (F.S.).

REQUESTED ADVISEMENT

The issue is whether the taxpayer, a property owners
association, is required to collect sales tax on the periodic
assessments made to its individual condominium unit owners for
common expenses that include security services.

FACTS

Your request for a Technical Assistance Advisement discusses
three parties: the taxpayer (the master property owners
association), the individual condominium unit owners, and the
individual building condominium associations. However, the only
parties to this transaction are the taxpayer and the individual
condominium unit owners.

In your request, you state:

[Taxpayer] is a condominium community located in XX. A
management company has previously provided security
services to the various condominium associations of
[taxpayer]. The security personnel were employed by the
management company, a third party. Therefore, the charges
for the services they provided to the individual
condominium associations were subject to sales tax. The
master condominium association, [taxpayer], is now

proposing to employ the security personnel. The cost for
providing such services will be borne by each condominium
owner living at [the Complex] through the periodic
Association dues. (Emphasis Supplied.)

Per a telephone conversation with you on October 29, 1998, it
was confirmed that the document referring to one of the building
associations is a separate association from taxpayer and that
the individual building associations and the taxpayer separately
bill individual condominium unit owners for expenses through
their periodic association assessments.

The following documentation was submitted as part of your
request:

1) "DECLARATION OF [one of the building associations],"
2) "PART 1 SUMMARY OF CERTAIN ASPECTS OF THE OFFERING"
(relating to one of the building associations), and
3) Documents for [taxpayer]
a. "SECOND AMENDED AND RESTATED DECLARATION OF
COVENANTS RESTRICTIONS AND EASEMENTS FOR [the
Complex]" and
b. "EXHIBIT A (TO ARTICLES OF AMENDMENT) AMENDED AND
RESTATED ARTICLES OF INCORPORATION OF
[TAXPAYER]."

The following excerpt is provided to show the relationship of
the individual building condominium associations to the taxpayer
and provides, in pertinent part:

DECLARATION
OF
[one of the building associations]

PART 1

SUMMARY OF CERTAIN ASPECTS OF THE OFFERING

The Property Owners' Association

There is a [taxpayer] membership associated with this
Condominium. Membership in the Property Owners'
Association is mandatory for Unit Owners. There is no
recreation lease or land lease associated with this
Condominium; however, each Unit will be assessed for a
share of the expenses relating to the operation,
maintenance, upkeep and repair of the Easement Area and any
common facilities which may be constructed thereon. There
is a lien right against each Unit to secure the payment of
assessments or other exactions coming due for the
maintenance, operation, upkeep and repair of the Easement
Area and any such common facilities. The Unit Owners'
failure to make these payments may result in foreclosure of
the lien. See [the Covenants].

The Condominium is part of a community known as "[the
Complex"].... Each owner (as defined in [the Covenants])
will be a member of the Property Owners' Association. The
Property Owners' Association is responsible for operating
and maintaining the Easement Area. The Easement Area
consists of all of the property described as Easement Area
in [the Covenants],.... The Property Owners' Association
has the power to assess Unit Owners (and other members of
the Property Owners' Association) for a share of the
expenses of such operation and maintenance, and for
management fees, and to impose and foreclose liens in the
event such assessments are not paid when due....

[See page 4 of "PART 1 SUMMARY OF CERTAIN ASPECTS OF THE
OFFERING"] (Emphasis in the Original.)

These documents show that the individual condominium unit owners
are required as a condition of property ownership to be a member
of both the taxpayer's association and the individual building
condominium association. Both associations accrue expenses that
are assessed upon the individual condominium unit owners through
the assessment of periodic association dues.

Per your letter dated November 18, 1998, you have amended your
request to ascertain the tax consequences, for the taxpayer, of
this proposed change in its billing practice. Currently,

taxpayer is billing the individual condominium unit owners for
security services through the owner's building association.
Taxpayer is proposing to bill the individual condominium unit
owners directly for its periodic assessment, which would include
security services performed by personnel employed by the
taxpayer.

Further information was provided by your letter of February 2,
1999. Your letter verified that the individual condominium
owner is billed with a coupon that specifically states the
amount owed by the individual condominium owner to the taxpayer.
The coupon for the periodic assessment specifically states the
amount owed as "[Taxpayer's] ASSESSMENT." The coupon does not
itemize any services provided to the condominium owners.
Additionally, per a telephone conversation with you on February
15, 1999, it was confirmed that all assessments invoiced by the
taxpayer are for expenses relating to the maintenance and
operation of the complex as a whole and are for the benefit of
all condominium owners.

APPLICABLE LAW

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

Section 212.05(1)(j), F.S., provides that tax is due and
payable:

1. At the rate of 6 percent on charges for all:

a. Detective, burglar protection, and other protection
services (SIC Industry Numbers 7381 and 7382)....

Rule 12A-1.0092, F.A.C., provides, in pertinent part:

(1) Persons who provide any of the services enumerated in
Industry Numbers 7381 and 7382 of the Standard Industrial
Classification Manual, 1987, are dealers in a taxable
service and are required to charge sales tax on the total
taxable sales price of the service.

(2)(a) Detective, burglar protection, and other protection
services are those services which are rendered to minimize
or prevent loss or damage to life, limb, or property and
are of a kind typically performed by security or alarm
system companies, or are those investigative services which
are rendered to obtain evidence or other information for
legal, business, employment, or personal purposes of a kind
typically performed by detective or investigative agencies.
These taxable services include:

6. Guard service;

10. Protective service, guard; and

11. Security guard service.

(d) Security Services Provided to Housing Facilities.
1. Security services, such as vehicle or foot patrols;
gate, lobby, or entrance guard service; or personnel which
may be dispatched from any other site upon request, are
taxable. The following businesses or persons who charge for
these services must also charge, collect, and remit tax on
those services.

b. Homeowner's, condominium, cooperative, or community
associations who charge their members.

2. A charge for the transactions enumerated in subparagraph
3. is considered to be made when:
   a. A charge for security services is expressly noted on an
   invoice given to the purchaser; or
   b. A charge is made for a package of services which, by
   agreement, includes security services. See Rule 12A1.0161(7)(a), F.A.C.
   (e) The services in this rule are not taxable when provided
   by employees to their employers. See Rule 12A-1.0161(3),
   F.A.C.
   * * * (Emphasis Supplied.)

DETERMINATION

Based upon the documentation received, taxpayer is employing
security service personnel to perform security services for the
taxpayer at the complex. Taxpayer, as a condominium
association, makes periodic assessments of all common expenses
to the individual condominium unit owners.

As established above, taxpayer's employees will be providing
security services to their employer (taxpayer). Thus, the
amounts taxpayer pays to its employees will not be subject to
taxation as security services. See Rule 12A-1.0092(2)(e),
F.A.C. Under Rule 12A-1.0092(2)(d)1., F.A.C., condominium
associations who "charge" for security services must charge,
collect, and remit tax on the services. However, Rule 12A1.0092(2)(d)2., F.A.C., provides that a "charge for services" is
considered to be made either when a charge for security services
is expressly noted on an invoice given to the purchaser, or when
a charge is made for a package of services that includes
security services. Taxpayer has specifically stated that its
charges are identified solely as "assessments." Additionally,
taxpayer is not charging individual unit owners for a "package
of services." Taxpayer is merely periodically assessing its
individual unit owners for a proportionate share of the total
common expenses relating to the operation and maintenance, and
for management fees, of the Complex. The individual condominium
unit owners are required to pay these common expenses pursuant
to the Second Amended and Restated Declaration of Covenants
Restrictions and Easements for the Complex ("Covenants"). The
Covenants set forth the specific proportion each owner is to be
assessed, based on the number of units owned divided by the
total units in the Complex. The amounts paid go to maintenance,
repair, insurance, debt service, construction, taxes, and
services connected to Complex common areas.

Based upon the above, no sales tax is due on charges made as
periodic assessments to the Complex's individual condominium
unit owners.

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, your request and
related backup documents 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, your backup
materials or response.

Sincerely,

Jennifer J. Silvey
Attorney
Technical Assistance & Dispute Resolution

Enclosure
Control #35452
JJS/