How did Florida tax portable storage-unit rentals, warehouse storage charges, and county surtax after a unit moved?

Plain-English summary

Florida taxed both the rental of each portable storage unit and the additional charge for storing it in the company's warehouse. The unit was tangible personal property; the warehouse charge paid for use of real property.

Because the company also paid tax on its prime warehouse leases, Florida allowed anti-pyramiding relief. If all or all but an incidental part of a warehouse was re-rented to customers, the company could give its landlord a resale certificate and pay tax on any retained portion. Otherwise it took a pro-rata credit for tax paid on the space re-rented.

The all-storage Tampa warehouse and the Clearwater warehouse with only 5% office use qualified for the resale-certificate method, with direct tax still due on Clearwater's retained 5%. The Pinellas Park location did not because approximately 35% was used for manufacturing.

Each recurring unit-rental payment was a separate sale. County surtax followed the unit's location when that payment became due; moving the unit between due dates could also create use tax in the destination county.

What this means for you

Track unit location on every payment date and document how much leased warehouse space is actually re-rented. The real-property and tangible-property charges were both taxable even when combined on one invoice.

Common questions

Q: Was the extra warehouse fee taxable? Yes.

Q: Could the company use a resale certificate for every warehouse? No. Nearly all the space had to be re-rented.

Q: Which county's surtax applied after a move? The county where the unit was located when the next rental payment became due.

Q: Was a warehouse-to-warehouse reimbursement fee taxable? Yes, as a payment for real-property use.

Citations and references

• Fla. Stat. §§ 212.05 and 212.031 — tangible-property and commercial real-property rentals
• Fla. Stat. §§ 212.02(15)(a) and 212.054(3)(a) — rental as sale and county surtax situs
• Fla. Admin. Code rr. 12A-1.070(8)–(9) and 12A-1.071(1)(c)1. — re-rental relief and recurring payments
• Fla. Admin. Code rr. 12A-15.003 and 12A-15.004(2)(c) — county sourcing and separate transactions
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99A-079

Original ruling text

SUMMARY

QUESTION 1: Is the taxpayer's rental of portable storage
units to the public, and the storage of such units in
warehouses leased by the taxpayer, a re-rental of such
warehouse space for the purposes of determining whether
there may be a "double tax?"

ANSWER - Based on Facts Below: Because the taxpayer charges
an additional amount for storage of the units in its
warehouses, the taxpayer is re-renting that warehouse
space, and depending on whether all, or all but an
incidental portion of the space is re-rented, the taxpayer
may take a credit for the amount of tax it pays on its
prime lease of warehouse space or extend a resale
certificate to its prime lessor.

QUESTION 2: If a portable storage unit is moved to one of
the taxpayer's warehouses in a different county, should the
new county's surtax rate be charged?

ANSWER - Based on Facts Below: The due date of each new
rental payment for a storage unit is a new "sale" for
purposes of sales tax, use tax, and local discretionary
sales tax. Thus, the location of the portable storage unit
on the due date of a rental payment will determine which
county's surtax is applicable. If the unit is moved
between rental payment due dates, a use tax may be due to
the new county.

Dec 30, 1999

Re: Technical Assistance Advisement 99A-079
Sales & Use Tax - Rental of Storage Units
Sections 212.031; 212.05; 212.054(3)(a), F.S.
Rules 12A-1.045; 12A-1.070(8), (9); 12A-1.071(1)(c)1.; 12A1.091; 12A-15.003, F.A.C.
XXX ("Taxpayer")

F.E.I. #XX

Dear :

This is in response to your letter dated XX, requesting the
Department's issuance of a Technical Assistance Advisement
("TAA") concerning the above referenced parties and matter.
Your letter 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. This response to your request
constitutes a TAA and is issued to you under the authority of
section 213.22, F.S.

Issues Presented

1. Whether the Taxpayer's rental of portable storage units to
   the public, and the storage of such units in warehouses leased
   by the Taxpayer, is a re-rental of such warehouse space for the
   purposes of determining whether there may be a "double tax" on
   the rental of warehouse space.

2. Whether, if a portable storage unit is moved from one
   warehouse to another in a different county, the new county's
   surtax rate should be charged. Whether the charge to move the
   unit is taxable.

Discussion of Facts

The Taxpayer manufactures and rents portable storage units to
the public to be used as an alternative means of storage rental
space to the mini-storage market or as an alternative means for
customers to conduct physical moves of household or business
contents. There are two sizes of units. The smaller size
measures 8' by 8' by 12', and the larger size measures 8' by 8'
by 16'. The Taxpayer generally provides short-term rentals on a
weekly basis for moves and on a monthly basis for storage either
on the customer's site or in the Taxpayer's warehouses. The
Taxpayer also provides pickup and delivery service for the
storage units.

The storage units are self-contained, and the actual storage may

take place at the customer's location, or in a company
warehouse. If the storage takes place in a company warehouse,
the typical charge for the unit is $40 per month more than if
the storage takes place at the customer's location. When the
unit is stored in a warehouse, the customer has access to the
storage unit during specified business hours, but in order to
provide that access, the contract with the customer requires two
hours notice. The Taxpayer does not insure the contents of the
property in the storage unit. It does offer insurance coverage
through an unrelated carrier, but the customer may purchase
insurance from any carrier.

The Taxpayer's standard agreement, used with all customers, is
titled a "RENTAL AGREEMENT," and the agreement states that "no
bailment or deposit of goods for safekeeping is intended or
created hereunder." In this connection, the Taxpayer never has
access to the contents of the storage unit. The customer
maintains control over the locks on the unit.

The Taxpayer leases a storage and administrative building,
located in Clearwater, Florida. In addition, the Taxpayer
leases a building in Pinellas Park, Florida, that is used for
storage of the units and also for its manufacturing facilities.
The Taxpayer further leases warehouse space in Tampa, Florida.
The square footage and usage at each site are as follows:
Clearwater - 38,000 square feet, of which approximately 5
percent is used for offices, with the balance used for the
storage of units; Pinellas Park -40,000 square feet, of which
approximately 35 percent is used for manufacturing, with the
balance used for the storage of units; Tampa - 50,000 square
feet, all of which is used exclusively for the storage of units.

The Taxpayer is in the process of franchising operations and is
setting up locations throughout the state, as well as
contemplating franchises outside of the state. In each of these
locations, whether company- or franchisee-owned, the space
rented is almost exclusively rented in order to store storage
units, with a minimal use of space for administrative functions
such as billing and occasional customer contact. All customer
calls are routed through a centralized dispatch center in
Clearwater, and the remote locations therefore have minimal

office needs. In some cases, offices may be in separate
locations from warehouses.

The Taxpayer intends, as additional locations are added, to
offer customers the ability to pack their possessions in a
storage unit and have them transferred to a new location for
storage. For example, the franchisee in Orlando may lease a
storage unit to a customer moving from Orlando to Tampa. The
customer packs his storage unit, and it is transferred to a
warehouse in Tampa. The Orlando franchisee will collect the
income during the rental period, as it is its storage unit that
is being utilized. The customer might be charged a moving fee,
as well as a rental fee. The Orlando franchisee will pay a
reimbursement fee to the warehouse location for storage
overhead.

Discussion and Analysis of Law

Issue 1. Whether there is double taxation.

Section 212.031, F.S., imposes a commercial rentals tax, with
certain exceptions, on the privilege of engaging in the business
of renting, leasing, letting, or granting a license for the use
of, any real property. The rental by the Taxpayer of the
various parcels of real property used by it for offices,
manufacturing, and warehousing is subject to the commercial
rentals tax.

Section 212.05, F.S., states that every person is exercising a
taxable privilege who engages in the sale of tangible personal
property at retail or, among other things, in the rental of
tangible personal property. The portable storage units rented
by the Taxpayer are tangible personal property, and the rental
of the units is therefore taxable.

The Taxpayer charges an additional fee, currently $40 monthly,
for storage of a unit in one of its warehouses. This additional
fee does not involve the rental of tangible personal property
but is instead a fee for the use of real property taxable under
section 212.031, F.S. Consequently, there is a potential for
double taxation of the warehouse space: once when the building

is being rented by the Taxpayer, and once when the taxpayer
licenses that same space for the storage of units.

Section 212.031(2)(b), F.S., states that the tax under that
section "shall not be pyramided by a progression of
transactions," and Rule 12A-1.070, F.A.C., provides for the use
of a credit mechanism or, alternatively, of resale certificates
to avoid a double tax. Subsections (8) and (9) of Rule 12A1.070, F.A.C., provide:

(8) When a tenant (lessee) or other person occupying,
using, or entitled to use any real property (licensee)
sublets or assigns some portion of the leased or licensed
property, he may take credit on a pro rata basis for the
tax that he paid to his landlord or other such person on
the space that he subleases or assigns....

(9) If a tenant or other person sublets or assigns his
interest in all of the leased or licensed premises, or
retains only an incidental portion of the entire premises,
then such tenant or other person may elect not to pay tax
on the prime lease or license, provided that such tenant or
other person shall register as a dealer and collect and
remit tax due on the sub-rentals or assignments and pay the
tax due on the portion of the rental charges or license
fees pertaining to any taxable space which he retains. If
the tenant or licensee elects not to pay the tax to his
landlord, or other person granting the right to occupy or
use such real property, he should extend to his landlord or
such other person a resale certificate.

Under both subsections (8) and (9) of Rule 12A-1.070, F.A.C.,
the lessee of property (in this case, the Taxpayer) should
collect tax from the sublessees or sublicensees (in this case,
the Taxpayer's customers). The difference between the two
subsections is that, under subsection (8), the lessee pays tax
on the prime lease and then takes a credit, and under subsection
(9), the lessee pays no tax on the prime lease by extending to
the lessor a resale certificate. Use of the resale certificate
procedure is available to the lessee at the election of the
lessee, but only if all but an incidental portion of the entire

premises is sublet or sublicensed.

A further requirement for the use of a resale certificate is
that the total tax on the prime lease may not be decreased by a
progression of transactions. Section 212.031(2)(b), F.S. Thus,
if more than an incidental portion of the warehouse is not released through the storage of units, use of a resale certificate
in connection with the prime lease is not proper, and, instead,
a credit should be taken by the Taxpayer on the portion of the
rent paid for the prime lease that is being re-leased through
the storage of units.

Based on the facts submitted to us, the prime lease for the
Tampa warehouse, all of which is used exclusively for the
storage of units, would qualify for use of a resale certificate
mechanism, and the prime lease for the Clearwater warehouse, of
which all but 5 percent is used exclusively for the storage of
units, would also qualify. The prime lease for the Pinellas
Park warehouse would not qualify for use of a resale
certificate, however, as approximately 35 percent of that
warehouse is used for manufacturing.

As to any warehouse lease that does qualify for use of a resale
certificate, tax must be paid on that portion of the rental
under the prime lease that is not exclusively used for the
storage of units. That is, tax would have to be paid by the
Taxpayer directly to the Department of Revenue on 5 percent of
the prime lease rental of the Clearwater warehouse, even if a
resale certificate is given to the lessor.

Because the Taxpayer must collect tax on the lease or license of
space in its warehouses from its customers for storage of
storage units and must also collect tax on the rental of the
storage units, the entire amount charged to customers for both
unit rental and unit storage is subject to tax, and there is no
reason for the Taxpayer to separately state either element of
the charge on its customer invoices.

Issue 2. The moving of a storage unit to a different county.

As noted in the factual section of this letter, it is possible

that a storage unit will be moved by a customer from one of the
Taxpayer's warehouses to another. If the Taxpayer is successful
in its expansion and franchise plans, this possibility becomes
more likely. In the event of such a move, the Taxpayer
contemplates that the original warehouse or location will
continue to bill the customer for use of the storage unit and
that the original warehouse will pay a "reimbursement fee" to
the warehouse in which the unit is being stored. The warehouses
may be located in different counties, and the counties may
impose different discretionary surtaxes.

In a lease of tangible personal property, "[s]ales tax is due
and payable by the lessee to the lessor when the lessee's
obligation arises to pay to the lessor each agreed payment...."
Rule 12A-1.071(1)(c)1., F.A.C. Further, each lease or rental
payment made by a lessee represents one taxable transaction.
Rule 12A-15.004(2)(c), F.A.C.

Section 212.054(3)(a), F.S., provides that a transaction is
deemed to have occurred in a county imposing the surtax when the
sale includes an item of tangible personal property, and the
property is delivered within the county. Section 212.02(15)(a),
F.S., defines "sale" to include the lease or rental of tangible
personal property for a consideration.

Rule 12A-15.003, F.A.C., provides rules for determining the
county in which a taxable transaction takes place for purposes
of the surtax. In accordance with section 212.054(3)(a), F.S.,
the sale, and therefore the rental, of tangible personal
property generally takes place in the county in which delivery
is made

Accordingly, when one of the Taxpayer's warehouses rents a
portable storage unit to a customer, tax is due when the
customer is obligated to pay the rent, and each rental payment
is a separate transaction. Delivery of the property is in the
county in which the warehouse originating the transaction
delivers the unit. In accordance with Rule 12A-15.003(2),
F.A.C., the county surtax due is that imposed by the county in
which delivery is made.

So long as the unit remains in the county of original delivery,
that county's surtax will apply to each rental payment as it
accrues. If between the time that rent is paid and another
rental payment becomes due, the unit is moved to another county
for storage there, a taxable use takes place in the new county.
Use tax becomes due unless the unit was used in the county of
original delivery for more than six months. See Rule 12A15.003(2)(g)4.a., F.A.C., for several examples concerning the
movement of a boat, an analogous situation, between counties
having different rates of surtax. However, even if use tax is
not due because the unit was used in the county of original
delivery for more than six months, the due date of each rental
payment constitutes a separate sales transaction, and the county
in which the unit is located at the time the rental payment is
due is the county in which a new sale takes place and therefore
is the county whose surtax is applicable.

The "reimbursement fee" that one of the Taxpayer's warehouses
might pay to another warehouse for storage of a customer's unit
in the latter warehouse is a fee paid for the use or possession
of real property, and tax is due on such fee as provided in
section 212.031, F.S. Rule 12A-15.003(2)(i), F.A.C., provides
that the location of the real property determines the liability
for the county surtax.

Any charge made to the customer for moving the storage unit from
one location to another is not subject to sales tax if the
customer either has the option of not moving the unit or may
utilize other means of moving the unit. If, however, a contract
with a customer should provide that the Taxpayer will provide
the customer with a storage unit at the location of the
customer's choice and a moving or delivery charge is, even if
separately stated, included in the amount that the customer must
pay under the contract, and the customer is given no alternative
choice but to utilize the Taxpayer's moving service if the
customer wants to rent the unit, then the price of the unit
includes the moving or delivery charge, and that entire price is
subject to tax. See Rule 12A-1.045, F.A.C., for the rules
applicable to transportation charges.

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 upon 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 from that which is 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. Confidential information
must be deleted before public disclosure. In an effort to
protect confidentiality, we request you provide the undersigned
with an edited copy of your request for Technical Assistance
Advisement, the backup material and this response, deleting
names, addresses and any other details which might lead to
identification of the Taxpayer. Your response should be
received by the Department within 15 days of the date of this
letter.

Should you have any further questions concerning this matter,
please do not hesitate to contact me.

Sincerely,

Robert D. Heyde
Senior Attorney
Technical Assistance & Dispute Resolution
Control #39555