Were rents for municipal beach concession buildings exempt when the tenant sold food and drinks?

Subject

Lease of Municipally Owned Buildings on a Beach

Plain-English summary

Rent for the two municipally owned beach concession buildings was exempt. The tenant sold food and drinks from facilities located on a beach, which the ruling treated as a recreational facility covered by the exemption.

What this means for you

Municipal ownership alone was not the stated basis. The tenant's food-and-drink business and the premises' recreational location supplied the exemption.

Common questions

Q: Were the concession rents taxable? No.

Q: What did the tenant sell? Food and drinks.

Q: What recreational facility mattered? The beach.

Citations and references

• Fla. Stat. § 212.031(1)(a), (c) — real-property lease tax and exemptions
• Fla. Admin. Code r. 12A-1.070 — real-property leases
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00A-032

Original ruling text

SUMMARY

QUESTION: Are payments made by a tenant, for the right to
occupy or use real property owned by a municipality,
subject to sales tax when the tenant is engaged in the
sales of food and drink, and the real property is located
on a beach?

ANSWER - Based on Facts Below: The statutory exemption
which exempts payments made by a person engaged in selling
food and drink in a recreational facility is applicable to
payments made by the tenant to the municipality for the
right to occupy or use real property on the beach.

Jun 28, 2000

Re: Technical Assistance Advisement 00A-032
Lease of Municipally Owned Buildings on a Beach
XXX (herein Lessee)
XXX (herein Concessionaire Stand One)
XXX (herein Concessionaire Stand Two)
XXX (herein City or Lessor)
XXX (herein County)
Section 212.031(1)(a), (1)(c), F.S.
Rule 12A-1.070, F.A.C.

Dear :

This is a response, styled a Technical Assistance Advisement, to
your letter dated May 19, 2000, in which you ask whether
payments made pursuant to two agreements for the lease of two
municipal buildings within, and owned by, the City, located on
beach areas, are subject to sales or use tax. This Department
communication and your letter of May 19, 2000, both reference
and incorporate the request and information contained in your
earlier letter dated December 16, 1999. The Department issued a
Letter of Technical Advice as a response to your letter dated
December 16, 1999. You provided the Department with copies of

the two agreements, noted above, both of which are for terms of
5 years commencing on July 1, 1996.

One contract bears the legend, [City] Lease Agreement for the
[Concession Stand One.] The other contract is styled, [City]
Lease Agreement for the [Concession Stand Two.] The parties to
both agreements are the City, identified in both agreements as
the lessor, and the Lessee. You also provided site drawings and
photographs of the physical locations of Concession Stand One
and Concession Stand Two.

Both of the leased properties are described in Article 2 of the
agreements as "... improved with public restrooms and
retail/concession facilities, and such other facilities as may
be in existence of the date of the execution of this Lease."
The contracts provide, in Article 4, for the payment by the
Lessee of a minimum rent of $48,000 per year, with the sum
increased in subsequent periods.

You contend that under Florida case law the rents paid by Lessee
pursuant to the two agreements described above are not subject
to Florida sales tax. You cite the decision in Lloyd
Enterprises, Inc. v. Department of Revenue, 651 So.2d 735 (Fla.
5DCA 1995).

Department Response

In a telephone conversation the Department learned that the
premises subject to the two leases are two buildings located "on
the beach" and that in both instances the leases convey the
right to use adjacent beach areas for the renting of cabanas and
occasionally water sports equipment. In both locations the
buildings are used for the purpose of preparing and serving food
and beverages, as well as, the sale of beach related tangible
personal property such as towels, lotions and other similar
products.

Section 212.031, F.S., imposes sales tax on the lease of, or the
grant of a license to use or occupy, real property. Section
212.031(1)(c), F.S., mandates the tax is levied on the "total
rent or license fee" charged for such lease or license. Rule

12A-1.070, F.A.C., interprets the statute.

The Department declines the invitation to apply the decision in
Lloyd Enterprises, Inc., to the facts as they are understood by
the Department. The opinion in Lloyd Enterprises states, in
part:

We hold that, in exercising the duties imposed on it by the
Unified Beach Code, the County did not enter into the
business of renting, leasing or licensing real property....
The County's "business" was to regulate the use of the
beach in an orderly manner to preserve "individual peace
and quiet" and to enhance the public's enjoyment of the
beach... At 737.

The Court in that case held that Volusia County was not in the
business of leasing real property when it granted to
concessionaires the right to operate on its beaches by granting
then a right to operate their vehicles within certain distance
of assigned "spots" on the beach. The agreements by which the
concessionaires were granted such rights were not leases of real
property within the meaning of s. 212.031, Florida Statutes.

Rather than being engaged in the business of leasing real
property, the county assumed the obligations set forth in the
County Uniform Beach Code of enhancing the public image of the
beach area, including the enjoyment generally by the public in
the use of the beach; preserving the peace and quiet of the
beaches; and, regulating the beach concessionaires in their
delivery of goods and services to ensure those "... are provided
to the public without disruptive competition." Lloyd
Enterprises, at 737.

Here, the properties subject to both leases are buildings over
which the Lessee has dominion as in any landlord/tenant
relationship. The premises are not "positions" or "spots" on
the beach. Importantly, the City has not enacted an ordinance
governing the conduct of the concessionaires on the beaches, nor
is there any other ordinance affecting the beaches that is
similar to any degree to the Uniform Beach Code adopted by
Volusia County cited in the Lloyd case.

Further, County, in which the City is located, appears to lack
the power to adopt a county-wide beach ordinance which would
regulate the activity of the concessionaires, and otherwise
implement the police powers which formed the basis of the
opinion in the Lloyd case. Article II, Section 2.04 of the
County's Code of Ordinances appears to lack the sweep of
jurisdiction granted in Article II, Section 2.05.2 through
205.6. of the Code of Ordinances for Volusia County. These
ordinance sections comprise the Uniform Beach Code, which is so
prominently cited in the Lloyd case.

Consequently, given these facts, the decision in Lloyd does not
control the outcome in the instant matter. The Department makes
the determination that the payments made by the Lessee to the
City, as required by the two agreements, are the "total rent or
license fee" paid by the Lessee for the right to occupy or use
the City beach improvements and such payments, pursuant to s.
212.031(1)(c), F.S., are subject to sales tax, unless an
exemption is applicable.

The City, with respect to these two beach locations, and the
agreements to which it is signatory, is indeed in the business
of leasing real property. The two leases come within the
definition of the term "business" as provided in s. 212.02(2),
F.S., as "... any activity engaged in by any person, or caused
to be engaged in by him or her, with the object of private or
public gain...." The decision in Lloyd Enterprises is not
applicable.

However, you are alerted that the payments made pursuant to the
agreements are not subject to sales tax based on a statutory
exemption. The exemption applicable to the leases is that
expressed in s. 212.031(1)(a)10., Florida Statutes. This law
grants an exemption from sales tax to real property leased,
subleased or licensed to a person who provides "food and drink
concessionaire services within the premises" of certain
enumerated buildings including what the statute designates as a
"recreational facility." Each of the beaches of the kind at
issue here that contain watersports, exercise and restroom
facilities are classed as a "recreational facility." Thus, at

both leased sites, located within or on a recreational facility,
at which food or beverages are served or prepared, the exemption
granted in s. 212.031(1)(a)10., F.S., is applicable.

This response constitutes a 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 and
related backup documents 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. 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.

Sincerely,

Robert G. Parsons
Tax Law Specialist
Technical Assistance and Dispute Resolution

Ctrl. No. 41485