Could a qualifying Florida youth nonprofit lease donated boats and other property without collecting sales tax?

Subject

Leases of Donated Property

Plain-English summary

The qualifying youth nonprofit's leases of donated property were exempt from Florida sales and use tax. For this ruling, property qualified as donated when transferred to the nonprofit for less than 50% of fair market value. The nonprofit could not pass sales tax on to its lessees.

To establish a lease exemption, the nonprofit was told to provide the lessee with the lease agreement and a copy of the ruling. Boat and motor-vehicle sales required the specified registration or title exemption form, an "other" explanation citing section 212.08(7)(l), and a bill of sale from the nonprofit.

What this means for you

The exemption depended both on the nonprofit's statutory status and on the property's qualifying donation. Documentation remained necessary even though the transaction itself was exempt.

Common questions

Q: Were third-party leases of donated property exempt? Yes.

Q: Could the nonprofit collect tax from the lessee anyway? No.

Q: Did registered boats and vehicles need supporting forms? Yes.

Citations and references

• Fla. Stat. § 212.08(7)(l) — qualifying youth organizations and donated-property exemption
• Fla. Admin. Code r. 12A-1.038(1) — documentation of exempt sales
• Associated Marine Institutes, Inc. v. Department of Revenue, D.O.A.H. Case No. 99-1679RX (Sept. 13, 1999)
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00A-085

Original ruling text

SUMMARY

QUESTION: Is an organization described in section
212.08(7)(l), F.S. (2000), exempt from sales tax on its
leases of donated property, as well as sales of donated
property, as defined by section 212.08(7)(l), F.S. (2000)?

ANSWER - Based on Facts Below: Yes. An organization
described in section 212.08(7)(l), F.S. is exempt on its
leases of donated property [as defined by section
212.08(7)(l), F.S.] to third parties, and sales tax cannot
be passed on to or collected from persons or entities which
lease from the exempt organization. However, to establish
the exemption on the leases the organization should provide
the purchaser with a copy of the lease agreement made out
to the purchaser from the exempt organization, when it
leases donated property to third parties. In addition, on
the sale of boats, the customer will be required to
complete a Sales Tax Exemption Affidavit (DR-40), at the
time of registration. The form lists several reasons why
the transfer of the boat is not subject to Florida sales or
use tax. The customer should mark the reason "other" and
insert, "exempt as provided in section 212.08(7)(l), F.S."
In addition, the organization should provide the purchaser
with a copy of the Bill of Sale made out to the purchaser
from the exempt organization. Also, on the sale of motor
vehicles, the customer will be required to complete an
Application for Certificate of Title With/Without
Registration (Form HSMV 82040). Section 11 of this form
provides for "sales tax exemption certification". Under
this section there is an item for "other", which should be
completed by inserting, "exempt as provided by section
212.08(7)(l), F.S." In addition, the organization should
provide the purchaser with a copy of the Bill of Sale made
out to the purchaser from the exempt organization.

Dec 29, 2000

Re: Technical Assistance Advisement 00A-085
Sales and Use Tax
Leases of Donated Property
Section 212.08(7)(l), F.S. (2000)

Dear :

This response is to your letter of November 21, 2000, 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 Taxpayer and matter. The Department
has carefully examined your request and supporting documents and
finds them to be in order.

Statement of Facts

A. Taxpayer Information.

("XXX") is a nonprofit corporation organized under Chapter 617
of the laws of the State of Florida. A copy of its current
Articles of Incorporation and Bylaws are attached to Exhibit "1"
of your letter dated November 21, 2000. XXX has received a
Consumer Certificate of Exemption from the Department of Revenue
(Exhibit "2", also attached to your letter of November 21,
2000). XXX purposes, as stated in its Articles of
Incorporation, include:

1. Rehabilitating dependent and delinquent youth by
   providing education, training, discipline and productive work;
   and

2. Conducting marine, wilderness and other environmental,
   education and rehabilitation programs for dependent, delinquent
   and other problem youth.

XXX programs include an active education component with state
qualified teachers. Minors often leave XXX programs with XXX or
substantial progress in their public education.

B.Transaction Information

XXX receives donations, including tangible personal property,
from various contributors. Contributors often donate boats to
XXX because many of XXX programs are marine related. Some of
the boats are sold outright by XXX to third parties. Others are
leased by XXX to third parties. Typically, the lease
arrangement includes an option for the lessee to purchase the
boat at the end of the lease term.

For purposes of this TAA, it is assumed that all property is
transferred to XXX for less than 50% of its fair market value
and therefore qualifies as "donated property" under Section
212.08(7)(l), Florida Statutes (2000).

Requested Advisement

1. Whether the taxpayer is exempt from sales tax on its leases
   of donated property, as well as sales of donated property, under
   Section 212.08(7)(l), Florida Statutes (2000).

2. Whether any certificate or other documentation must be
   provided at the time of the sale or lease by an organization
   which is exempt under Section 212.08(7)(l), Florida Statutes
   (2000).

Law and Discussion

Section 212.08(7)(l), F.S., states:

(1) Organizations providing special educational, cultural,
recreational, and social benefits to minors.- Also exempt
from tax imposed by this chapter are sales or leases to and
sales of donated property by nonprofit organizations which
are incorporated pursuant to chapter 617 the primary
purpose of which is providing activities that contribute to
the development of good character or good sportsmanship, or
to the educational or cultural development, of minors.
This exemption is extended only to that level of the
organization that has salaried executive officer or an
elected nonsalaried executive officer. For the purpose of
this paragraph, the term "donated property" means any
property transferred to such nonprofit organization for

less than 50 percent of its fair market value.

The statute specifically states that "sales of donated property
by" XXX are exempt from sales tax. The issue here is whether
leases of donated property by XXX are also exempt from sales
tax. Associated Marine Institutes, Inc. v. Department of
Revenue, D.O.A.H. Case No. 99-1679RX (Sept. 13, 1999). In
Associated Marine Institutes v. Department of Revenue, the
Administrative Law Judge held invalid the Department's previous
rules which required XXX to collect sales tax on its sales or
leases to third parties. Both the Senate Staff Analysis and the
House Staff Analysis state the 2000 amendments do "not reverse
the recent determination of the Administrative Law Judge in
Associated Marine Institute, Inc. That nonprofit organizations
providing certain benefits to minors are not required to collect
sales tax on sales or leases they make." Senate Staff Analysis
and Economic Impact Statement dated February 23, 2000, pt. 2-3
(emphasis added); House of Representatives Committee on Finance
and Taxation Analysis dated April 19, 2000, p.3. (emphasis
added).

Rule 12A-1.038(1), Florida Administrative Code (F.A.C.), states
that all sales are taxable unless "specifically exempt." The
Rule then requires that the dealer establish the exempt status
of the transaction by obtaining from the purchaser a resale
certificate or a consumer's certificate of exemption.

Determination

The facts presented indicate that XXX is an organization
described in Section 212.08(7)(l), F.S., that as such an
organization its leases of donated property [as defined by
Section 212.08(7)(l), F.S.] to third parties are exempt from
sales and use tax, and the sales tax cannot be passed on to or
collected from persons or entities which lease from XXX.

However, to establish the exemption on the leases XXX should
provide the purchaser with a copy of the lease agreement made
out to the purchaser from XXX, along with a copy of this TAA,
when it leases donated property to third parties.

On the sale of boats, the customer will be required to complete
a Sales Tax Exemption Affidavit (DR-40), copy enclosed, at the
time of registration. The form lists several reasons why the
transfer of the boat is not subject to Florida sales or use tax.
The customer should mark the reason "other" and insert, "exempt
as provided by Section 212.08(7)(l), F.S." In addition, XXX
should provide the purchaser with a copy of the Bill of Sale
made out to the purchaser from XXX.

Also, on the sale of motor vehicles, the customer will be
required to complete an Application for Certificate of Title
With/Without Registration (Form HSMV 82040), copy enclosed.
Section 11 of this form provides for "sales tax exemption
certification." Under this section there is an item for
"other", which should be completed by inserting, "exempt as
provided by Section 212.08(7)(l), F.S." In addition, XXX should
provide the purchaser with a copy of the Bill of Sale made out
to the purchaser from XXX.

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 that 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.
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,

Vicki Allen
Tax Law Specialist
Technical Assistance and Dispute Resolution
(850) 922-4846

Ctrl. No. 25490
Enclosures