Did an international art show qualify as an industry trade show so exhibitor booth subleases were exempt from Florida commercial-rent tax?

Subject

Industry Trade Show or Convention Lease and Sublease

Plain-English summary

The art show qualified as an industry trade show, so the organizer's booth subleases to exhibitors were exempt from commercial-rent tax. The organizer still owed tax on its prime lease of the convention center.

The event went beyond public display and sale of artwork. It served the art industry with seminars and workshops for curators and museum directors, panels, programs for collectors, access to private collections, and opportunities for galleries and partners to develop business.

The Department cautioned that separate charges for services to exhibitors could be taxable depending on the service.

What this means for you

The tax result separated the taxable prime venue lease from qualifying exhibitor subleases. The show's industry focus and programming supported its classification.

Common questions

Q: Was the prime convention-center lease taxable? Yes.

Q: Were exhibitor booth subleases taxable? No.

Q: Did retail sales prevent trade-show status? No, though exhibitors making sales had registration and collection obligations.

Q: Were added services automatically exempt? No.

Citations and references

• Fla. Stat. § 212.031(1) and (5) — commercial rent and trade-show subleases
• Fla. Admin. Code r. 12A-1.070(7)(b) — convention and trade-show sublease exemption
• Fla. Admin. Code r. 12A-1.060(1)(f)1. — trade-show exhibitor registration
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01A-052

Original ruling text

SUMMARY

QUESTION: Whether the subject art show qualifies as an
industry trade show or convention for purposes of section
212.031(5), F.S., whereby Taxpayer pays tax on its prime
lease with the convention center and the subleases with
exhibitors are exempt from tax.

ANSWER - Based on Facts Below: Yes. The specific facts and
documentation provided by the Taxpayer indicate that the
art show does in fact qualify as an industry trade show or
convention within the purview of section 212.031(5), F.S.
Therefore, the prime lease between Taxpayer and the
convention hall will be subject to sales tax while the
subleases between Taxpayer and exhibitors will be exempt
from sales tax.

Aug 17, 2001

Re: Technical Assistance Advisement 01A-052
Sales and Use Tax - Whether Art Show Subleases Qualify for
the Exemption Contained in Section 212.031(5), F.S.
Sections: 212.031(1)(a), (c), (5), F.S.
Rules: 12A-1.070(7)(b), 12A-1.060(1)(f)1.b., F.A.C.
XXX (herein Taxpayer or Company)
XXX (herein XXCC)

Dear :

This is in response to your request, dated June 21, 2001,
received June 26, 2001, for 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.

Documents provided by Taxpayer

You have provided several documents that are relevant to the
transaction. These include the following:

(The Company's brochure)
(Lease Agreement)
(Concept Statement)
Exhibitor's Application Documentation Brochure (Exhibitor's
Application)
Exhibitor's Contract
Typical Exhibitor's Invoice for the Show (Exhibitor's Invoice)

Facts

You have provided the following facts:

Taxpayer/Company is a trade show organizer with an international
reputation. Company has organized an international art show, to
be held annually in the XXCC. This is Company's first art
convention and exhibition in the United States.

Company is an event organizer offering a full range of services,
such as: planning, organizing and promoting the event,
coordinating the technical installations and assisting in the
design and installation of the exhibitor's presentation area,
providing public relations support, and arranging the
advertising and media work of the event. Company offers
customized packages to the exhibitors participating in the
events.

Company's Florida operations consist of organizing and promoting
the Show to be held annually in Florida. Company has entered
into a lease agreement with the XXCC, which spans five days for
the Show. Company will sublease the convention center space to
exhibitors participating each year in the Show. Company will
receive income from the sale of tickets used to obtain admission
to the event and from sponsorship fees paid by advertisers.

The Show features innovative strategies for displaying and
promoting art and introduces new art and procurement concepts.

Leading gallery owners, art collectors, museum directors and
curators, artists, and art enthusiasts from all over the world
are participating in the Show. This international art show
expects to feature 100-150 leading galleries from around the
world and expects to welcome 15,000 visitors.

The Show is promoted as a place for encountering art and the art
world. The Show promotes to open up new business opportunities
for galleries and sponsoring partners. The Show is geared to
promote significant dealer transactions, wherein exhibiting art
dealers (i.e., art gallery owners, museum directors, and
artists) are buying from each other.

Exhibitors participating in the Show will contract with Company
for rental of booth space at the XXCC. Exhibitors may contract
with Company for additional services in connection with the
rental of their booths for fees in addition to the basic booth
rental fee. Company offers customized Exhibitor Participation
Packages, which include a range of services along with the booth
space rental. A typical participation package may include:
space rental; walls of the booth, lighting, carpeting, sign
lettering, cleaning services for booth, marketing and public
relations by the show's management, a color page in catalog,
entry in show participant's index, and invitations to opening
night preview and other select events at the show. The Show
allows for exhibitor's sales to the art collector public
visiting the show.

The Show offers a symposium with customized seminars for art
curators and museum directors including workshops about law,
taxes, insurance, security, art conservation, and other services
to the art world; it includes special programs for art
collectors; it provides exclusive opportunities to view private
collections; and it serves to foster encounters between gallery
owners and collectors. The Show intends to generate significant
dealer trades and sales between the exhibitors participating in
the event.

Taxpayer's Position

You have provided the following as your position:

A lease or a license to use real property is generally
taxable unless there is a specific exemption from the tax
pursuant to section 212.031(1)(a), F.S. However, there is a
provision under section 212.031(5), F.S., wherein "when space is
subleased to a convention or industry trade show in a convention
hall, exhibition hall, or auditorium, whether publicly or
privately owned, the sponsor who holds the prime lease is
subject to tax on the prime lease and the sublease is exempt".

Taxpayer, the organizer of the Show, has entered into a
prime lease agreement with the XXCC for this event.
Taxpayer subleases the convention center space to the
exhibitors participating at this event.

Following the provision of section 212.031(5), F.S., Company, as
the convention or trade show organizer holding the prime lease
with the MBCC, would pay rent to the convention center together
with the sales tax thereon. Provided Company pays tax on its
prime lease with the convention center, the subleases with the
exhibitors are exempt from tax. Accordingly, no sales tax would
be collected from the exhibitors on the subleased space at the
convention center.

[You] have examined the nature of the event Taxpayer is
promoting in order to determine if the Taxpayer is eligible
for the exemption provided in section 212.031(5), F.S., so
as to not be obligated to collect sales tax from the
exhibitors on the subleased space at the convention center.
You look to the definition of "convention or industry trade
show" to determine whether the event qualifies. Rule 12A1.060(1)(f)(l)(b), F.A.C., defines a trade show or
convention as, "a meeting of limited duration of
individuals with organizational ties or similar interests,
one of the purposes of which is the displaying of products
or services or sharing of information on them, without a
major (emphasis added) purpose of making retail sales of
tangible personal property".

The Show is an internationally oriented, professionally
organized and innovatively devised art convention and

exhibition. The Show focuses on introducing new art
exhibition and procurement concepts featuring innovative
strategies for displaying and promoting art to the art
world. The Show caters to leading gallery owners, art
collectors, museum directors and curators, artists, and art
enthusiasts.

The Show offers a symposium with customized seminars for
art curators and museum directors including workshops about
law, taxes, insurance, security, art conservation, and
other services to the art world; it includes special
programs for art collectors; it offers discussion panels
for museum directors and curators; it provides exclusive
opportunities to view private collections; and it serves to
foster new business opportunities for gallery owners and
sponsoring partners. The Show promotes significant dealer
sales, wherein exhibitors are buying from each other. The
Show allows for exhibitor's sales to art collectors
attending the Show.

The Show offers a place for encountering art, a setting for
new business opportunities for galleries and sponsoring
partners, a means for introducing new art exhibition and
procurement concepts, and a symposium with customized
seminars and discussion panels. The Show allows retail
sales by the exhibitors. The Show promotes dealer sales
and trades amongst the exhibitors. Thus, the Show's "major
purpose" is not making retail sales of art (i.e., tangible
personal property).

Considering all of the aforementioned factors, which
contribute to the nature of the show, it appears that the
event meets the definitional requirements of a trade show
or convention as defined in Rule 12A-1.060(1)(f)(1)(b),
F.A.C. If the Show is a trade show or convention, it
follows Taxpayer who holds the prime lease with the
convention center is subject to tax on the prime lease and
the subleases with the exhibitor's are exempt from tax
pursuant to section 212.031(5), F.S.

In the event the Show does not meet the definition of a

convention or trade show, Taxpayer is required to charge
sales tax on the total rent collected on the subleases with
the exhibitors and remit the tax collected to the
Department. Taxpayer would submit a Resale Certificate
issued by the Department to the XXCC in order not to pay
sales tax on the prime lease payments to the convention
center since it is collecting tax from the exhibitors on
the subleases for space at the convention center.

Exhibitors participating in the Show have contracted with
Company for rental of booth space at the XXCC. Exhibitors
may contract with Company for additional services in
connection with the rental of their booths for fees in
addition to the basic booth rental fee.

In the event that the subleases executed between Taxpayer
and the exhibitors are not exempt pursuant to section
212.031(5), F.S., Taxpayer looks to what constitutes total
consideration received on the subleases, so as to ascertain
on which fees and line items billed by taxpayer to the
exhibitors should sales tax be charged. Rule 12A1.070(4)(b), F.A.C. provides in pertinent part that the tax
shall be paid on all considerations due and payable by the
tenant or other person actually occupying, using, or
entitled to use any real property to his landlord.
Following Rule 12A-1.070(4)(b), F.A.C., it appears that in
addition to those charges denoted as rents, all other line
item charges are also taxable.

Requested Advisement

The Show satisfies the definitional requirements of a "trade
show or convention" under Rule 12A-1.060(1)(f)1.b., F.A.C. As a
result, the taxpayer may follow the provision of Section
212.031(5), F.S., whereby Taxpayer pays tax on its prime lease
with the convention center and the subleases with the exhibitors
are exempt from tax.

Law

Section 212.031, F.S., provides in pertinent part:

(1)(a) It is declared to be the legislative intent that
every person is exercising a taxable privilege who engages
in the business of renting, leasing, letting, or granting a
license for the use of any real property....

(c) For the exercise of such privilege, a tax is levied in
an amount equal to 6 percent of and on the total rent or
license fee charged for such real property....

(5) When space is subleased to a convention or industry
trade show in a convention hall, exhibition hall, or
auditorium, whether publicly or privately owned, the
sponsor who holds the prime lease is subject to tax on the
prime lease and the sublease is exempt.

Rule 12A-1.070(7)(b), F.A.C., provides:

Notwithstanding the provisions of paragraph (a), when space
is subleased to a convention or industry trade show in a
convention hall, exhibition hall, or auditorium, whether
publicly or privately owned, the sponsor who holds the
prime lease is subject to tax on the prime lease and the
sublease shall be exempt.

Rule 12A-1.060(1)(f)1., F.A.C., provides:

a. An "exhibitor" means a person who enters into a written
agreement authorizing the display of tangible personal
property or services at a convention or trade show.

b. A "trade show or convention" is a meeting of limited
duration of individuals with organizational ties or similar
interests, one of the purposes of which is the displaying
of products or services or sharing information on them,
without a major purpose of making retail sales of tangible
personal property.

Discussion

Rule 12A-1.060(1)(f), F.A.C., entitled "Registration", contains

the controlling provisions of law for exhibitors who wish to
make sales at trade shows or conventions. Thus, exhibitors at
the Show who are making sales of tangible personal property
should act in accordance with this rule provision.

However, section 212.031, F.S., and Rule 12A-1.070, F.A.C., are
the controlling provisions of law for the lease, rental, or
license to use commercial real property and are therefore
applicable to the issue presented for requested advisement.

As noted above, section 212.031(1)(a), F.S., provides that it is
a taxable privilege to engage in the business of renting,
leasing, letting, or granting a license to use commercial real
property. In 1978, section 212.031, F.S., was amended to
provide an exemption from sales tax on subleases of convention
halls, exhibition halls, or auditoriums, whether publicly or
privately owned, when used for a convention or industry trade
show. The sponsor who holds the prime lease is subject to tax
on the prime lease. See section 212.031(5), F.S. and Rule 12A1.070(7)(b), F.A.C. The exemption provided for in section
212.031(5), F.S., does not restrict the trade show or convention
from making retail sales.

It would appear from the specific facts and documentation
provided that the subject show is in fact an industry trade show
or convention within the purview of section 212.031(5), F.S.
The Show is held out by Taxpayer as a "trade show". See
Exhibitor's Application. Beyond offering public display and
sale of the artwork, the show caters specifically to the Art
Industry providing for the presentation, education, and
discussion of an array of topics specific to the industry. The
show offers symposiums with customized seminars for art curators
and museum directors including workshops about law, taxes,
insurance, security, art conservation, and other services to the
art world; it includes special programs for art collectors; it
offers discussion panels for museum directors and curators; it
provides exclusive opportunities to view private collections;
and it serves to foster new business opportunities for gallery
owners and sponsoring partners.

Response

Based on the facts, law, and analysis as presented, a
determination is made that the subleases of booth space to be
executed between Taxpayer and exhibitors are exempt from sales
tax pursuant to section 212.031(5), F.S. Please note that
charges for additional services provided by the Taxpayer to the
exhibitors could potentially be subject to tax, depending on the
nature of the service.

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 advice, 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., and 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 that 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 that 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,

Shehla A. Milliron
Senior Attorney
Control # 45746