Was the allocated price of a hotel's land, improvements, and fixtures subject to Florida sales tax because a broker handled the sale?

Plain-English summary

The allocated price for the hotel's land, improvements, and fixtures was not subject to Florida sales tax. Florida treated those categories as real property, and the transaction documents did not specifically identify inventory, vehicles, boats, mobile homes, aircraft, or other tangible items as part of the improvements-and-fixtures allocation.

The real-estate broker's participation was irrelevant to tax on the real property. The ruling cautioned through its legal analysis that separately sold inventory or registered vehicles do not receive the same occasional-sale treatment and may require dealer or resale documentation.

What this means for you

Asset definitions and transaction documents drive a hotel-sale allocation. Calling an amount "fixtures" will not protect property that is actually inventory or a separately transferred registered vehicle.

Common questions

Q: Were land and improvements taxable? No.

Q: Were the documented fixtures taxable? No, on the stated allocation and facts.

Q: Did broker involvement make the real-property sale taxable? No.

Q: Did the ruling broadly exempt separately sold inventory or vehicles? No.

Citations and references

• Fla. Stat. § 212.02(2), (10)(h) — business, occasional sales, and real property
• Fla. Stat. § 212.05(1) — retail sales of tangible personal property
• Fla. Stat. § 212.06 — dealer registration referenced
• Fla. Admin. Code rr. 12A-1.037(2)(a)5. and 12A-1.039 — brokered sales and resale documentation
• Greenwald v. Graham, 130 So. 608 (Fla. 1930)
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01A-073

Original ruling text

SUMMARY

QUESTION: Whether sales tax is due on tangible personal
property sold in connection with the sale of a hotel?

ANSWER - Based on Facts Below: Although the sale and
purchase agreement identify different categories of
property, no specific reference is made to individual items
of inventory, boats, mobile homes, or other vehicles
transferred as part of the purchase and sale agreement.
Here, the fixtures do not include transfers of items such
as inventory, motor vehicles, boats, mobile homes,
aircraft, or other vehicles required to be registered by
this state or by the United States Government. Also, the
documents clearly reflect no part of the improvements and
fixtures included tangible personal property. Therefore,
the sales price charged for the improvements and fixtures
is not subject to the tax as provided by section 212.05(1),
F.S.

Dec 12, 2001

Re: Technical Assistance Advisement 01A-073
Sales by a Real Estate Broker
Sales and Use Tax
Section 212.02, F.S.
XXX (Petitioner)
XXX (Purchaser)
FEI #: XX

Dear :

This is in response to your letter dated September 11, 2001, and
other correspondence provided requesting a technical assistance
advisement regarding the taxability of the sale of a hotel and
other related property.

FACTS

Purchaser purchased a hotel pursuant to a sale and purchase
agreement dated December 17, 1997. Purchaser assigned all
rights to Petitioner pursuant to the transfer and assignment
agreement. The sale price was $11,460,000. The purchase and
sale agreement referenced different types of property including
real property, operating leases, permits, personal property,
business records, vehicles, improvements, leases, contracts, and
intangible personal property.

The sales and purchase agreement required that within 45 days of
the date of execution of the agreement the seller and purchaser
agree to allocate the sales price among the assets using the
allocation method required by 1060 of the Internal Revenue
Code. The allocation of purchase price was $1,719,000 for land,
$5,730,000 for improvements, and $4,011,000 for fixtures. No
allocation was made for personal property and inventories.

The sales and purchase agreement provided that the broker
receive a commission of no greater than one percent of the sales
price if the transaction closed. The broker was a licensed real
estate agent. There was no written agreement with the real
estate agent and the Purchaser or Petitioner, however the sale
and purchase agreement provided that the broker was allowed to
engage in negotiations.

Pursuant to the purchase and sale agreement, the warranty bill
of sale, dated January 20, 1998, transferred for $10, from the
seller of the hotel to the Purchaser, items of personal property
used in connection with the business at the hotel, including
fixtures, and other items, including motor vehicles.

ISSUE PRESENTED

Whether sales tax is due on tangible personal property sold in
connection with the sale of a hotel?

TAXPAYER POSITION

You provide in your correspondence and telephone conversations
several reasons why no portion of the sale of the hotel is

taxable as a sale of tangible personal property. You cite TAA
91A-005 for support of your position that no tax is due on the
sale of the hotel's land, improvements, and fixtures, because
the items sold are not separately stated and priced in the
purchase and sales agreement, bill of sale, or other tangible
evidence documenting the sale. You maintain that the reference
in the purchase and sale agreement regarding allocation of the
purchase price pursuant to 1060 of the Internal Revenue Code
does not change the nature of the transaction as one of a sale
of real property. You believe that since documentary stamp
taxes are due on the entire purchase price of the hotel, the
sale of the hotel should be viewed as a sale of real property.
You believe that the broker's activity is for primarily locating
a buyer and seller and that the only sales related activity is
for the sale of real property and not the sale of tangible
personal property.

APPLICABLE STATUTES AND RULES

Section 212.02(2) and (10)(h), F.S., provide:

(2) "Business" means 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, benefit, or advantage, either
direct or indirect. Except for the sales of any aircraft,
boat, mobile home, or motor vehicle, the term "business"
shall not be construed in this chapter to include
occasional or isolated sales or transactions involving
tangible personal property or services by a person who does
not hold himself or herself out as engaged in business....

(10)(h) "Real property" means the surface land,
improvements thereto, and fixtures, and is synonymous with
"realty" and "real estate."

Section 212.05(1)(a)1.a., F.S., provides:

It is hereby declared to be the legislative intent that
every person is exercising a taxable privilege who engages
in the business of selling tangible personal property at
retail in this state....

(1) For the exercise of such privilege, a tax is levied on
each taxable transaction or incident, which tax is due and
payable as follows:

(a)1.a. At the rate of 6 percent of the sales price of each
item or article of tangible personal property when sold at
retail in this state, computed on each taxable sale for the
purpose of remitting the amount of tax due the state, and
including each and every retail sale.

RESPONSE

Section 212.05(1), F.S., provides that every person is
exercising a taxable privilege when engaged in the business of
selling of tangible personal property. Section 212.02(2), F.S.,
excludes from the definition of the term "business" certain
occasional or isolated sales, which are out of the normal course
of business. As provided by section 212.02(2), F.S., the
exclusion is not applicable to the sale of aircraft, boats,
mobile homes, motor vehicles, or other vehicles in this state of
a class or type required to be registered, licensed, titled, or
documented in this state or by the United States Government. In
addition, the exclusion provided for by section 212.02(2), F.S.,
is not applicable to sales of inventory of tangible personal
property without the imposition of sales tax unless the
purchaser has, prior to the sale, registered as a dealer, as
that term is defined in Section 212.06, F.S., and complied with
the requirements of Rule 12A-1.039, F.A.C., of which a copy is
enclosed. In addition, Rule 12A-1.037(2)(a)5., F.A.C., provides
that no sale of tangible personal property made through a broker
required to be registered as a dealer for sales tax purposes
will qualify as an occasional or isolated sale.

The broker's activity relating only to the sale of real property
is not considered as engaging in a taxable privilege. The sale
of real property is not an activity subject to the provisions of
section 212.05(1), F.S. As provided by section 212.02(10)(h),
F.S., real property includes the land, improvements, and
fixtures. Therefore, the land, improvements, and fixtures sold
here are considered part and parcel of the real property. Also

see Greenwald v. Graham, 130 So. 608 (Fla. 1930).

Although the sale and purchase agreement identify different
categories of property, no specific reference is made to
individual items of inventory, boats, mobile homes, or other
vehicles transferred as part of the purchase and sale agreement.
Fixtures do not include transfers of items such as inventory,
motor vehicles, boats, mobile homes, aircraft, or other vehicles
required to be registered by this state or by the United States
Government. Here, the documents clearly reflect no part of the
improvements and fixtures included tangible personal property.
Therefore, the sales price charged for the improvements and
fixtures is not subject to the tax as provided by section
212.05(1), F.S. Thus, it is irrelevant in this case whether a
broker made the sale.

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 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 advise 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., and 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,

Charles Wallace
Senior Attorney
Technical Assistance and Dispute Resolution
(850) 922-4734

CW/
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Enclosure: Rule 12A-1.039, F.A.C.