Were point-based timeshare memberships taxable when Florida regulators classified them as timeshare estates?

Plain-English summary

Sales of the resort points were not subject to Florida sales or use tax because the interests qualified as timeshare estates. Members received points in perpetuity, could use them only to reserve accommodations in club properties, held voting and transfer rights, and could share in sale proceeds under the governing documents. The state timeshare regulator had approved the interests as timeshare estates.

Florida distinguished a timeshare estate from a taxable timeshare license. The perpetual interest and right to occupy club-owned property made this a real-property purchase, not merely a rental right. The ruling cautioned that ad valorem property tax applied, instruments conveying Florida timeshare interests were subject to documentary stamp tax, and financed purchases could trigger documentary stamp and nonrecurring intangible taxes on the financing documents.

What this means for you

Using points does not itself decide the tax result. The legal property interest, duration, occupancy rights, governing documents, and official timeshare classification controlled this ruling.

Common questions

Q: Were the points usable for cash, merchandise, or unrelated travel? No. The ruling says they could be used only to reserve club accommodations.

Q: Why were the points treated as real property? The members held perpetual occupancy rights coupled with the property and governance rights described in the plan.

Q: Did nontaxable sales-and-use-tax treatment eliminate every Florida tax? No. The ruling identified property, documentary stamp, and financing-related intangible taxes that could still apply.

Citations and references

• Fla. Stat. § 721.05(32) — timeshare estate
• Fla. Stat. § 721.05(35) — timeshare license
• Fla. Admin. Code r. 12A-1.061(3)(h)14 — timeshare-estate consideration
• Fla. Stat. §§ 201.02(1) and 201.08(1)-(2) — documentary stamp tax
• Fla. Stat. § 199.135 — nonrecurring intangible tax
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 02A-040

Original ruling text

SUMMARY

QUESTION: Are sales of timeshare membership units in the
form of points subject to sales and use tax, when the sale
of such units has been declared a timeshare estate by the
Department of Business and Professional Regulation?

ANSWER - Based on Facts Below: No, the sales of timeshare
units in the form of points are not subject to sales and
use tax, when such units meet the definition of "timeshare
estate" under s. 721.05(32), F.S.

Oct 03, 2002

Re: Technical Assistance Advisement 02A-040
Petitioner: XXX "Taxpayer"
FEI number: XXX
Sales and Use Tax - Timeshare Membership Points
Section: 721.05(32), (35), F.S.
Rule: 12A-1.061(3)(h)14., F.A.C.

Dear :

This is a response to your letter dated March 4, 2002, in which
you have requested a Technical Assistance Advisement concerning
the above referenced petitioner. 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 s. 213.22, F.S.

Stated Facts

In your letter, you state the following facts:

An affiliate of the Taxpayer created a multisite vacation
club and timeshare plan in November, 1993, by incorporating

XXX, a nonstock, nonprofit XXX corporation (the "Club"), and
transferring unencumbered condominium units ("Units") ... to
an independent trustee for the exclusive benefit of the Club
and its members (the "Club Members"). A trust agreement and
a master declaration were recorded in the appropriate
jurisdictions against the title of each Unit owned by the
Club....

Each member's rights are set forth by the Club instruments,
which include the Master Declaration and Bylaws. A copy of
the "Club Bylaws" is attached as Exhibit B. Club Members
are entitled to use the Units, based on a reservation
system (see Exhibit C for description of the reservation
system). Under the Club Bylaws, the Club Members are
entitled to vote at Club meetings, based on the number of
membership interests they own. The Club Members elect a
board of directors which manage and operate the operations
of the Club (see Section 3.6 of the Club Bylaws providing
that Club Members are entitled to vote at the annual
meeting and Section 4.2 of the Club Bylaws providing that
Club Members elect the Board of Directors). Article X of
the Club Bylaws provide that upon a 90% vote of the
membership units, the Resort is to be sold, and the
proceeds after payment of all obligations distributed pro
rata to the Club Members in proportion to their membership
interest in the Club. Club Members are entitled to
transfer their membership units, subject to a right of
first refusal by the Club.

The Department of Business and Professional Regulation,
Division of Florida Land Sales, Condominiums and Mobile
Homes (the "Division") has approved the filings submitted
by Taxpayer, pursuant to a letter dated February 5, 2002
("Timeshare Approval Letter"), a copy of which is attached
as Exhibit D. The Timeshare Approval Letter concludes that
the timeshare interests of the Club are timeshare estates,
pursuant to [Section] 721.05(32), F.S.

The Taxpayer desires to offer memberships for sale to the
public in Florida pursuant to the Timeshare Approval
Letter....

... The [T]axpayer requests a binding ruling from the
Department of Revenue that the sale of the membership units
by the Taxpayer to the Club Members will not be subject
from [S]tate of Florida sales tax or any local option sales
tax and that the Club Members use of a Unit in the Club's
resort in Florida will not be subject to State of Florida
use tax, or any local option use tax...."

Taxpayer's Position

In your letter, you state:

... Florida sales and use tax is not due on the sale of
real property or on the sale of intangible personal
property. The timeshare membership units have been
determined to be a timeshare estate by the Division. Rule
12A-1.061(3)(h)15 ., F.A.C., provides that
consideration paid by a timeshare owner for the purchase of
a timeshare estate per [Section] 721.05[,] F.S.[,] is not
subject to Florida sales and use tax. Accordingly, the sale
of the membership units should not be subject to Florida
sales and use tax, since they qualify as a timeshare estate
per [Section] 721.05, [F.S.,] as determined by the
Division. Although not binding on the Department, we would
note that TAA 01A-072 discusses a very similar timeshare
program, and concludes that the interests sold are not
subject to sales and use tax. The Membership Units
purchased by Club Members are in the nature of a
cooperative interest discussed in TAA 01A-072. Club
Members have the right to vote for the board of directors,
they have the right to use the Units pursuant to the
reservation system, they have the right to transfer their
membership interests, and they have the right, upon a super
majority vote, to cause the Club to sell all of the Units
and distribute the net proceeds, pro rata, to the Club
Members. Accordingly, the rationale of TAA 01A-072 is
applicable to this case.

Applicable Authority and Discussion

Section 721.05(32), F.S., states:

(32) "Timeshare estate" means a right to occupy a timeshare
unit, coupled with a freehold estate or an estate for years
with a future interest in a timeshare property or a
specified portion thereof. The term shall also mean an
interest in a condominium unit pursuant to s. 718.103, an
interest in a cooperative unit pursuant to s. 719.103, or
an interest in a trust that complies in all respects with
the provisions of s. 721.08(2)(c)3.

Section 721.05(35), F.S., states:

(35) "Timeshare license" means a right to occupy a
timeshare unit, which right is neither coupled with a
freehold interest, nor coupled with an estate for years
with a future interest, in a timeshare property.

Rule 12A-1.061(3)(h)14., F.A.C., states:

(h) The following is a non-inclusive list of charges
separately itemized on a guest's or tenant's bill, invoice,
or other tangible evidence of sale that are NOT rental
charges or room rates for transient accommodations: ...

14. Consideration paid by a timeshare owner for purchase of
    a timeshare estate, as defined in s. 721.05, F.S.
    Consideration paid under a timeshare license, as defined in
    s. 721.05, F.S., are rental charges or room rates and are
    subject to tax.

Advisements

Timeshare estates are not subject to sales or use tax because
they are considered the purchase of real property. As such,
they will be subject to ad valorem, or real property, taxation.
The documents submitted with your letter state that club members
will receive an annual allotment of resort or INDI points in
perpetuity, which can be used for resort accommodations. The
club member has a right to use his points to reserve a unit in
any of the resort's properties. The points cannot be used by

the club member for any purpose other than to reserve
accommodations in resort properties.

This department agrees with the determination of the Department
of Business and Professional Regulation that these transactions
would be the sale of timeshare estates. The sale of these
resort and INDI points that can be used only for Club
accommodations is essentially the same as purchasing a timeshare
estate in a particular piece of property. As stated in the
statute, a timeshare estate is the right to occupy a timeshare
unit together with a freehold estate or an estate for years with
a future interest. The key difference between a timeshare
estate and a timeshare license is the element of time. A
timeshare purchaser must hold a freehold interest or an estate
for years coupled with a future interest to qualify as owning a
timeshare estate. Here, the Club member would be entitled to
timeshare accommodations in perpetuity. This element of time
with regards to the purchaser's interest, together with the
purchaser's right to occupy timeshare property owned by the
Club, meets the essential requirements of a timeshare estate.
Therefore, the sale of resort or INDI points to club members
will be considered the purchase of a timeshare estate, not
subject to sales or use tax.

An instrument that conveys an interest in Florida real property,
such as an instrument that conveys an interest in a Florida
timeshare, is subject to documentary stamp tax as imposed under
s. 201.02(1), F.S. Where the purchase of a timeshare interest
is financed, the documentary stamp tax as imposed under s.
201.08(1) or (2), F.S., is due if the note or other obligation
to pay money is executed or delivered in Florida or if there is
a mortgage filed or recorded in Florida. The nonrecurring
intangible personal property tax as imposed under s. 199.135,
F.S., is also due if Florida real property secures a note or
other obligation to pay money.

Closing Statement

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, 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.

If you have any further questions with regard to this matter and
wish to discuss them, you may contact me directly at (850) 4889669.

Sincerely,

Tammy S. Manke
Attorney
Technical Assistance & Dispute Resolution

TSM/
Control No: 49136