Was an arena's annual club-seat license fee taxable even though the customer still had to buy a separate ticket for each event?

Plain-English summary

Florida required sales tax on an arena's annual club-seat license fee. The agreement did more than give customers an early chance to buy tickets: it granted a limited right to use specified club seats and other restricted arena facilities.

Customers chose three- or five-year terms and paid annual license fees in addition to the normal admission price for each event. Five-year licensees paid $300 annually for the first two years and $350 annually for the last three; three-year licensees paid $400 annually.

The agreement granted rights in real property

The licensees received priority rights to purchase a ticket in the same seat location for public ticketed events. They also received access to the Club Level lounge, a private VIP entrance and elevator, in-seat wait service, a club concourse, private restrooms, TV monitors, and an option to purchase advance parking.

The agreement called the customers licensees, characterized the benefits as licensee rights, and expressly granted a limited license to use the club seats. Florida found those rights consistent with the statutory definition of a license to use real property.

A separate event ticket did not remove the tax

The customer could use a club seat only after buying and presenting the appropriate ticket for that event. Florida rejected the argument that this made the annual payment merely an option fee.

Section 212.031 did not require the real-property privilege to be unconditional. A taxable license could still require an additional admission payment before each use.

Restricted access mattered

The licensed benefits were unavailable to the general public merely buying ordinary arena tickets. That preferential and exclusionary access supported treatment as a real-property license rather than a bare ticket-purchase priority.

What this means for you

Arenas, stadiums, and entertainment venues

Review what a seat-rights program actually grants. Rights to specified seats, private lounges, entrances, restrooms, concourses, or parking can make an annual fee taxable as a real-property license even when event tickets cost extra.

Ticketing and membership programs

Calling a fee an “option” does not control when the contract gives ongoing venue-use rights. Agreement language and the actual package of benefits matter.

Accountants and tax professionals

Separate the annual license fee from event admission, but do not assume the extra ticket requirement makes the license fee nontaxable. Analyze any narrow statutory exemption independently.

Common questions

Q: Did the annual fee include admission to events?
A: No. The licensee still had to buy a ticket for each event.

Q: Why was the annual fee taxable?
A: It granted conditional use of specific club seats and restricted arena facilities, fitting Florida's definition of a real-property license.

Q: Was priority ticket access the only benefit?
A: No. Licensees also received lounge, entrance, elevator, in-seat service, restroom, monitor, and parking-related privileges.

Q: Did the football box-seat exemption apply?
A: No such qualification was found. The ruling cited that provision as evidence that similar seating rights can be leases or licenses, while the statutory exemption was limited to specified nonprofit-sponsored high school or college football arrangements.

Citations and references

• Fla. Stat. § 212.02(10)(i) — license means a privilege to use or occupy real property for any purpose
• Fla. Stat. § 212.031(1)(a) — taxable business of granting a license to use real property
• Fla. Stat. § 212.031(1)(c) — tax on total rent or license fee
• Fla. Stat. § 212.031(9) — limited exemption for specified nonprofit-sponsored football box-seat arrangements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 04A-043

Original ruling text

SUMMARY
QUESTION: Whether license fees paid for the right to purchase admission tickets for specific club seats are subject
to subject to the sales tax.
ANSWER - Based on Facts Below: Yes. The license fees are paid pursuant to the license agreement which
characterizes the customers as licensees, the rights as licensee rights, and provides for the conditional right of the
use of specific club seats and other facilities.

July 23, 2004

Subject: Technical Assistance Advisement 04A-043
Club Seat License
Sales and Use Tax
Section 212.031, F.S.
Section 212.02(10)(i),F.S.
XXX, Petitioner ("Agent")
FEI#: XX
XXX ("Arena")
XXX ("Principal")
XXX ("License Agreement")
XXX ("State A")
Dear :
This is in response to your request for a Technical Assistance Advisement regarding seating arrangements sold at the
Arena.
ISSUE
Whether the license fee paid to Agent is subject to sales tax.
FACTS
Agent is a State A general partnership. Agent manages Arena as agent for Principal. Arena offers various levels of
seating and accommodations for various events. Musical and other entertainment events are held at Arena.
Customers seeking priority seating order club seats on an order form. A form provides that the customer may seek a
five-year term or a three-year term. In addition to the normal ticket admission price, the customers are required to pay
a license fee for club seats. The license fee is prorated over each year. The payment is recorded as income when
received. The annual fee for the five-year term licenses is $300 per year the first two years and $350 per year the last

three years. The customers seeking a three-year term pay a $400 per year license fee. The order form provides the
following:
$150 holding deposit due for each club seat, upon signing of this agreement, which will be applied toward the first
year license fee of the agreement - balance due July 1st. Remaining annual license fees due in two (2) equal
installments, each year of the agreement on January 1st and July 1st....
The form also provides that before club seats can be held, the licensee must sign the form and submit the required
deposit. The deposits are refundable in the event club seat licenses are not allocated. Five-year agreements receive
priority seat selection as opposed to the three-year agreements.
The License Agreement provides for various benefits. In addition to receiving the option to purchase one ticket in the
same seat location for all events for every public ticketed event prior to the general public offering, exhibit 1 of the
License Agreement provides that the Licensee receives various privileges and amenities, including membership to the
Club Level Lounge during, prior to, and after Arena events. Licensees of club seats receive the use of a private VIP
entrance with an elevator, in-seat wait service, access to the Club Level lounge, concourse, and private restrooms,
and access to TV monitors in the Club Lounge. In addition, the Licensee is granted the option to purchase advance
parking
Section 1(f) of the License Agreement provides in part, "The license fee payable by Licensee to Manager ("License
Fee") is... pro rated and payable for the First Year... plus applicable taxes...." (Emphasis in original)
Section 2 provides, "(sic) The Deposit paid by Licensee to reserve the Club Seats in conjunction with the execution of
this Agreement shall be applied to the installments of the License Fee for the first Year. Licensee acknowledges and
agrees that the Deposit is non-refundable."
Section (3) of the License Agreement provides the following in part:

3. Club Seat License
   (a) Rights of Licensee. Manager hereby grants to Licensee a limited license to use the Club Seats in accordance
   with the terms and subject to the conditions and restrictions of this Agreement, including the privileges and amenities
   listed in Exhibit 1, throughout the Term of this Agreement. Licensee acknowledges and agrees that use of the Club
   Seats for all Events shall be by paid ticketed admission only. (Emphasis added)
   (b) Use Periods. Licensee may use the Club Seats during and immediately before and after Events and at such
   other times that Manager in its absolute discretion may permit.... (Emphasis in original)
   Section (5)(b) provides the following in part: "In addition to the License Fee, Licensee shall pay any applicable sales,
   use ... taxes ... with respect to the License Fee, ...." Section (6)(b) provides the following in part:
   (b) Licensee's Rights. Licensee shall have the right to use the Club Seats only for the amount of time reasonably
   necessary to attend Events for which Licensee holds Club Seats Tickets and at such other times that may be

permitted by Manager in its sole discretion. To use the Club Seats for each Event, Licensee must purchase and
present appropriate Club Seats Tickets for the Event....
Section 9 of the License Agreement provides the following in part:

9. Transfer of Licensee's Rights in Club Seats.
   (a) Assignment. This Agreement creates and confers a limited right to Licensee to use the Club Seats for Events as
   herein provided. Licensee may assign its rights under this Agreement only with the prior written consent of Manager....
   (b) Scalping. Licensee may not request or receive a premium of any kind for or in connection with an assignment or
   other transfer of any right or interest in or relating to this Agreement, the Club Seats or any Club Seats Tickets or
   other Arena tickets As used herein, "premium" means any consideration, whether cash, property or other, and
   whether or not paid at the time of transfer, the value of which exceeds the unearned portion of any prepaid License
   Fee.... (Emphasis in original)
   APPLICABLE STATUTES AND RULES
   Section 212.02(10)(i), F.S., provides:
   (10)(i) "License," as used in this chapter with reference to the use of real property, means the granting of a privilege
   to use or occupy a building or a parcel of real property for any purpose.
   Section 212.031(1) and (9), F.S., provides in 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 by the person charging or collecting the rental or license fee....
   (9) The rental, lease, sublease, or license for the use of a skybox, luxury box, or other box seats for use during a high
   school or college football game is exempt from the tax imposed by this section when the charge for such rental, lease,
   sublease, or license is imposed by a nonprofit sponsoring organization which is qualified as nonprofit pursuant to s.
   501(c)(3) of the Internal Revenue Code.
   TAXPAYER POSITION
   Agent does not grant access to club seats or any other space within Arena to anyone without a ticket. Club Seat
   Option holders must purchase tickets to those events that they want to attend. Club Seat Option holders are merely
   granted an option to purchased a Club Seat ticket before they are made available to the general public.
   RESPONSE

Section 212.031(1), F.S., imposes the sales tax on persons who engage in the business of licensing real property.
Section 212.02(10)(i), F.S., defines the term "license" to include the granting of a privilege to use real property for any
purpose. Here, the customers enter into an agreement characterized by the parties as a license agreement. The
customers are referred to in this agreement as licensees. The agreement characterizes the benefits to the licensee as
licensee rights, and the payment is characterized as an annual license fee. These licensees are entitled to use
privileges that include preferential seating for events that licensees choose to attend, preferential parking rights, and
access to the Club lounge. These benefits are at the exclusion of the general public who may seek to obtain a ticket to
an event at Arena.
The rights afforded to the licensees are consistent with a license to use real property as defined by section
212.02(10)(i), F.S. In addition, section 212.031(9), F.S., includes similar seating for certain football games to be
included as a lease or license as provided for by section 212.031, F.S. As such, the tax provided for by section
212.031, F.S., applies to the license fee paid. The use provided pursuant to the privilege granted in the agreement is
conditional only upon payment of the admission price for a ticket for each event. Section 212.031, F.S., does not
require that the privilege be absolute and may include a privilege granted which requires additional payments.
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 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.
Sincerely,
Charles Wallace
Senior Attorney
Technical Assistance and Dispute Resolution
(850) 922-4734
CW/
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