Was a private operator's lease of an entire city-owned golf course exempt from Florida rent tax because it sold food and drinks in the clubhouse?

Plain-English summary

Florida found that the private operator's lease of an entire city-owned golf course did not qualify for the food-and-drink concessionaire exception to commercial-rent sales tax. The golf course was a publicly owned recreational facility, but the statutory exception covered space leased or licensed to a concessionaire operating within a larger facility—not the lease of the whole facility to an operator that also sold food and beverages.

The city granted a 20-year lease for an 18-hole public golf course, practice area, teaching facility, clubhouse, and related property. The lessee had construction, renovation, operation, and maintenance duties; charged greens and cart fees; and sold food and drinks in the clubhouse.

Rent included a quarterly payment plus 3% of annual gross revenue above $1.1 million. The lessee also had to use the city's strategic beverage partner as supplier, but that partner did not operate the concessions.

The golf course was a recreational facility

Section 212.031 did not define “recreational facility,” so the Department applied the phrase's ordinary meaning. A public golf course was plainly designed for play, sport, and relaxation and therefore fit the term.

Whole-facility operation was not concessionaire service

The exception in section 212.031(1)(a)10. applied to property leased or licensed “to a person providing food and drink concessionaire services within the premises” of specified facilities.

Florida read that language as presupposing an existing facility and exempting only the portion leased to a concessionaire, or a license granting the right to operate services within the facility. It did not exempt the entire premises merely because the overall operator also sold food and beverages.

Because this lessee rented the whole golf course, it was not occupying a concession space within the course. The lease did not qualify for the exception.

The Department did not decide what percentage of gross revenue must come from food and drinks because the threshold lease requirement already failed.

What this means for you

Municipalities and public recreation facilities

Separate concession-space agreements from whole-facility operating leases. A food vendor's lease or license inside a public facility may be analyzed differently from the operator's lease of the entire property.

Golf-course operators

Selling food and drinks in a clubhouse does not automatically convert the full golf-course lease into an exempt concession agreement.

Concessionaires

The ruling focused on a lease of a portion of premises or a license to provide services within an existing facility. Agreement scope and the exact space granted matter.

Common questions

Q: Was the city-owned golf course a publicly owned recreational facility?
A: Yes.

Q: Did clubhouse food and drink sales exempt the entire lease?
A: No. The exception did not extend to a lease of the whole facility.

Q: Did the required beverage supplier count as the concessionaire?
A: No. The supplier only supplied beverages and did not operate concessions.

Q: Did Florida set a minimum food-sales percentage?
A: No. That issue was moot because the entire-facility lease failed the exception first.

Citations and references

• Fla. Stat. § 212.031(1)(a)10. — exception for specified concessionaire premises within public and other facilities
• Fla. Stat. § 212.031(1)(c) — tax on base rent, percentage rent, and similar commercial-real-property charges
• Fla. Admin. Code r. 12A-1.070 — commercial real-property rentals
• Department of Revenue v. Val-Pak Direct Marketing Systems, Inc., 862 So. 2d 1 (Fla. 2d DCA 2003) — tax exemptions construed against the taxpayer when doubtful

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 04A-048

Original ruling text

SUMMARY
QUESTIONS and ANSWERS: (1) Is a publicly owned golf course considered a "recreational facility" pursuant to
Section 212.031(1)(a)10., F.S.? Yes. The leased property is a "recreational facility" under any plain meaning of that
phrase. A publicly owned golf course is a place designed for play, games, relaxation, etc.
(2) Does the lessee of a publicly owned golf course provide food and drink concessionaire services when it sells food
and drinks within the clubhouse, thus qualifying for the exemption found in Section 212.031(1)(a)10., F.S., for the
lease of the golf course? No. The lease or license referred to in Section 212.031(1)(a)10., F.S., is a lease of a portion
of the premises of a facility, or in the case of a license, a grant of the right to provide services within the facility, but the
exemption does not encompass the lease of the entire facility.
(3) Do a lessee's revenues from the sale of food and drink need to be a certain percentage of gross revenues in order
to qualify for the exemption found in Section 212.031(1)(a)10., F.S.? Because the lease in the instant case does not
qualify for the exemption found in Section 212.031(1)(a)10., F.S., this issue is moot.

August 9, 2004

Re: Technical Assistance Advisement 04A-048
Concessionaire Services at a City

Owned /Privately Operated Golf Course

Sales and Use Tax
Section 212.031, Florida Statutes ("F.S.")
Rule 12A-1.070, Florida Administrative Code

("F.A.C.")

Dear :
This response is in reply to your letter dated May 27, 2004, requesting the Department’s issuance of a Technical
Assistance Advisement ("TAA") pursuant to Section 213.22, F.S., and Rule Chapter 12-11, F.A.C., regarding the
Department’s position on the issue of the exemption found in Section 212.031(1)(a)10., F.S. An examination of your
letter has established that you have complied with the statutory and regulatory requirements for issuance of a TAA.
Therefore, the Department is hereby granting your request for issuance of a TAA.
ISSUES

1. Is a publicly owned golf course considered a "recreational facility" pursuant to Section 212.031(1)(a)10., F.S.?
2. Does the lessee of a publicly owned golf course provide food and drink concessionaire services when it sells food
   and drinks within the clubhouse, thus qualifying for the exemption found in Section 212.031(1)(a)10., F.S., for the
   lease of the golf course?

3. Do a lessee's revenues from the sale of food and drink need to be a certain percentage of gross revenues in order
to qualify for the exemption found in Section 212.031(1)(a)10., F.S.?
FACTS
Your letter provides, in part:

[The City] (Lessor) executed a Lease Agreement ... with [Lessee], for a period of twenty (20) years, commencing ...
2002, and ending … 2022. This agreement allows the [Lessee] to manage a public golf course and golf teaching
facility located [within the City] (real property owned by [the City]).
The Lessee's responsibilities include: various construction upgrades and improvements, including paving existing
parking and cart paths, renovating all greens, renovating and expanding existing clubhouse; developing a golf school
and learning center; and in general, operating and maintaining the real property as an 18 hole public golf course. The
course also contains a practice area and offers food and beverages for sale inside the clubhouse. Participants pay a
fee (greens fee) to play a round of golf and an additional fee for usage of an electric cart.
The Lessee pays the City a quarterly rental payment and an additional, annual three percent (3%) of gross revenues
in excess of $1.1 million.

Along with your letter, you provided the "Lease Agreement" between the City and the Lessee. This Lease Agreement
provides, in part:

USE AND CARE OF PREMISES

8. ... The [Lessee] agrees to solely use the City's strategic business partner for the distribution and resale of all
   beverages as outlined in the City's current Agreement with said partner.

During our telephone conversation of June 24, 2004, you advised me that the City's strategic business partner only
supplies beverages to the Lessee. The City's strategic business partner does not operate concessions.
REQUESTED ADVISEMENT
Your letter provides, in part:

The transaction in question surrounds the applicability of the State sales tax to the quarterly and annual percentage in
excess of a revenue amount lease payments made by the Lessee to the Lessor. The statute states 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 unless such property is leased, subleased, licensed, or rented to a person providing food and
drink concessionaire services within the premises of a convention hall, exhibition hall, auditorium, stadium, theater,
arena, civic center, performing arts center, publicly owned recreational facility, or any business operated under a
permit issued pursuant to [C]hapter 550. Based on the stated statute change, the City requests a determination on
the following issues:

1. The usage of the real property (owned by the City ...) is for operating and maintaining a public golf course. Is this
   usage considered a publicly owned recreational facility?
2. The lease is for a usage as a public golf course that also provides food and drink concessionaire services (sold
   within the clubhouse). Section 8 of the lease, Use and Care of the Premises, makes a reference to the fact that the
   lessee agrees to solely use the City's strategic business partner for the distribution and resale of all beverages. Is the
   Lessee considered to be providing food and drink concessionaire services, within the premises of a publicly owned
   recreational facility, and thus qualify to be exempt from sales tax on the (fixed) quarterly payment (Section 2, Rental)?
3. Is the Lessee considered to be providing food and drink concessionaire services, within the premises of a publicly
   owned recreational facility, and thus qualify to be exempt from sales tax on the annual three percent (3%) of gross
   revenues in excess of $1.1 million (Section 2, Rental)?
4. Do the Lessee's revenues from the sale of food and drink concessionaire services need to be a certain percentage
   of gross revenues (for example, more than fifty percent) to qualify for the exemption as stated above?

TAXPAYER'S POSITION
Your letter provides, in part:

In the City's request for a determination of the tax status, we make no reference direct or indirect as to the applicability
of sales tax. The City is only desirous of complying with any and all State statutes and administrative rulings. We only
seek a ruling that will adequately support the Department of Revenue's positions and ensure that both the Lessee and
Lessor are in compliance.

APPLICABLE STATUTES AND RULES
Section 212.031, 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 unless such property is:

10. Leased, subleased, licensed, or rented to a person providing food and drink concessionaire services within the
premises of a convention hall, exhibition hall, auditorium, stadium, theater, arena, civic center, performing arts center,
publicly owned recreational facility, or any business operated under a permit issued pursuant to chapter 550....

(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. The total rent or
license fee charged for such real property shall include payments for the granting of a privilege to use or occupy real
property for any purpose and shall include base rent, percentage rents, or similar charges.... In the case of a
contractual arrangement that provides for both payments taxable as total rent or license fee and payments not subject
to tax, the tax shall be based on a reasonable allocation of such payments and shall not apply to that portion which is
for the nontaxable payments.

DISCUSSION AND RESPONSE
The issues presented focus on the exemption on commercial real property leases found in Section 212.031(1)(a)10.,
F.S., and how it applies to a city owned golf course that is leased and managed by a private entity. The golf course
has a facility to provide food and beverages.
As a general principle, "[d]oubtful language in a statutory provision granting a tax exemption is to be construed against
the taxpayer." Department of Revenue v. Val-Pak Direct Marketing Systems, Inc., 862 So.2d 1, 5 (Fla. 2d DCA, 2003),
citing to Sebring Airport Authority v. McIntyre, 642 So.2d 1072 (Fla. 1994) and United States Gypsum Co. v. Green,
110 So.2d 409 (Fla. 1959).
Issue #1: Yes. No definition of "recreational facility" is provided by statute. Thus, it is necessary to look to principles of
statutory construction. Words of common usage, when used in a statute, should be construed in their plain and
ordinary sense. Pederson v. Green, 105 So.2d 1 (Fla. 1958).The word "recreation" is defined in Webster's New
Twentieth Century Dictionary, Unabridged, Second Edition, 1968, as follows:

1. refreshment in body or mind, as after work, by some form of play, amusement, or relaxation.
2. any form of play, amusement or relaxation used for this purpose, as games, sports, hobbies, reading, walking, etc.
   The word "facility" is defined in The Random House Dictionary of the English Language, The Unabridged Edition, as
   "something designed, built, installed, etc., to serve a specific function affording a convenience or service...."
   The leased property is a "recreational facility" under any plain meaning of that phrase. A publicly owned golf course is
   a place designed for play, games, relaxation, etc.
   Issue #2: No. The publicly owned golf course falls within the ordinary meaning of the term "recreational facility," as
   that term is used in Section 212.031(1)(a)10, F.S. The exemption contained therein does not, however, extend to the
   lease or license of the entire facility. Section 212.031(1)(a)10., F.S., specifically states that the exemption applies only

to property leased or licensed "to a person providing food and drink concessionaire services within the premises of a
...recreational facility...." (e.s.) That language presupposes the existence of a recreational facility and exempts only
that portion of the premises within that facility that is leased or licensed to a person providing food and drink
concessionaire services.
Few of the qualifying facilities listed in the subject exemption do not make food and drink available to their patrons
either through lease or license agreements with concessionaires or through their own direct sales. If the legislature
had intended for the lease of the entire premises of a qualifying facility to be exempt when such facility simply made
food and drink sales directly to its patrons, it could have done so. However, the statute exempts only the lease of real
property "to a person providing food and drink concessionaire services within the premises" of a qualifying facility,
rather than the lease of the entire premises of a qualifying facility when such facility makes food and drink sales
directly to its patrons.
An examination of the term "concessionaire" confirms this conclusion. The term, while not defined in the statute, is
defined in Merriam-Webster's Collegiate Dictionary, Tenth Edition as:
[T]he owner or operator of a concession; esp: one that operates a refreshment stand at a recreational center
The term "concession" is defined in Merriam-Webster's Collegiate Dictionary, Tenth Edition in pertinent part as:
2: c(3): a lease of a portion of premises for a particular purpose;
Accordingly, the lease or license referred to in Section 212.031(1)(a)10., F.S., is a lease of a portion of the premises
of a facility, or in the case of a license, a grant of the right to provide services within the facility, but the exemption
does not encompass the lease of the entire facility.
In the instant case, the Lessee is leasing the entire facility. Therefore the lease does not qualify for the exemption
found in Section 212.031(1)(a)10., F.S.
Issue #3: Because the lease in the instant case does not qualify for the exemption found in Section 212.031(1)(a)10.,
F.S., this issue is moot.
CONCLUSION
Under the facts presented, the leased golf course is a "recreational facility" as contemplated under Section
212.031(1)(a)10., F.S. However, while the Lessee may be selling food and drinks within the clubhouse at the golf
course, it is not providing food and drink concessionaire services pursuant to Section 212.031(1)(a)10., F.S., and
therefore its lease does not qualify for the exemption found therein.
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 Section 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,
Eric R. Peate
Senior Attorney
Technical Assistance and Dispute Resolution
(850) 922-4714
ERP/
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