Were mandatory HOA dues paid by resident owners for association-owned recreational common areas subject to Florida admissions tax?

Plain-English summary

Florida found that the resident homeowners' mandatory annual dues were not taxable admissions. The owners paid the dues because property ownership required membership, and the tennis courts, pool, and clubhouse were association-owned common areas—not separate recreational access purchased through an optional club membership.

The community included 319 residential home sites and condominiums. Its governing documents made each property owner a resident member, tied the membership and the member's share of association assets to the residential unit, barred voluntary resignation, and allowed a lien for unpaid dues or assessments.

Resident members paid $1,800 annually to defray operating costs for the recreational facilities. They could transfer membership only by transferring title to their unit. The association owned the facilities, and the declaration classified them as common areas for residents' benefit.

Why the admissions tax did not apply

Florida generally taxes admissions under section 212.04, and section 212.02(1) includes dues paid to private or membership clubs offering recreational facilities.

Rule 12A-1.005(4)(d)3., however, excludes mandatory dues paid to a homeowners' association when:

1. Payment is required as a condition of owning or occupying real property.
2. The recreational facilities are part of the property's common elements or common areas.

Both conditions were met. The Department therefore treated the annual resident-owner dues as ownership-based HOA obligations, not taxable charges for admission to a recreational facility.

The ruling was limited to resident owners

The community also had associate members and renter members who paid dues for the right to use the facilities. The advisement's stated issue and conclusion addressed the mandatory annual dues paid by resident members; it did not give the same conclusion for those other membership classes.

What this means for you

Homeowners' associations

Governing documents matter. The strongest facts here were mandatory membership, dues enforceable against the unit, membership transferable only with title, and association ownership of the facilities as common areas.

Property managers and accountants

Separate mandatory owner assessments from optional recreation memberships and user charges. Different fee classes can have different admissions-tax treatment even within the same community.

Homeowners

The ruling did not say every payment to an HOA is exempt. It addressed annual dues required by ownership and used for common-area recreational facilities under the specific declaration and bylaws.

Common questions

Q: Were the resident owners' $1,800 annual dues taxable?
A: No. They were mandatory ownership-based HOA dues for common-area facilities.

Q: Did access to tennis courts, a pool, and a clubhouse make the dues taxable?
A: No under these facts, because the facilities were association-owned common areas and payment was required by property ownership.

Q: Could resident members resign and stop paying?
A: No. The governing documents barred voluntary resignation, and membership transferred only with title to the home.

Q: Did the ruling exempt renter-member or associate-member dues?
A: It did not decide that question. Its issue and conclusion were limited to mandatory annual dues paid by resident owners.

Citations and references

• Fla. Stat. § 212.02(1) — admissions include certain recreational and membership-club dues
• Fla. Stat. § 212.04(1) — tax on admissions
• Fla. Admin. Code r. 12A-1.005(4)(d)3. — exclusion for mandatory HOA dues tied to ownership and common-area facilities
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 04A-060

Original ruling text

SUMMARY
QUESTION: Whether the mandatory annual dues paid by Resident Members are subject to the sales tax on
admissions.
ANSWER - Based of Facts Below: No. The members are paying mandatory annual dues to maintain their interest as
homeowners as provided for by Rule 12A-1.005(4)(d)3., F.A.C. The mandatory dues are paid as a condition of
ownership of property in the community governed by the Association. The recreational facilities are owned by the
Association and are part of the common areas of the Association.

November 17, 2004

Subject: Technical Assistance Advisement 04A-060
Homeowners' Association Mandatory Dues
Sales and Use Tax
Section 212.04, F.S.
Rule 12A-1.005, F.A.C.
("Taxpayer")
Taxpayer Identification Number: XX
XXX ("Owner")
XXX ("Developer")
XXX ("Community")
Dear:
This is in response to your request of a Technical Assistance Advisement concerning the mandatory dues paid by
homeowners.
ISSUE
Whether the mandatory annual dues paid by Resident Members are exempt from sales tax.
FACTS
Developer built Community, which consists of 319 residential home sites and condominiums. Community consists of
several smaller communities. Each separate community has a separate association (homeowner's or condominium) to
operate and maintain the common properties shared by the residents within each separate smaller community. The
property rights of each property unit or parcel are subject to the governing documents of Community. Such documents
include, but are not limited to, the Declaration of Covenants and Restrictions ("The Declaration"), Articles of
Incorporation (Articles) for the Taxpayer and Owner, and the Bylaws for the Taxpayer and the Owner.

Owner is the master homeowner association of all of the related homeowner and condominium associations in
Community. Owner is a not-for-profit corporation formed to operate as a homeowner's association and is owned by its
members. The members consist of property owners in Community. The governing documents provide that Owner's
primary purpose is to maintain the common properties of Community. In 2001, Developer transferred title and control
of certain recreational facilities, including tennis courts, pool, and a clubhouse (The "Recreational Facilities"), to Owner
pursuant to a quitclaim deed. The Declaration provides that the Recreational Facilities are part of the common areas
of Community. The Declaration provides that the common areas are deemed to be operated by and subject to the
homeowner association's jurisdiction. The governing documents provide that the Recreational Facilities are common
areas for the benefit of Owner's members and to be used for residential and related recreation use and not for
commercial, trade, or business purposes. The Declaration provides that the Declaration’s covenants run with the land
of all units or parcels in Community.
Taxpayer is a not-for-profit corporation, organized in 1991 pursuant to chapter 617, F.S., owned by Owner. Taxpayer
manages Recreational Facilities on Owner's behalf exclusively to be used for the recreation of Owner's members,
their guests, and Associate members. Taxpayer has different member classifications (Resident Members, Associate
Members, and Renter Members). Resident Members (referred also to as Owner Members) become Members by
virtue of ownership of a residential unit within Community.
All Community unit (residential dwelling unit or lot) property owners are required to be members of Owner and of the
local community association. Upon purchasing ownership of a Unit within the Community, the new owner taking fee
simple title is required to become a Resident Member of the Taxpayer. The Declaration provides that each Resident
Member's share in the funds and assets of the Owner is as an appurtenance to the member’s ownership of the
member’s residential unit.
Resident Members are required to pay a fee, the funds of which were placed in a reserve fund. Seventy five percent
of the fee is paid back to the Resident Member if he or she resells the property in Community. The fund is also used to
pay for capital improvements of the Recreational Facilities.
The governing documents require Resident Members to pay dues each year to defray the cost of operating the
Recreational Facilities. Currently, the Resident Members currently pay $1,800 a year per member. Resident Members
become part of the Member registry and may only transfer their membership by transferring title to their residential
unit. Resident Members are not permitted to resign their membership. As provided by the Declaration and Bylaws,
failure to pay fees, dues, or assessments may result in Owner placing a lien on the Resident Member's unit located in
Community.
An Associate Member is either a co-owner not designated as the Resident Member of a Community unit or a spouse
who is not a property owner within the Community. Associate Members are required to pay the initiation fee. Associate
Members pay membership dues for the right to use recreational facilities operated by Taxpayer. A Renter Member is a
renter of a unit owned in Community by a Resident Member. In addition, Renter Members pay dues solely for the right
to use the recreational facilities operated by Taxpayer.

The governing documents provide that the Resident Members shall have the right to elect the members of the Board
of Directors. The governing documents permit the Owner to charge dues, user fees, and minimum purchase amounts.
Taxpayer's Board of Directors annually set the dues, fees, and minimum dining charges to be charged in advance.
The dues are assessed against Resident Owners in a pro rata manner. The dues are used to defray annual operating
costs. The Board of Directors is permitted to make assessments to cover operating deficits and capital improvement
assessments. In addition to the annual dues to Residents and user fees and dues paid by the other members, all
members pay for goods and services they use or consume at the Recreational Facilities.
TAXPAYER POSITION
Your correspondence provides that the dues are not subject to the sales tax on admissions since the requirements of
Rule 12A-1.005(4)(d)3., F.A.C., are satisfied. You maintain that the dues are (1) mandatory, (2) paid to a
homeowners' association, condominium association, or cooperative association, (3) required to be paid as a condition
of ownership, and (4) the club facilities are part of the common elements or common areas of real property.
In regard to the first requirement of the Rule, your correspondence provides that the dues are mandatory because the
governing documents require that each unit owner within Community is required to become a Resident Member. Your
letter provides that the Resident Member has no choice. Your letter also provides that the governing documents
mandate that a Resident Member may not resign voluntarily.
In regard to the second requirement, your correspondence provides that the fee must be paid to a homeowners'
association. Your letter cites section 720.301(7), Florida Statutes. It defines "homeowners' association" as a Florida
corporation responsible for the operation of a community in which the voting membership is made up of parcel owners
or their agents, or a combination thereof. The corporation must also include members whose membership is a
mandatory condition of parcel ownership, and the corporation must be authorized to impose assessments that, if
unpaid, may become a lien on the parcel. Your letter provides that the governing documents only permit Resident
Members in good standing to have any voting rights and require Resident Members to obtain membership in Taxpayer
and Owner. In addition, your correspondence provides that the governing documents permit the Owner to allow
Taxpayer to place liens against a Resident Member's residential unit for failure to pay the dues payment.
In regard to the third requirement, your correspondence provides that payment of the dues is a mandatory condition of
parcel ownership. Your letter provides that all Resident Owners are required to become Resident Members when they
purchase a residential unit. In addition, your correspondence provides that a lien may be attached to a Resident
Member's property for failure to pay the annual dues.
In regard to the fourth requirement, your correspondence provides that the Recreational Facilities are part of the
common elements or common areas of real property, because Owner is the owner of the Recreational Facilities and
Owner is responsible for the common properties shared jointly by all communities in Community. The correspondence
provides that the Recreational Facilities are operated and maintained by Taxpayer.
APPLICABLE STATUTES AND RULES

Section 212.04(1), F.S., provides:
(1)(a) It is hereby declared to be the legislative intent that every person is exercising a taxable privilege who sells or
receives anything of value by way of admissions.
(b) For the exercise of such privilege, a tax is levied at the rate of 6 percent of sales price, or the actual value received
from such admissions, which 6 percent shall be added to and collected with all such admissions from the purchaser
thereof, and such tax shall be paid for the exercise of the privilege as defined in the preceding paragraph....
Section 212.02(1), F.S., provides:
(1) The term "admissions" means and includes the net sum of money after deduction of any federal taxes for admitting
a person or vehicle or persons to any place of amusement, sport, or recreation or for the privilege of entering or
staying in any place of amusement, sport, or recreation, including, but not limited to, theaters, outdoor theaters,
shows, exhibitions, games, races, or any place where charge is made by way of sale of tickets, gate charges, seat
charges, box charges, season pass charges, cover charges, greens fees, participation fees, entrance fees, or other
fees or receipts of anything of value measured on an admission or entrance or length of stay or seat box
accommodations in any place where there is any exhibition, amusement, sport, or recreation, and all dues and fees
paid to private clubs and membership clubs providing recreational or physical fitness facilities, including, but not
limited to, golf, tennis, swimming, yachting, boating, athletic, exercise, and fitness facilities ....
Rule 12A-1.005(4)(d)3., F.A.C., provides:
(d) Fees paid to private clubs or membership clubs that do not entitle the payor to the use of the club's recreational or
physical fitness facilities are not subject to tax. Examples of such fees are: ....

3. Mandatory dues and fees paid to a ... homeowners' association ... when they are required to be paid as a condition
   of ownership or occupancy of real property and the club facilities are part of the common elements or common areas
   of the real property.
   RESPONSE
   The privilege of engaging in the business of selling admissions is subject to tax as provided by section 212.04(1), F.S.
   Section 212.02(1), F.S., defines the term "admissions." It includes, but is not limited to, the amounts paid for the right
   or privilege of admitting or entering a person to a place of amusement, recreation, entertainment, or sport. Rule 12A1.005(4)(d)3., F.A.C., provides that mandatory dues and fees paid to homeowners' association paid as a condition of
   ownership of real property for use of club facilities that are part of the common elements or common areas of the real
   property are not considered taxable as an admission. In this instance, based on the documentation provided, the
   mandatory annual dues paid by the Resident Members are not taxable admissions.
   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/
Ctrl#: 60408