Were canal-maintenance fees and per-barrel wharfage charges under a perpetual navigational easement subject to Florida sales tax?

Plain-English summary

Florida sales tax did not apply to the canal-maintenance and wharfage payments because the underlying property right was a true easement, not a lease or license. Section 212.031 taxed renting, leasing, letting, and licensing real property; the Department found this navigational easement outside that list.

The taxpayer operated a bulk petroleum terminal with docking facilities. Ships and barges reached the terminal through a privately owned canal. The agreement granted a common, nonexclusive right to travel over, across, and through the canal and required the canal owner to dredge and maintain it. The taxpayer paid a wharfage charge based on petroleum and related products unloaded at the dock.

Substance controlled over the document label

The Department identified six relevant characteristics:

1. the easement was created by grant and recorded documents;
2. it was perpetual;
3. it was nonexclusive rather than a grant of exclusive possession;
4. it defined and limited the taxpayer's permitted uses;
5. the documents and circumstances showed an intent to grant passage over, through, and across the waterway; and
6. it served traditional easement functions—ship ingress and egress—similar to a road, driveway, or rail line.

Because the right was neither a lease nor a license, the related payments were not taxable real-property rent or license fees under section 212.031.

The port-authority alternative did not apply

The taxpayer alternatively argued for the port-authority exemption. The Department rejected that alternative because the canal property was privately owned and was not property "at a port authority." That did not change the outcome because the easement was already outside the taxable rent-or-license statute.

What this means for you

Payments tied to access over another owner's property are not classified by the agreement's title alone. Duration, exclusivity, recorded grant language, the parties' intent, and the narrow purpose of the access right all mattered here. A revocable or possessory arrangement with broader use rights may require a different analysis.

Common questions

Q: Did the taxpayer have exclusive use of the canal?
A: No. It had a nonexclusive right of reasonable ship passage.

Q: Why were the maintenance and wharfage payments not treated as rent?
A: They were paid under a true easement that granted limited ingress and egress, not exclusive possession or a license to occupy real property.

Q: Did the port-authority exemption apply?
A: No. The property was not at a port authority, but the exemption was unnecessary because the transaction was outside section 212.031.

Citations and references

• Fla. Stat. § 212.02(10)(i) — real-property license definition
• Fla. Stat. § 212.031 — tax on real-property rent, lease, letting, or license
• Fla. Stat. § 315.02(2) — port authority definition
• Fla. Admin. Code r. 12A-1.070 — real-property rentals and licenses

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 05A-001

Original ruling text

SUMMARY
QUESTION: Is Florida sales tax due on the maintenance fees and wharfage charges paid pursuant to the grant of a
canal easement?
ANSWER - Based on Facts Below: Florida sales tax is not due, because this easement is beyond the scope of the
statute. The easement is neither a license to use real property nor a lease of real property. This determination goes
beyond the labels used. We find the following characteristics to be relevant to our determination, although we
expressly recognize that there may be other factors under a different set of facts that would also be relevant.

1. The "easement" presented was created by grant as evidenced by the Agreement and other recorded documents;
2. The "easement" presented is "perpetual" (i.e., permanent);
3. Unlike a lease which grants exclusive possession, this "easement" is non-exclusive in nature;
4. The "easement" defines and limits the permitted uses by the Taxpayer;
5. Under all the facts, circumstances, and documents, it is clear that the intent of the Taxpayer and the Canal Owner
   was to grant an easement over, through and across the Canal Owner’s waterway; and
6. The "easement" is an easement in the traditional sense of the term (i.e., it is used for egress and ingress, it is akin
   to a road, driveway, or rail line, etc.)

January 4, 2005

Re: Technical Assistance Advisement 05A-001
Florida Sales and Use Tax
Canal Easement
Sections 212.02, 212.031, 213.22 and 315.02, F.S. ("Florida Statutes")
Rule 12A-1.070, F.A.C. ("Florida Administrative Code")
Dear :
This response is in reply to your letter dated September 2, 2004, requesting the Department's issuance of a Technical
Assistance Advisement ("TAA") pursuant to Section 213.22, F.S., and Chapter 12-11, F.A.C., regarding maintenance
fees related to a Canal Easement. 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.

ISSUE
Whether, under all the facts presented, payments made for the maintenance of an easement are subject to Florida
sales tax under Section 212.031, F.S.
FACTS
Your letter of September 2, 2004 provides, in part:

[The Taxpayer] is a large supplier of gasoline and diesel petroleum products in the State of Florida. In that connection,
[the Taxpayer] owns a bulk terminal facility on the ... Ship Channel that includes docking facilities to allow ships and
barges to load and unload petroleum products for shipment to and from other locations. To reach [the Taxpayer's]
docking facilities, the ships and barges must travel through the ... Ship Channel to the property owned by [the
Taxpayer].
The ... Ship Channel is owned by [Canal Owner] .... [The Taxpayer] has entered into an agreement with Canal Owner
regarding the use of the channel by ships coming to and from the [Taxpayer's] facilities. The agreement [hereinafter
"Agreement"] is entitled "Canal Easement, Channel Docking Easement, Channel Maintenance Easement and
Declaration of Covenants and Restrictions." This agreement was originally entered into in December, 1993, by and
between [previous Canal Owner] and [the one of the Taxpayer's owners], as Upland Owner. However, since that time,
[Canal Owner] has become a successor in interest to the agreement as the Canal Owner and [the Taxpayer] has
become a successor in interest to the agreement as the Upland Owner.
The agreement grants to [the Taxpayer], as the Upland Owner, a non-exclusive common use navigational easement
over, across and through the water in the canal for use by [the Taxpayer's] ships as a means of ingress and egress to
and from [the Taxpayer's] parcel of land and the open bay. [The Taxpayer] does not have an exclusive right of use of
the canal but merely a nonexclusive right for reasonable ship passage similar to the rights of all other parties that may
have been granted and easement.
As part of the agreement, the Canal Owner commits to dredge and maintain the canal to certain specifications as
required by [the Taxpayer's] ships. In consideration for the maintenance of the canal, Section 5.3 of the agreement
provides that [the Taxpayer] "shall pay to the Canal Owner a Wharfage Charge for petroleum, petroleum products,
chemicals or related products unloaded by Upland Owner from ships or barges moored at the Dock ...." The current
rate for the wharfage charges is [$0.xxx] per barrel handled over the dock.

Information available via the County's Official Records indicates a "Non-Exclusive Channel Docking and Access
Easement" at the location identified with your letter of September 2, 2004. (The Plat Book and Page are omitted for
confidentiality purposes)

Information available online from the County's Official Records and from the local Port Authority's website reveals that
none of the property in question is owned or operated by the local "Port Authority." From the attachments to your letter
of September 2, 2004, it would appear that the Port Authority did own the property until selling it to a private entity in
the 1960's. Based on all the information available, from various sources, it appears that the property in question is
currently owned and operated by the private firms identified in your letter of September 2, 2004.
TAXPAYER'S POSITION
Your letter of September 2, 2004 also provides, in part:

Section 212.031, F.S., provides that certain taxable uses of real property are subject to sales and use tax including
renting, leasing, letting or granting a license for the use of real property. In addition, Rule 12A-1.070(4)(b), Florida
Administrative Code, provides that, for those taxable uses, tax shall be paid on all consideration due and payable by
the tenant or other person to the landlord or other person.
In this case, there is no lease agreement between the parties nor is there a landlord/tenant relationship. The
easement agreement does not convey an exclusive possessory interest in real property as is common with the types
of uses of real property that are subject to sales tax. In addition, there is no license to use real property granted under
the easement agreement. A license to use property implies that there is an exclusive right to make use of the real
property. The easement that has been granted to [the Taxpayer] conveys the right to "go over, across and through"
the land of Canal Owner and only in a manner consistent with all restrictions in the agreement.
... If the easement transaction itself does not fall under the category of taxable uses under Section 212.031, F.S., the
maintenance charges paid in consideration of the easement are also beyond the contemplation of Section 212.031,
F.S.[,] and Rule 12A-1.070(4)(b) as additional taxable consideration as well.
Alternatively, in the event that this transaction is considered taxable under Section 212.031, F.S., [Section
212.031(1)(a)8.a.] provides an exemption from sales tax for property used at a port authority exclusively for the
purpose of oceangoing vessels or tugs docking, or for the purpose of loading or unloading cargo or passengers onto
or from such vessels, or to the extent that the amount paid for the use of any property at the port is based on the
charge for the amount of tonnage actually imported or exported through the port by a tenant. The wharfage charge at
issue is based upon the barrels of petroleum product imported or exported through the Port ... Terminal.

APPLICABLE STATUTES AND RULES
Section 212.02(10)(i), F.S., provides:
"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, 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:

8.a. Property used at a port authority, as defined in s. 315.02(2), exclusively for the purpose of oceangoing vessels or
tugs docking, or such vessels mooring on property used by a port authority for the purpose of loading or unloading
passengers or cargo onto or from such a vessel, or property used at a port authority for fueling such vessels, or to the
extent that the amount paid for the use of any property at the port is based on the charge for the amount of tonnage
actually imported or exported through the port by a tenant.

(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....

Section 213.22(1), F.S., provides, in part:
... Technical assistance advisements shall have no precedential value except to the taxpayer who requests the
advisement and then only for the specific transaction addressed in the technical assistance advisement, unless
specifically stated otherwise in the advisement....
Section 315.02(2), F.S., provides:
The term "port authority" or the word "authority" shall mean any port authority in Florida created by or pursuant to the
provisions of any general or special law or any district or board of county commissioners acting as a port authority
under or pursuant to the provisions of any general or special law.
Rule 12A-1.070, F.A.C., provides, in part:
(1)(a) Every person who rents or leases any real property or who grants a license to use, occupy, or enter upon any
real property is exercising a taxable privilege unless such real property is:

7.a. Property used at a port authority exclusively for the purpose of oceangoing vessels or tugs docking, or such
vessels mooring on property used by a port authority for the purpose of loading or unloading passengers or cargo

onto or from such vessels, or property used at a port authority for fueling such vessels. See subsection (2).
b. The term "port authority" means any port authority created by or pursuant to the provisions of any general or special
law or any district or board of county commissioners acting as a port authority under or pursuant to the provisions of
any general or special law.

(4)(b) The tax shall be paid at the rate of 5 percent prior to February 1, 1988, and 6 percent on or after February 1,
1988, on all considerations due and payable by the tenant or other person actually occupying, using, or entitled to use
any real property to his landlord or other person for the privilege of use, occupancy, or the right to use or occupy any
real property for any purpose.
(c) Ad valorem taxes paid by the tenant or other person actually occupying, using, or entitled to use any real property
to the lessor or any other person on behalf of the lessor, including transactions between affiliated entities, are taxable.

DISCUSSION
In Florida, the renting, leasing, letting, or granting a license for the use of any real property is subject to Florida sales
tax. See Section 212.031, F.S. An "easement" is distinguishable from the granting of a license or lease in real
property. In ascertaining whether the Agreement presented creates an easement, we must respect the clear and
unambiguous language of the relevant documents (See Emergency Associates of Tampa, P.A. v. Sassano, 664
So.2d 1000 (Fla. 2d DCA 1995)), while keeping in mind that substance is always preferred over form (See Markell, et
al. v. Hilbert et al., 140 Fla. 842, 192 So. 392 (Fla. 1939)).
An easement:
... is chiefly distinguished from a license in that an easement implies an interest in land, which ordinarily is created by
a grant and is often permanent, since it runs with the land. Conversely, a license does not imply an interest in land,
but is simply a personal, unassignable, and ordinarily revocable privilege or permit to do something on the land of
another. An easement is an interest in land within the statute of frauds, while a license is not. Generally, the question
whether a license or an easement is created by an instrument depends upon the intent of the parties. 20 Fla. Jur 2d,
Easements and Licenses in Real Property s. 3.
A "lease" has been defined as:
... an agreement for exclusive possession of lands, tenements, or hereditaments for life, for a term of years, or at will,
usually for a specified rent or compensation; it creates in the lessee an interest in the real estate. Under Florida law, a
"lease" may be defined as a contract for possession and profits of land for the lessee, and recompense or rent or profit
for the lessor. Again, it has been said to be a conveyance by the owner of an estate to another of a portion of his
interest therein for a term shorter than his own. A lease passes a present interest in the land for the period specified.

34 Fla. Jur 2d, Landlord and Tenant s. 31.
Easements can be distinguished from other interests in land (such as leases). For example:
... Typical easements are for driveways, roads, rail lines, walkways, and pipe and other utility lines. ... [I]t would hardly
do to grant simply an "easement"; its purpose must also be stated, which at once defines and limits the permitted
uses. Possession means exclusive occupation, which means the possessor may wholly exclude all others from all
parts of the land, without having to show they will actually interfere with any aspect of use and enjoyment. With an
easement or profit, the right to exclude others extends only so far as to prevent their interference with the servitude's
particular purpose. Roger A. Cunningham, et al., The Law of Property, s. 8.1, at 437 (2d ed. 1993).
Here, there are two (2) property owners, identified as the Taxpayer and the Canal Owner, who own in fee their
respective lands. The Canal Owner, owning the waterway, has granted an easement to the Taxpayer so that ships
can access the oil terminal on land owned by the Taxpayer.
CONCLUSION
Florida sales tax is not due under Section 212.031, F.S., because this easement is beyond the scope of the statute.
The easement is neither a license to use real property nor a lease of real property. This determination goes beyond
the labels used. We find the following characteristics to be relevant to our determination, although we expressly
recognize that there may be other factors under a different set of facts that would also be relevant.

7. The "easement" presented was created by grant as evidenced by the Agreement and other recorded documents;
8. The "easement" presented is "perpetual" (i.e., permanent);
9. Unlike a lease which grants exclusive possession, this "easement" is non-exclusive in nature;
10. The "easement" defines and limits the permitted uses by the Taxpayer;
11. Under all the facts, circumstances, and documents, it is clear that the intent of the Taxpayer and the Canal Owner
    was to grant an easement over, through and across the Canal Owner's waterway; and
12. The "easement" is an easement in the traditional sense of the term (i.e., it is used for egress and ingress, it is akin
    to a road, driveway, or rail line, etc.)
    To address your alternative argument related to the exemption found in Section 212.031(1)(a)8.a., F.S., we note that
    the property in question is not "at a port authority" and, therefore, would not qualify for the exemption. Of course, with
    our above determination, employing the exemption is unnecessary.
    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,
Eric R. Peate
Senior Attorney
Technical Assistance & Dispute Resolution
(850) 922-4714
Control No.: 61887