Were commissions paid to independent truck-rental dealers taxable as payments for a license to use the dealers' real property?

Plain-English summary

Florida ruled that a truck-rental company's commissions to independent dealer locations were not taxable payments for use of real property.

The dealers rented the company's trucks and equipment to consumers, collected applicable rental tax, and sent rental proceeds to the company. The company paid commissions based on rental performance and service criteria such as safety, maintenance, marketing, weekend hours, and customer complaints.

The company had no access to or control over dealer property, no fixed amount of space, and no right to enter fenced or locked locations to reclaim equipment. Dealers chose where to place the equipment. The commission also depended on equipment leaving the location through rentals; equipment that never left produced no payment.

Florida therefore treated the agreement as one for dealer services and rental performance, not a lease or license of space.

What this means for you

Equipment located at another business does not by itself create taxable commercial rent. The agreement must grant a privilege to use or occupy real property, and payment structure and control are important evidence.

Common questions

Did the truck company control dealer space? No.

What determined the commission? Rental performance and specified dealer-service criteria.

Were the commissions subject to commercial-rent tax? No.

Citations and references

• Fla. Stat. §§ 212.02 and 212.031, as quoted and discussed in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 10A-005

Original ruling text

SUMMARY
QUESTION: Is the Taxpayer granting a license for the use of real property when it
enters into agreements with dealers for the purpose of renting trucks and equipment?
ANSWER: Under the applicable agreement and facts provided, Taxpayer is not leasing
or being granted a license for the use of the Dealer’s real property. Therefore, the
payments to the Dealers are not subject to sales tax under Section 212.031, F.S.

February 10, 2010
XXX
Re:

Technical Assistance Advisement 10A-005
Taxability of Commission Payments Paid to Dealers
Sales and Use Tax
Section 212.031(1), Florida Statutes (F.S.)
XXX (“the Taxpayer”)
FEI #: XXX

Dear XXX:
This is in response to your letter dated December 2, 2009, requesting this Department’s
issuance of a Technical Assistance Advisement (“TAA”) pursuant to Section 213.22,
F.S., and Rule Chapter 12-11, Florida Administrative Code (F.A.C.), regarding the
taxability of certain commission payments made by the Taxpayer pursuant to XXX
Dealer Agreements with participating dealers. 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 a
TAA.
ISSUE
The issue is whether the Taxpayer is leasing or granted a license for the use of real
property.
FACTS
The Taxpayer is in the business of renting trucks to consumers. The Taxpayer will enter
into agreements with independent locations (“Dealers”) for the purpose of renting the
aforementioned trucks and equipment. The Dealers will rent the trucks to consumers and
collect any applicable sales tax on the equipment rental. The “XXX Dealer Agreement”
(“Agreement”), submitted, indicates that all proceeds from the rental of the equipment is
distributed directly to the Taxpayer.

Technical Assistance Advisement
Page 2 of 4

The Agreement further indicates the Taxpayer “. . . shall compensate Dealer monthly for
renting the Rental Equipment by paying Dealer up to XXX percent (XXX %)
commission . . . .” This commission payment is made up of various criteria that Dealers
must meet or exceed to receive the full amount, and the payment may be reduced for
failure to comply. The basis of the commission paid includes:
•
•
•
•
•

Safety, such as accident reports and safe driving tips
Maintenance, such as walk around and ten point inspections
Marketing, such as phone handling and discounting
Weekend hours
Customer complaints

The Agreement and facts provide that Taxpayer does not have use over the Dealer’s real
property. Taxpayer does not have access or control over Dealer’s real property. Dealer
has the sole discretion where to locate Taxpayer’s equipment. Taxpayer’s equipment
does not reside on any set amount of space, as the amount of equipment may change.
Taxpayer has no right to enter Dealer locations to reclaim Taxpayer’s property if
Taxpayer and Dealer have a disagreement, and because many locations are fenced and
locked, Taxpayer may not have the ability to enter the premises. Further, as the
commission payments are tied to the equipment rentals, the Dealer’s payments are tied to
the amount of time that the equipment is not located on the Dealer’s real property. If the
equipment never leaves the Dealer’s location then the Dealer receives no payments.
With regard to the intent of the parties, the Agreement provides:
WHEREAS, Dealer desires to rent [Taxpayer’s] rental equipment at the Dealers
address specified on the signature page of this Agreement (The ‘Dealer
Location’). [Taxpayer] has agreed to allow Dealer to become an Authorized
[Taxpayer] Truck Rental location or similar designation and engage in the
business of renting [Taxpayer] owned trucks and accessory equipment, including
trailers, tow dollies, car carriers, furniture pads, and trucks and similar equipment
(collectively, ‘Rental Equipment’), to the public pursuant to the terms of this
Agreement.
The Agreement further provides, in part:
Nothing contained in this Agreement or any acts of the parties to this Agreement
shall be deemed or construed by the parties or by any third party as creating the
relationship of landlord-tenant, employer-employee, franchisor-franchisee, a
partnership, a joint venture or any other relationship including principal-agent
between the parties. (e.s.)

Technical Assistance Advisement
Page 3 of 4

TAXPAYER POSITION
It is your position that the Taxpayer does not pay dealers for the use of space. You
provide, “Rather, the agreements are service agreements through which the dealers
cooperate, for their own benefit, in [the Taxpayer’s] truck rental business.” You cite
numerous Technical Assistance Advisements (TAAs), which you assert, support your
position. The cited TAAs relate to whether the use of advertising signs involves the
taxable license to use real property.
LAW AND DISCUSSION
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(1)(a), F.S., provides the legislative intent, “. . . that every person is
exercising a taxable privilege who engages in the business of . . . granting a license for
the use of any real property . . . .” Accordingly, dealers must be in the business of
granting licenses for the use of real property to be subject to the sales and use tax. It is
not apparent, based on the language in the Agreement and the facts provided that the
Dealers are engaging in the business of leasing or granting a license for the use of real
property. These commissions are base solely on sales performance and services provided
by Dealers (as opposed to for any particular use of the property). Taxpayer does not have
use, access, or control over Dealer’s real property. Further, as provided in the
Agreement, the Dealers’ motivation for entering into the contracts with the Taxpayer is
related to the desire to rent equipment for a profit.
As to your contention regarding previously issued TAAs, it is important to note that a
Technical Assistance Advisement has no precedential value except to the taxpayer who
requests the advisement. Moreover, such an Advisement is not an order or rule or policy
of general applicability. See Section 213.22(1), F.S.
RESPONSE
Under the Agreement and facts provided, Taxpayer is not leasing or being granted a
license for the use of the Dealer’s real property. Therefore, the payments to the Dealers
are not subject to sales tax under Section 212.031, F.S.
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

Technical Assistance Advisement
Page 4 of 4

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,

R. Clay Brower
Revenue Program Administrator
Technical Assistance and Dispute Resolution
(850) 922-4837
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