Were payments for a sponsor's name or advertising on agency-controlled highway signs taxable as a license to use real property?

Plain-English summary

The Florida Department of Revenue concluded that sponsorship payments for placing a sponsor's name or advertising on public highway signs were not subject to sales and use tax.

The program administrator marketed sponsorships, negotiated terms, and collected revenue. But the transportation agency remained solely responsible for sign fabrication and installation and controlled sign locations and advertisement placement.

Because sponsors and the administrator received no right to access, occupy, modify, or control the highway signs or underlying property, the arrangement was not a taxable license to use real property.

What this means for you

Public agencies and sponsorship administrators

Retaining control over sign location, installation, fabrication, access, and content placement supports service or sponsorship treatment rather than real-property rent.

Sponsors and advertisers

Publicity rights alone did not create a property license under these facts.

Accountants and tax professionals

Review operational control, not just who pays fabrication costs or receives a share of sponsorship revenue.

Common questions

Q: Could the sponsor access or control the sign?
A: No.

Q: Who controlled sign location and placement?
A: The transportation agency.

Q: Were the sponsorship payments taxable rent?
A: No.

Citations and references

• Fla. Stat. §§ 212.02(10)(i), 212.031(1)(a), and 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 16A-005

Original ruling text

Executive
Director
Leon M. Biegalski

QUESTION: ARE SPONSORSHIP PAYMENTS, MADE TO THE FLORIDA DEPARTMENT OF
TRANSPORTATION, FOR THE PROVISION OF ROADSIDE SIGNS, SUBJECT TO FLORIDA SALES
AND USE TAX?
ANSWER: NO. FDOT RETAINS CONTROL OVER THE REAL PROPERTY.
April 8, 2016
Re:

Technical Assistance Advisement – TAA 16A-005
Taxability of Placement of Advertising on Highway Signs
Sales & Use Tax
Sections 212.02(10)(i) & 212.03(1)(a), Florida Statutes (F.S.)
XXX (the Taxpayer)
FEI #: XXX

Dear XXX:
This is in response to your letter dated February 23, 2016, 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 advertising on highway signs. 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 concerns the taxability of placements of advertising on XXX owned roadside signs.
FACTS AS PRESENTED
Your request provides in part the following:
The [Taxpayer] entered into an agreement with the XXX pursuant to which the [Taxpayer] will
administer the XXX’s Sponsorship Program, a program whereby Sponsors either purchase certain
services or products or contribute money to the XXX in exchange for publicity. The Sponsorship
Program is defined in the Agreement as:
an innovative program that allows a person, a firm, or an entity to sponsor an element of a
public agency’s highway operation through the provision of highway-related services,
products, or monetary contribution. The purpose is that these sponsorship opportunities
Child Support Enforcement – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Dr. Maurice Gogarty, Director  Information Services – Damu Kuttikrishnan, Director

www.myflorida.com/dor
Tallahassee, Florida 32399-0100

Technical Assistance Advisement
Page 2
benefit the traveling public with an improved transportation system by providing flexibility
for public agencies to pursue innovative sources of financing for maintenance and
construction activities and other highway-related services. This program will create new
revenue streams for the [XXX] by establishing long-term corporate
relationships/partnerships that provide meaningful brand engagement and awareness
opportunities with the everyday users of the [XXX’sl transportation system.
(Agreement, Exhibit A, Section A.) Pursuant to the Agreement, the Taxpayer’s responsibilities in
administering the Sponsorship program include identifying potential Sponsors and marketing the
Sponsorship Program to those potential Sponsors (Agreement, Exhibit A, Section B. 1);
negotiating sponsorship terms and conditions (Agreement, Exhibit A, Section B.2); providing an
opinion to XXX on whether it should accept or reject a sponsorship package (Id.); and invoicing
and collecting sponsorship revenues from the Sponsors (Agreement, Exhibit A, Section B.8).
In exchange for its provision of these services, the Taxpayer retains a portion of the fees paid by
the Sponsors to enter into sponsorship arrangements; the remaining portion is remitted by
Applicant to the XXX. For the first, second, and third years of the Agreement, the Taxpayer retains
30%, 28%, and 26% of the sponsorship fees, respectively. For the fourth and any following years
of the agreement, the Taxpayer retains 24% of the sponsorship fees. (Agreement, Section 3.)
At issue in this request for a TAA is whether Sponsor’s acquisition of rights to place its name or
advertisements on highway signs pursuant to certain sponsorship opportunities is subject to the
Florida sales and use tax. There are several sponsorship opportunities that provide the Sponsor
with the right to have its name or other advertisement placed on highway signs. In all such
arrangements, the mechanics of the highway sign placement and maintenance are the same as
discussed below.
Paragraph 4 of Exhibit A of the Agreement specifies that either the Taxpayer or the Sponsor will
he responsible for all cost and expense associated with the installation and fabrication of the
sponsorship media, with the exception of capital expenditures.
Paragraph 6 of Exhibit A of the Agreement then specifics that the XXX is solely responsible for
the cost and expense of capital expenditures. “The capital expenses associated with the Department
infrastructure and/or assets that are utilized or made available as a sponsorship media, and the
maintenance thereof, falls to the Department.”
In the Letter [1], it was clarified that
[t]he term Capital Expenditures was clearly intended to address and include the installation
of highway signs, but is not specifically defined in the Agreement or its exhibits, Thus, this
letter clarifies that such term includes highway signs, with the Department thus being
solely and exclusively responsible for the cost and expense, and the fabrication and
installation of the highway signs: the [XXX] or [the Taxpayer] at the direction of the
[XXX] can, of course, retain third parties to actually perform these activities on behalf of
the [XXX].
1

You supplied a letter from XXX, signed by XXX, dated January 5, 2016, along with your TAA request.

Technical Assistance Advisement
Page 3
The [Taxpayer] has entered into an agreement with Subcontractor pursuant to which
Subcontractor will perform certain of the [Taxpayer’s] responsibilities under the Agreement with
respect to one of the opportunities available to Sponsors through the Sponsorship Program; thus
Subcontractor is responsible for all administration concerning the “511 Sponsorship Program.”
RULING REQUESTED
It is your position that the placement of a sponsor’s name upon highway signs, by XXX, does not
constitute a taxable license to use real property for sales and use tax purposes.
LAW AND DISCUSSION
Section 212.03l(1)(a), F.S., provides, in part:
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 . . . .
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.
In general, sales and use tax is imposed on any license for the use of real property in Florida. A license is
granted when a person is given the privilege to make use of the property in conducting its intended
business.
As outlined above, Taxpayer has contracted with XXX to market sponsorships for highway advertising
signs, negotiate terms and conditions, and collect revenues from sponsors. The Agreement does not
authorize the Taxpayer to modify, access, or use the highway signs. The Agreement and the subsequent
clarification letter specify that XXX is solely responsible for the fabrication, placement, and installation of
the sponsored highway signs. XXX maintains control over the location and placement of the sign
advertisements. Since Taxpayer’s responsibilities do not extend to actual use, access to, or occupation of
the signs, the terms of the Agreement do not constitute a license to use real property. Therefore, payments
made under the Agreement are not taxable sales and use transactions.
RESPONSE
Because XXX retains the control over the various locations, including control over the method of
placement of the advertisements (pursuant to the terms of the Agreement), the Taxpayer is not granted a
license to use the property. The payments made to XXX are not subject to sales and use tax.
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

Technical Assistance Advisement
Page 4
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.
If you have any further questions with regard to this matter and wish to discuss them, you may contact me
directly at (850) 717-6306.
Sincerely,

R. Clay Brower
Revenue Program Administrator
Technical Assistance & Dispute Resolution
Record ID: 209807