Was a festival promoter's percentage of concession sales taxable as rent for licensed public recreational-facility space?

Plain-English summary

The Florida Department of Revenue concluded that a festival concessionaire's percentage payment to the promoter was exempt from sales tax under the public recreational-facility concessionaire exemption.

The promoter rented a publicly owned park from a city and granted the concessionaire space and exclusive rights to sell beverages and other items during the festival. The concessionaire paid the promoter percentages of beverage revenue. The Department treated that arrangement as a license to use real property and the percentage payment as a license fee.

The exemption applied because the concessionaire sold food and drink within a publicly owned recreational facility. The ruling separately notes that the concessionaire's sales of alcoholic beverages, food, water, and merchandise to festival customers remained taxable.

What this means for you

Festival and event promoters

A revenue share can be rent or a license fee when it is required in exchange for occupying event space. The exemption here depended on both the public recreational-facility setting and the food-and-drink concessionaire use.

Concessionaires

The exemption for the space payment did not exempt retail sales to customers. The ruling says all parties agreed tax was due on the concessionaire's beverage, food, water, and merchandise sales.

Accountants and tax professionals

Review the property owner, the nature of the facility, the licensed portion of the premises, and the concessionaire's actual activity before applying section 212.031(1)(a)10.

Common questions

Q: Was the percentage-of-sales payment treated as a profit distribution?
A: No. The Department treated it as payment for a license to use real property.

Q: Why was that license fee exempt?
A: The licensed space was within a publicly owned recreational facility and was used by a food-and-drink concessionaire.

Q: Were the concessionaire's customer sales also exempt?
A: No.

Citations and references

• Fla. Stat. §§ 212.02(10)(i), 212.031(1)(a)10., 212.031(1)(c), and 213.22
• Fla. Admin. Code r. 12A-1.070

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 17A-011

Original ruling text

May 23, 2017

Executive Director
Leon M. Biegalski

TAX: Sales and Use Tax
TAA NUMBER: 17A-011
ISSUE: Whether the “profit split” paid by the Concessionaire to the Taxpayer from sales tax that occurred at the 2015 Music
Festival was subject to sales tax.
STATUTE CITES: Sections 212.02 and 212.031, Florida Statutes (F.S.)
Rule 12A-1.070, Florida Administrative Code, (F.A.C.)
QUESTION:
Was the “profit split” paid by the Concessionaire to the Taxpayer from sales tax that occurred at the 2015
Music Festival subject to sales tax?
ANSWER – Based on the Facts Below: The 2015 Agreement was a license to use real property granted to a food and
beverage concessionaire at a publicly owned recreational facility. The “profit split” paid by the Concessionaire to the Taxpayer
from sales that occurred at the 2015 Music Festival was exempt pursuant to s. 212.031(1)(a)10., F.S.

XX
Re:

Technical Assistance Advisement 17A-011
Sales and Use Tax– Concessionaire Lease/License
Sections 212.02 and 212.031, Florida Statutes (F.S.)
Rule 12A-1.070, Florida Administrative Code, (F.A.C.)
XX (the Taxpayer)

Dear XX:
This is in response to your letter dated August 30, 2016, requesting this Department’s issuance of a
Technical Assistance Advisement (“TAA”) pursuant to section 213.22, F.S., and Rule Chapter 12-11,
F.A.C. An examination of your letter has established 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.
Facts
Your letter dated August 30, 2016, provides that following in part:
. . . Taxpayer’s principal business is putting on the XX Music Festival (“Festival”).
. . . [Festival] is a multi-day, multi-stage music festival taking place on XX beach (“City Beach”),
featuring some of the biggest names in country, rock and roots music. [Festival] brings likeminded fans together for an unforgettable beach weekend experience that pairs music with
Child Support – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Dr. Maurice Gogarty, Director  Information Services – Damu Kuttikrishnan, Director

www.floridarevenue.com
Florida Department of Revenue
Tallahassee, Florida 32399-0100

Technical Assistance Advisement

meaning to raise awareness for marine conservation. [Festival] works hand in hand with the XX
(“Foundation”) to increase public awareness about the issues impacting the world’s oceans and to
support scientific research, education and ocean conservation initiatives.
. . . It is our position that the taxpayer has overpaid sales tax to the Florida Department of Revenue
since the inception of [Festival] in 2013.
. . . Sales that occur during the weekend of the festival include alcoholic beverages, nonalcoholic beverages, food, merchandise, etc. Alcoholic beverage sales are the largest
portion of sales during the festival and the main issue at hand. A master concessionaire ([the
Concessionaire)]is used to run the various bars and is the point of sale contact with the customers.
The [Concessionaire] collects and remits sales tax on the alcoholic sales.

. . . The key issue for the taxpayer is the profit split from the alcohol sales between the
taxpayer and [Concessionaire]. This transaction was originally treated as
commercial rent and taxed accordingly.

On February 15, 2017, in response to the Department’s request for supporting documentation, you
provided the following via e-mail:


A copy of a “2015 Concessions Agreement” between the Taxpayer and XX (“Concessionaire”),
executed April 9, 2015;



A copy of the 2015 [Festival] Concessions Recap; and

The 2015 Concessions Agreement with Concessionaire provides the following in part:

1. [The Taxpayer] hereby grants and leases unto [Concessionaire] certain rights, privileges, and
   space during the 2015 [Festival] (herein after called “Festival”) to be held April 11 & 12, 2015
   at XX (the “Premises”) at which [the Taxpayer] chooses to contract with [Concessionaire] to
   conduct, operate, and sell upon the Premises, herein after designated by Grantor, such business
   and articles that are exhibited below.
2. Privileges granted under this contract give [Concessionaire] permission to conduct or sell
   beverages including beer, wine, liquor, soft beverages, and water on the Premises. . . .
3. The use of premises or space granted to [Concessionaire] under this contract is described as
   follows: trailers, vehicles, food trucks, and tents. Said trailers and tents to be located on such
   part of the [the Taxpayer’s] premises and will be designated by [the Taxpayer]. . . .
4. In exchange for the exclusive rights to the sale or giveaway of all beverage consumables to the
   general public, [Concessionaire] agrees to the following terms:

Technical Assistance Advisement

. . . e) [Concessionaire] agrees to remit 40% of the gross-net water sales. . . . Beverage
commissions for [Festival] will be paid out at 50% of total gross-net beverage revenue
earned at the conclusion of Festival with any additional commission owed to be paid within
five (5) business days of the conclusion of [Festival] according to the percentages within each
of the following tier levels:

Gross-Net Beverage Revenue

% Paid to Promoter

$0 to $1,100,000
$1,100,001 to $1,500,000
$1,500,001+

50%
53%
55%

A “Public Meeting Notice,” obtained from the City’s website, XX, provides the following regarding the
Festival, in part:
. . . [T]he [Festival] returns to the sands of [the Beach] April 11 – 12 with multiple award-winning
recording and performing artists . . . .
Please be aware that the sidewalk and parking lots extending [through] . . . XX Park will be closed
at various points beginning April 1 through April 16 for [Festival]. . . .
The “Public Meeting Notice” includes a map that identifies the “Event Site” to be in the middle of XX
Park.
Information regarding XX Park obtained from the same website provides the following in part:
Park Facilities and Amenities
• Boat Ramp — non-motorized
• Grills
• Picnic Tables
• Outdoor Showers
• Restrooms
• Basketball Full Court
• Playground
• Volleyball Court

In an e-mail dated May 9, 2017, the Taxpayer confirmed that “all bars, stages, beer stands, etc., take place
on publicly owned property.” The Taxpayer also confirmed that it rents the festival area from the City of
XX and has entered into an agreement with the Concessionaire to sell alcoholic beverages, food, water,
and concert merchandise at the Festival.

Technical Assistance Advisement

Requested Advisement
You request an advisement that provides the “publicly owned recreational facility exemption” provided in
s. 212.031(1)(a)10., F.S., is applicable to the agreement between the Taxpayer and the Concessionaire and
that payment of the “profit split” between the Taxpayer and Concessionaire is not subject to sales tax.
The response will address the Taxability of the “profit split” paid by the Concessionaire to the Taxpayer
from sales tax occurred at the 2015 Music Festival.1

Applicable Authority and Discussion
Section 212.031, F.S., imposes sales tax on the privilege of engaging in the leasing of or the granting of a
license to use, real property for any purpose, unless specifically exempt. A “license” to use real property is
defined in s. 212.02(10)(i), F.S., as “. . . the granting of a privilege to use or occupy a building or a parcel
of real property for any purpose.” Section 212.031(1)(c), F.S., provides that “[f]or 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” is defined to 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.”
The guiding principles are that, to constitute a payment of rent, the payment must be required by the lease
or license as a condition of occupancy of the property, and the payment must benefit the landlord. A
payment is considered to be in exchange for the right to occupy real property if a failure to make such
payment results in the loss of the right to occupy.
Section 212.031(1)(a)10., F.S., provides an exemption for real property 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, or publicly
owned recreational facility. The cited exemption presupposes the existence of a “recreational facility,”
and it exempts only that portion of the premises within such facility that is leased or licensed to a person
providing food and drink concessionaire services.
Rule 12A-1.070, F.A.C., is the Department’s administrative rule implementing the provisions of s.
212.031, F.S. Subparagraph (1)(b)3. of the rule provides in part:
For purposes of this rule, the term “retail concessionaire,” which may be either a lessee or licensee,
shall mean any person who makes sales of food or drink directly to the general public within the
premises of a . . . publicly owned . . . recreational facility . . . .
No definition of “recreational facility” is provided by statute. Thus, it is necessary to look 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).
1

All parties agree that sales tax is due on the sale of alcoholic beverages, food, water, and merchandise sold by the
Concessionaire.

Technical Assistance Advisement

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 festival is held at XXX which is owned by the City. The facilities provided by the City at XX Park
   include grills, tables, showers, public restrooms. XX Park falls within the plain and ordinary meaning of
   “recreational facility,” as it is established to be used for “play, amusement, or relaxation” to the City’s
   residents and guests. The Agreement provides that the Taxpayer “grants and leases . . . space” to the
   Concessionaire in order to sell beer, wine, liquor, soft beverages, and water during the music festival. In
   exchange, the Concessionaire pays the Taxpayer a percentage of the “gross-net beverage revenue”
   received during the festival.
   Conclusions
   The 2015 Agreement was a license to use real property granted to a food and beverage concessionaire at a
   publicly owned recreational facility. The “profit split” paid by the Concessionaire to the Taxpayer from
   sales that occurred at the 2015 Music Festival was exempt pursuant to s. 212.031(1)(a)10., 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 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 that 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,

Brinton Hevey

Technical Assistance Advisement

Tax Law Specialist
Technical Assistance and Dispute Resolution
850/717-6839
Record ID: 212736