Could a port tenant allocate rent between taxable areas and areas used exclusively to load or unload vessel cargo?

Plain-English summary

The Florida Department of Revenue approved a tenant's square-footage method for dividing rent on mixed-use port property between taxable and excluded uses.

The leased premises contained ordinary office, warehouse, parking, open-storage, and other areas, plus an area used exclusively for temporary storage and loading or unloading cargo from oceangoing vessels or tugs. Section 212.031(1)(a)8.a. excluded the qualifying port loading-and-unloading area from tax on real-property rent.

Rule 12A-1.070(14) permits an allocation when part of leased real property is taxable and another part is not. The Department accepted the proposed ratio of taxable square footage to total leased square footage; the ruling's opening summary states that 53.03% of the rent was taxable. It did not independently verify the square-footage figures.

What this means for you

Port tenants

Document which portions of leased property are used exclusively for qualifying vessel loading or unloading. Mixed office, storage, parking, or other uses may remain taxable.

Landlords

An allocation can be appropriate where one lease covers both taxable and excluded areas. The calculation should be supported by plans, measurements, and the actual use of each area.

Accountants and tax professionals

The Department approved the methodology, not an independent survey. Preserve the source square footage and confirm that the excluded area meets the statutory exclusive-use condition.

Common questions

Q: Was all rent for the port property exempt?
A: No. Only the portion allocated to qualifying exclusive loading-and-unloading use was excluded.

Q: What allocation method did the Department accept?
A: Taxable square footage divided by total leased square footage.

Q: Did the Department verify the measurements?
A: No. It expressly limited its response to the proposed methodology.

Citations and references

• Fla. Stat. §§ 212.031(1)(a)8.a., 213.22, and 315.02(2)
• Fla. Admin. Code r. 12A-1.070(14)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 17A-015

Original ruling text

August 15, 2017

Executive
Director
Leon Biegalski

TAX: Sales and Use Tax
TAA NUMBER: 17A-015
ISSUE: Whether Tenant’s proposed allocation of real property lease payments for multiuse
property should be allowed?
STATUTE CITE(S): Section(s) 212.031(1)(a)8. F.S.
RULE CITE(S): Rule 12A-1.070, F.A.C.
QUESTION: Is Taxpayer’s proposed method of allocation of rental payment for multiuse
property reasonable?
ANSWER: Section 212.031(1)(a)8., F.S., allows an exemption for certain property used, a port
to load and unload cargo from oceangoing vessels. Rule 12A-1.070(14), F.A.C., identifies an
allocation method regarding lease payments for multiuse property, which may include the portion
addressed by s. 212.031(1)(a)8., F.S. Taxpayer’s use of the method used by the Rule, which
allows for a 53.03% portion of the rent payment as being subject to sales tax is allowed

XXXXXXXX
XXXXXXXX
XXXXXXXX
Subject: Technical Assistance Advisement (“TAA”)
TAA 17A-015
Sales and Use Tax
Real Property Rentals
Section(s) 212.031, Florida Statutes (“F.S.”)
Rule(s) 12A-1.070, Florida Administrative Code (“F.A.C.”)
XXXXXXXX (“Petitioner”) (“Tenant”)(“Taxpayer”)
FEI#: XXXXXXX
XXXXXXXXX (“Affiliate”)
FEI#: XXXXXXXX
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

Page 2 of 4
Technical Assistance Advisement
BPN: XXXX
XXXXXX (“Landlord”)
FEIN: XXXXXXX
Dear XXXXXX:
This letter is a response to your petition dated May 22, 2017, for the Department’s issuance of a
Technical Assistance Advisement (“TAA”) to Petitioner, regarding whether Tenant’s allocation
method for multiuse property is appropriate. Your petition has been carefully examined, and the
Department finds it to be in compliance with the requisite criteria set forth in Rule Chapter 1211, F.A.C. This response to your request constitutes a TAA and is issued to you under the
authority of section 213.22, F.S.
Issue
Whether Tenant and Landlord may a use the proposed allocation methodology to determine the
portion of lease payments subject to sales tax?
Facts
Tenant’s primary business is the temporary storage of XXXXXXX products. Tenant leases XX
acres, or XXXX square feet, from the Landlord for a period of XXXX years, with a renewal
option available. The current lease agreement began in XXXX and will end in 2020. The
monthly lease payment is $XXXXX. The TAA request provides that the leased premises are
part of XXXXX, as defined by section 315.02(2), F.S., and that a large portion of the improved
property of the leased premises is directly related to the loading and unloading of XXXXX
products from vessels, and for XXXXX at Landlord’s location.
The TAA request provides that Tenant has three types of uses and purposes with the leased
premises. One area (“Non-Production Area One”) includes the XXXXXXXX, lab offices, a
general open storage area, and outbuildings. It also includes the ditch that runs north and south
across the property. It also includes all unimproved property east of the ditch, less the
production area for XXXX located east of the ditch. The total area associated with this area is
XXXX square feet.
Another area (“Non-Production Area Two”) lies in the southwest corner of the leased property,
and includes the main office buildings, shop, warehouse, and employee parking. This area
includes paved and gravel parking, along with unimproved grassy areas. The total area
associated with this section is XXX square feet.
A third area (“Improved for Load/Unload Area”) of the property includes a XXXX farm,
XXXXX, XXXXX area, secondary containment, and the shore-side facility used to move the
product from the vessel to the consumer. The facilities shown in the aerial photos include an
integrated XXXX system, XXXXXX, XXXX, and XXXXX equipment. The XXXX

Page 3 of 4
Technical Assistance Advisement
containment runs along the border of the entire area. This area is also used exclusively to unload
cargo from oceangoing vessels or tugs XXXX. The TAA request provides that the use of this
property qualifies for the exemption provided for by s. 212.031(1)(a)8.a., F.S. The TAA request
provides that this area is for the remainder of the leased premises not part of Non-Production
Area One and Non-Production Area Two.
Taxpayer Position
Tenant maintains that a portion of the rental payment should be exempted from sales tax. This is
because the Improved for Load/Unload Area is used for an exempt purpose, as provided by s.
212.031(1)(a)8.a., F.S. Tenant believes that XXXX% of the lease payment is subject to sales
tax. Tenant maintains that the lease payment should be determined by using an allocation based
on square feet for each area. You believe that the square feet of the total of Non-Production
Area One and Non-Production Area Two (XXXX square feet) should be divided by the square
feet for the total leased premises (XXXXX square feet). Using this formula, the taxable
percentage of the lease payment should be XXXX%.

Applicable Law
The Department has not verified the square footage of the figures that were provided. This response
is regarding the methodology the Tenant proposes to use to calculate the taxable portion of the lease
payment.
Section 212.031, F.S., imposes the tax on the total rent or license fee charged for the lease or rental
of real property by the person charging or collecting the rental or license fee. Section
212.031(1)(a)8.a., F.S., excludes real property “used at a port authority . . . exclusively . . . for the
purpose of loading, or unloading passengers or cargo onto or from such a vessel . . . .” The facts
included with the request provide that Tenant’s lease is for real property located at a port authority,
as defined in section 315.02(2), F.S. Therefore, under this lease, the real property exclusively used to
load or unload passengers or cargo onto or from vessels is excluded from sales tax on rental
payments.
In this case, Tenant leases a total of XXXX square feet from Landlord. According to the facts
provided in Tenant’s Request for TAA, the Improved for Load/Unload Areas is used exclusively for
temporary storage, loading and unloading oil and fuel cargo. Rule 12A-1.070(14)(a), F.A.C.,
authorizes the Department to determine the taxable portion of the total rent payment when, in a lease
of real property, there are multiple uses of such property, and a portion of the property is subject to
the tax, while another portion is not subject to the tax. Applying the information provided in the
Tenant’s request and supporting documentation, the Department agrees with the calculation
methodology proposed by Tenant.

Page 4 of 4
Technical Assistance Advisement
Response
Based on the information provided, the proposed taxable percentage of XXXX% of the lease
payment by Tenant to Landlord would be subject to sales 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 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 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 10 days of the date of this
letter.

Respectfully,
Chuck Wallace
Chuck Wallace
Technical Assistance & Dispute Resolution
850-717-7541
Record ID: 213475