Are common-area maintenance assessments paid by commercial-property owners taxable as Florida real-property rent?

Plain-English summary

The Florida Department of Revenue ruled that common-area maintenance assessments paid by commercial-property owners to their nonprofit owners' association were not taxable as rent.

The owners were association members, and the association maintained shared areas for their benefit. Because the arrangement did not create a lessor-lessee relationship, the owners' payments were not consideration for renting or occupying real property.

The result changed if an owner passed a CAM charge to a tenant or other occupant. An occupant's payment was taxable as part of the consideration for using the commercial property, regardless of whether the owner or the association received it.

What this means for you

Commercial-property owners' associations

Owner assessments used to maintain common areas are not automatically taxable rent. The ownership and association documents must support that the payors are owners rather than tenants or licensees.

Landlords and tenants

A charge that is nontaxable when assessed to an owner can become taxable when passed through to a tenant or other occupant as part of the right to use the property.

Common questions

Q: Were the owners' CAM assessments taxable?
A: No. The Department found no lessor-lessee relationship between the association and its owner-members.

Q: What if an owner charged the CAM amount to a tenant?
A: The amount was taxable as consideration for the tenant's use or occupancy of the real property.

Q: Did it matter whether the owner or association received the occupant's payment?
A: No. The ruling says occupant-paid fees were taxable regardless of which one received the payment.

Citations and references

• Fla. Stat. §§ 212.031 and 213.22
• Fla. Admin. Code r. 12A-1.070(4)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 18A-003

Original ruling text

Executive
Director
Leon Biegalski

QUESTION: WILL COMMON AREA MAINTENANCE CHARGES BE TAXABLE WHEN
PAID BY OWNERS OF REAL PROPERTY?
ANSWER: NO.

January 31, 2018
XXXX
XXXX
XXXX

Technical Assistance Advisement 18A-003
Sales & Use Tax – Taxability of Common Area Maintenance
Section 212.031, Florida Statutes (F.S.)
Rule 12A-1.070, Florida Administrative Code (F.A.C.)
XXX (The Taxpayer)
Dear XXXX:
This is in response to your letter dated November 20, 2017, 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 common
area maintenance fees charged to “association owners.” Your petition has been carefully
examined, and the Department finds it to be in compliance with the requisite criteria set forth in
Rule Chapter 12-11, 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
The issue is whether common area maintenance fees (CAM fees) collected by the Taxpayer,
from commercial property owners and used for common area maintenance, insurance, utilities
and Taxpayer’s salaries and wages, are subject to Sales/Use Tax.
Facts
Your request provides in pertinent part:
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

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Technical Assistance Advisement

To reiterate, this is not a commercial rental property and we are not collecting rent. This
is an Association of owners of commercial property whereby CAM fees are being used to
pay for the expenses of maintaining the common areas of the Association. These common
area maintenance expenses are estimated for the year, billed to the owners in monthly
installments, and then adjusted at the end of the year based on actual expenses paid.
Refunds are made to Owners if actual expenses are less than fees collected, or additional
amounts billed to Owners if actual expenses are more than fees collected. Please find
enclosed the Associations Articles of Incorporation, Bylaws, and Covenants, Restrictions
and Reciprocal Easements. I have highlighted pertinent information to evidence the
owner relationship, purpose of the Association and Common Area Maintenance
assessments.
In Article I, labeled, “Purposes,” of the Amended and Restated Articles of Incorporation of [the
Taxpayer] (the Articles), section B provides one of the stated purposes of the Taxpayer is “[t]o
own and maintain, repair and replace the general and/or Common Areas and other improvements
in and/or benefiting . . . Plaza.”
Section E. of the Articles, provides that the Taxpayer is to “operate without profit for the benefit
of its members.”
Article IV, labeled, “Members,” section A. provides in pertinent part that “[t]he members will
consist of the Owners in . . . Plaza, and all such Owners will be members of the [the Taxpayer].”
The Amended and Restated Bylaws of [the Taxpayer] (the Bylaws), provides in Article VIII,
section B., in pertinent part, the following:
The Board will adopt, for, and in advance of, each calendar year, a budget for the
Association showing the estimated costs of performing all of the functions of the
Association as to . . . XXX for the year. Each budget will show the total estimated
expenses of the Association for that year and will contain an itemized breakdown of
expenses, which will include, without limitation, the costs of operating and maintaining
the Common Areas, taxes on Association property, wages and salaries of Association
employees, management, legal and accounting fees, office supplies, public utility services
not metered or charged separately to Sites, premiums for insurance carried by the
Association and any reserve accounts and/or funds which may be established from time
to time by the Board. Each budget will also show the proportionate share of the total
estimated expenses to be assessed against and collected from the Owner of each Site and
the due date(s) and amounts of installments thereof. . . .
The “Amended and Restated Declaration of Covenants, Restrictions and Reciprocal Easements
for . . . Plaza (the Easement),” provides in Article IX, Section 9.1 that the Taxpayer “. . . was
created for the purpose of providing a forum and structure within which Owners and Occupants

Page 3 of 4
Technical Assistance Advisement
[1] of portions of the Overall Site can make decisions affecting their common interests, and
perform on behalf of Owners and Occupants such maintenance and other functions as provided
herein or as such Owners deem appropriate. . . .” The Easement indicates the owners will pay
the fees.
Applicable Law
Section 212.031(2)(a), Florida Statutes, states:
The tenant or person actually occupying, using, or entitled to the use of any property
from which the rental or license fee is subject to taxation under this section shall pay the
tax to his or her immediate landlord or other person granting the right to such tenant or
person to occupy or use such real property.
Rule 12A-l.070(4)(b), Florida Administrative Code, provides in part:
The tax shall be paid . . . 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.
Rule 12A-1.070(4)(d), F.A.C., provides:
Common area maintenance charges paid by a tenant to the lessor for the privilege or right
to use or occupy real property are taxable.
Payments made by the owners for their portion of the common area maintenance fees would not
be taxable as rental income, since there is no relationship between the owners and the Taxpayer
as ‘‘lessor’’ and “lessee.” However, if any of the subject fees are passed down to any person or
entity occupying or leasing an owner’s commercial property, defined as an “occupant” in the
Easement, such fees would be subject to tax as part of the consideration to use the subject real
property.
Concluding Statement

The CAM fees, collected by the Taxpayer from the owners, are not subject to Sales/Use Tax.
However, any fees paid by occupants, as defined in the Easement, are subject to tax (regardless
of whether the owner or the Taxpayer receives the payment).
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
“Occupant” is defined in Article I, labeled “Definitions and References,” as “. . . a person or entity which occupies,
from time to time, all or a portion of a Building or other improvements situated upon the Overall Site, whether
pursuant to ownership, lease, sublease or otherwise.”
1

Page 4 of 4
Technical Assistance Advisement
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,
R. Clay Brower
R. Clay Brower
Technical Assistance & Dispute Resolution
(850) 717-6306
Control No: 33703