Did a Florida food hall's agreement with independent restaurant vendors create a taxable license to use real property?

Plain-English summary

The Florida Department of Revenue treated a food hall's vendor agreement as a taxable license to use real property. Independent restaurant vendors used the operator's food hall, kitchen, equipment, furniture, and supplies to sell food.

The agreement said it was not a lease and described the vendors as independent contractors. But the Department focused on substance: the vendors operated on another person's real property, and licenses to use real property "for any purpose" were taxable.

The operator collected all food-sale revenue, paid vendors for their services, and retained part of the proceeds. The Department treated the retained amounts as taxable consideration for use of the premises.

What this means for you

Food-hall operators and vendors

Contract labels do not control. Revenue-sharing can be taxable real-property consideration when independent vendors operate from another person's premises.

Accountants and tax professionals

Review who controls sales revenue, equipment, and premises, and how the operator is compensated.

Common questions

Q: Did calling the vendors independent contractors prevent tax?
A: No.

Q: Was a fixed rent payment required?
A: No. Retained sales proceeds were treated as consideration for use of the premises.

Citations and references

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

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 18A-009

Original ruling text

QUESTION: IS A CERTAIN VENDOR AGREEMENT A LICENSE TO USE REAL PROPERTY?
ANSWER: YES.

XXX

Technical Assistance Advisement 18A-009
Sales & Use Tax – License to Use Real Property
Section 212.031, Florida Statutes (F.S.)
Rule 12A-1.070, Florida Administrative Code (F.A.C.)
XXX
FEI#: XXX
Dear XXX:
This is in response to your letter dated March 15, 2018, 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 a certain “Vendor Agreement,” (the
Agreement), and whether it constitutes a license to use real property, subject to sales and use tax. 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 a certain vendor agreement is a license to use real property, whereupon, the
proceeds retained by the Taxpayer are subject to sales and use tax.

XXX
May 16, 2018
Florida Department of Revenue
Page 2
Facts Provided by Taxpayer
Your request provides in pertinent part:
Taxpayer has the contractual right to operate a full-service food hall at its business location in
XXX County, Florida. In order to operate efficiently, Taxpayer enters into a standard form
agreement with various types of restaurants or small chefs (“Vendor(s)”) looking to expand their
business. The arrangement between Taxpayer and Vendor is one in which Taxpayer leases the
food hall, kitchen and dining equipment, furniture, and supplies. Meanwhile, the Vendor will
have some of its own equipment and will share Taxpayer’s equipment and supplies with other
Vendors in the hall.
The Vendors, using Taxpayer’s products, will sell the food products to customers on behalf of
Taxpayer. Sales tax is collected and remitted by Taxpayer on the sales of the food products.
Additionally, pursuant to the Agreement, all revenues from the food product sales become the
sole property of Taxpayer.
At the end of each day the food hall is open, Taxpayer will go to each vendor and collect the
entirety of the cash from each register. Taxpayer then reconciles the cash to the sales made by
the Vendor. Once Taxpayer has done so, Taxpayer will pay each Vendor an amount for their
services.
[You assert that] It is important to note that Taxpayer is not leasing any space or equipment to
any Vendor. Taxpayer receives no consideration for the lease of any space or equipment either.
This language can be specifically found in paragraph three (3) of the Agreement. . . .
Paragraph (3), of the Agreement, provides in pertinent part:
At all times during the term of this Agreement, Vendor will maintain its own separate legal
identity. Vendor is an independent contractor of [the Taxpayer]. Vendor is not an employee or
agent of [the Taxpayer] or its affiliates. . . .
Applicable Law & Discussion
Section 212.031(1)(a), F.S., provides in pertinent 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 . . . . [emphasis supplied]
Section 212.031(2)(a), Florida Statutes, states:

XXX
May 16, 2018
Florida Department of Revenue
Page 3
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
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.
. . . [emphasis supplied]
The agreement, termed, “XXX” (the Agreement) does evidence provisions indicating the agreement is
not to be construed as a lease. However, it is indisputable that the independent contractor vendors are
operating their business on the real property of another. Licenses to use real property, “for any
purpose,” are subject to sales and use tax.
Concluding Statement
The Agreement is a license to use real property, whereupon, the proceeds retained by the Taxpayer are
subject to sales and use tax. The vendors are independent contractors permitted to sell their goods at
the real property owned by the Taxpayer. Accordingly, the sales amounts retained by the Taxpayer are
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
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

XXX
May 16, 2018
Florida Department of Revenue
Page 4
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: 61023