Which assessments remain exempt after a Florida homeowners' association merges with a recreational club?

Plain-English summary

The Florida Department of Revenue ruled that regular assessments imposed after a homeowners' association merged with a recreational club were not taxable admissions when they were mandatory, required as a condition of owning a home, and paid for association-owned common areas.

Capital assessments and capital contributions by equity members could also be exempt when they satisfied Rule 12A-1.005(4). But benefitted and operating assessments used for golf and tennis facilities were taxable because those payments were optional and those facilities were not common areas available through the base membership.

Voluntary dues, fees, and all other optional charges were taxable. The ruling therefore separated ownership-based community costs from elective recreational access.

What this means for you

Homeowners' associations merging with clubs

Define which facilities become common areas and which require an elective membership tier. That distinction drove the tax treatment here.

Golf and tennis communities

An assessment labeled "operating" or "benefitted" is not automatically exempt. If it funds optional facilities rather than mandatory common areas, Florida may treat it as a taxable admission.

Accountants and tax professionals

Trace each payment to governing documents, property ownership, facility ownership, and member choice. Capital charges also require the specific criteria in Rule 12A-1.005(4).

Common questions

Q: Were regular annual HOA assessments taxable?
A: No. They were mandatory ownership charges supporting common areas.

Q: Were golf and tennis benefitted assessments taxable?
A: Yes. They funded optional facilities that were not common areas under the described structure.

Q: Were capital contributions exempt?
A: Equity-member capital contributions and qualifying capital assessments were exempt if the rule's criteria were met.

Q: What about other optional user charges?
A: They were taxable admissions.

Citations and references

• Fla. Stat. §§ 212.02(1), 212.04, and 213.22
• Fla. Admin. Code r. 12A-1.005(4), including (4)(d)3.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 19A-003

Original ruling text

TAX: Sales and Use Tax
TAA NUMBER: 19A‐003
ISSUE: Admissions
STATUTE CITE(S): Section(s) 212.02(1) and 212.04, F.S.
RULE CITE(S): Rule 12A‐1.005(4)(d)3., F.A.C.
QUESTION: Are certain assessments paid by members of a homeowners’ association to the
homeowners’ association subject to sales tax?
ANSWER: No, the payments meet the criteria of the Rule. The payments will be mandatory,
the payments will be made to a homeowners’ association, the payments will be made as a
condition of ownership of a home in the association area, and the recreational facilities are for
common areas used by the members who will be paying the assessment. All optional payments
will be subject to sales tax.
January 29, 2019
XXXXXXXXXXXX
XXXXXXXXXXXX
XXXXXXXXXXXX
XXXXXXXXXXXX
Subject: Technical Assistance Advisement (“TAA”)
TAA 19A‐003‐
AMS#: 7000127314
Sales and Use Tax‐Admissions
Section(s) 212.02(1) and 212.04, Florida Statutes (“F.S.”)
Rule(s) 12A‐1.005(4), Florida Administrative Code (“F.A.C.”)
XXXXXXXXXXXXXXX (“Petitioner”)(“Club”)
Business Partner Number: XXXXXXXX
FEIN: XXXXXXXX
XXXXXXXXXXXXX (“Homeowners’ Association”)

January 29, 2019
Florida Department of Revenue
Page 2

FEIN: XXXXXXXXXX
Business Partner Number: XXXXXX
XXXXXXXXXXXXX (“Community”)
Dear XXXXXXXX:
This letter is a response to your petition dated October 26, 2018, for the Department’s issuance
of a Technical Assistance Advisement (“TAA”) to Petitioner, regarding member assessments.
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.
Facts
Club is a private member‐owned not‐for‐profit Florida corporation that has XXXX members.
XXXX of the members are homeowners in the Homeowners’ Association as well. Club currently
owns a golf course, driving range, tennis courts, swimming pool, spa, restaurants, clubhouse,
and other recreational facilities.
Homeowners’ Association is a homeowners’ association pursuant to Florida law. It is a not‐for‐
profit Florida corporation consisting of XXXX residential properties. Homeowners’ Association
is governed by Chapter 617 and 720, Florida Statutes (“F.S.”), and also by recorded restrictive
covenants, including, but not limited to, the Declaration of Covenants, Articles of Incorporation,
By‐Laws, and Rules and Regulations. These documents, including amendments, are referred to
as the “Homeowners’ Association Documents.” The Homeowners’ Association is responsible to
maintain amongst other things, the community’s entrance area, streets, perimeter gates,
perimeter walls, streetlights, lakes, and other areas designated as “Common Properties.”
Homeowners’ Association and Club each conduct their operations within Community located in
XXXXXXXXXX County. Club and Homeowners’ Association have almost the same membership
except that Club also has XX full equity non‐resident members and XX non‐equity members.
The non‐equity members were offered for prospective home buyers who are not homeowners
in Community. The current Homeowners’ Association Documents require Community
homeowners to own an equity membership in Club.
The Club and Homeowners’ Association will merge XXXXXX. After the merger, Homeowners’
Association will be the surviving corporation, will continue to be a homeowners’ association,
and will own all of Club’s property. The members after the merger will be equity owners. The
Club property will be Common Property, except for certain golf and tennis facilities, which will
require acquisition of an XXXXXXXX Membership by the equity member. All other Club
property transferred to Homeowners’ Association will become common areas. After the
merger, the Homeowners’ Association Documents will grant Community residents an easement

January 29, 2019
Florida Department of Revenue
Page 3

to use the Club property that is part of the common areas. The easement will be a covenant
that runs with the land.
The three types of XXXXXXXXX Memberships will be Full Memberships, Sports Memberships,
and Tennis Memberships. XXXXXXXX Members will pay an initial contribution. Full Members
must pay annual dues. Full Members will have full use of the golf and tennis facilities without
being required to pay user fees. Full Members have preference in sign up times for use of the
golf and tennis facilities. Sports Members pay annual dues amount and have more limited use
rights of the golf and tennis facilities than Full Members. Tennis Members cannot use the golf
facilities and will pay annual dues.
All Homeowners’ Association members will be required to pay Regular Annual Assessments
after the merger on a pro rata basis. XXXXXXX Members are required to pay a Benefitted
Assessment to defray the budgeted costs of the golf and tennis facilities. Operating and Capital
Assessments may be levied against XXXXXXXX Members. Operating Assessments will be
charged to XXXXXXXX Members to pay for actual operating costs of the golf and tennis facilities
if the Benefitted Assessments are not enough to meet actual operating costs. The Capital
assessments will be used to satisfy the reserves for future capital expenditures. The Capital
Assessment will satisfy the requirements for the exemption from sales tax provided by Rule
12A‐1.005(4), Florida Administrative Code (“F.A.C.”).
Liens will be placed on residential property of members for unpaid assessments. Non‐equity
club members will be required to purchase an equity membership to obtain use of
Homeowners’ Association facilities.
Issue
Whether the dues, fees, Regular Assessments, Capital Assessments, Operating Assessments, or
Benefitted Assessments are subject to sales tax?
Law and Discussion
Section 212.04, F.S., provides that sales tax must be collected by a person on the amount
received from the sale of admissions. Section 212.02(1), F.S., provides, in part, the following:
dues and fees payments to a private club or membership club are admissions. Rule 12A‐
1.005(4)(d)3., F.A.C., provides the following:
Fees paid to private clubs or membership clubs that do not entitle the payor to
the use of the club’s recreational or physical fitness facilities are not subject to
tax. Examples of such fees are:

3. Mandatory dues and fees paid to a condominium association, homeowners’
   association, or cooperative association when they are required to be paid as a

January 29, 2019
Florida Department of Revenue
Page 4

condition of ownership or occupancy of real property and the club facilities are
part of the common elements or common areas of the real property.
As provided by Rule 12A‐1.005(4)(d)3., F.A.C., Homeowners’ Association will not be required to
collect sales tax on the Regular Assessments. This is because the payments are mandatory, the
payments are paid directly to a homeowners’ association, and the payments are required as a
condition of property ownership. Also, the Homeowners’ Association Documents provide that
the Club property transferred that are non‐golf and non‐tennis areas to be common areas.
Homeowners’ Association will not be required to collect sales tax on Capital Assessments and
capital contributions paid by XXXXXXX Members so long as the criteria established by Rule 12A‐
1.005(4), F.A.C., are satisfied.

Homeowners’ Association must collect sales tax on Benefitted Assessments and Operating
Assessments paid to defray the costs of the golf and tennis facilities. This is because the
payments are optional, and the facilities are not common areas. Also, the dues and fees are
subject to sales tax since all payments are voluntary.
Response
Sales tax will not due on the Regular Assessments, Capital Assessments, and capital
contributions by equity members after the merger. Sales tax must be collected on the
Benefitted Assessment, Operating Assessment, dues, and fees. Sales tax must be collected on
all other optional charges.
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,

January 29, 2019
Florida Department of Revenue
Page 5

Chuck Wallace
Chuck Wallace
Technical Assistance & Dispute Resolution
(850) 717‐7541
AMS #: 7000127314