Were college-bookstore contracts nontaxable management agreements or taxable property licenses?

Plain-English summary

A bookstore contractor operated stores on college and university campuses under agreements described as management arrangements. The contractor paid the institutions, sometimes a guaranteed minimum regardless of profit, owned inventory, funded improvements and equipment, carried insurance, and bore the business's risk of loss.

Florida concluded that these were not management agreements. The contractor was operating its own business and paying for the right to use college real property, so the real-property portion of the payments was taxable.

Not every payment component was taxable. Rights to use institutional names, emblems, logos, seals, goodwill, and franchise-like intangible rights fell within the exclusion for intrinsically valuable personal property. The parties had to make a reasonable, market-based allocation between taxable real-property use and nontaxable intangible rights.

What this means for you

Florida looked primarily at who bore economic risk and which direction payment flowed. Contract labels did not control. When one agreement bundles space with valuable intangible rights, records must support a reasonable allocation reflecting fair market value.

Common questions

Why were the agreements not management contracts? The contractor bore operating risk, owned inventory, and paid the colleges even when the bookstore was unprofitable.

Which payments were taxable? Amounts for use and occupancy, including required minimum or percentage payments, required improvements or contributions, and certain occupancy-related charges described in the ruling.

Which rights were nontaxable? Reasonable value assigned to institutional marks, goodwill, and franchise-like intangible rights.

How could the parties allocate mixed payments? By a reasonable, economically substantive allocation supported by market evidence and adequate records.

Did this ruling apply retroactively? No. It revised and modified TAA 88-294 prospectively from October 13, 2005.

Citations and references

• Fla. Stat. § 212.031(1)(c) (real-property license fees and allocation)
• Fla. Admin. Code r. 12A-1.070 (real-property rentals and licenses)
• Fla. Admin. Code r. 12-11.007(1) (prospective modification of advisement)
• Fla. Stat. § 213.22 (Technical Assistance Advisements)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 88A-294R

Original ruling text

SUMMARY
Question: Whether contracts between the Contractor and various colleges and universities constitute nontaxable
management agreements or whether the Colleges have entered into a lease or granted a license to use real property.
Answer - Based on Facts Below: The terms of the Agreements between the Contractor and the Colleges indicate
that the Agreements do no constitute management agreements, and that the Contractor is paying for the right to use
the Colleges' real property.
A management agreement involves a principal entrusting the management of some business to the agent or
manager, who carries out that business and makes an accounting to the principal. The paramount consideration when
determining whether the Agreements constitute a management agreement or whether a license to use real property
arises is how the Agreements allocate the risk of economic loss. This inquiry indicates whether the payments to the
Colleges are a return of the operational proceeds of the bookstore business to the Colleges, as owners of the
business, or whether the Contractor is instead paying the Colleges for the right to use real property. Here, the
payment provisions and allocation of the risk of loss clearly indicate that the Agreements are not management
contracts. Accordingly, the Contractor is paying for the right to use the Colleges' real property.
However, Section 212.031(1)(c), F.S., states that "payments for intrinsically valuable personal property such as
franchises, trademarks, service marks, logos, or patents are not subject to tax." The Contractor is generally granted
the right in the Agreements to use the institutions' emblem, logo, seal, and other identifying marks in the items sold
and in its operations. These grants clearly fall within the category of intangible personal property excluded from tax. In
addition, a portion of the payments pursuant to the Agreements also involves a grant in the nature of a government
franchise or payment for goodwill associated with the Colleges and the bookstores. Both of these are also intangible
personal property, and are thus not subject to tax. Section 212.031(1)(c), F.S., requires that a reasonable allocation
be made between the portion of payments made pursuant to the Agreements that is taxable as a license to use real
property and the portion that is for the type of nontaxable personal property that is excluded from tax.

October 13, 2005

Re: Technical Assistance Advisement 88A-294R
Sales and Use Tax
Management Agreement or License to Use Real Property
Section 212.02, Florida Statutes (F.S.)
Section 212.031, F.S.
Section 212.054, F.S.
Section 212.055, F.S.
Section 212.07, F.S.
Section 212.21, F.S.

Section 213.22, F.S.
Rule 12-11, Florida Administrative Code (F.A.C.)
Rule 12A-1.070, F.A.C.
XXX (the Contractor)
FEI # XX
Business Partner #XX
To Whom It May Concern:
In response to a letter dated July 1, 1988, from XXX (Representative) for XXX (Predecessor), this Department issued
Technical Assistance Advisement (TAA) 88-294, dated October 20, 1988, pursuant to Section 213.22, F.S., regarding
the referenced matter and party. After further consideration of the issue, the Department has revised its response to
the request as provided below. The response constitutes Revised Technical Assistance Advisement 88A-294R. The
revised advisement is directed to your company as the successor in interest to Predecessor with regard to this matter,
and is issued under the authority of Section 213.22, F.S., and Rule 12-11, F.A.C.
Facts
The Contractor operates bookstores at colleges and universities throughout the United States. The Contractor's
website indicates that it is presently operating at over 500 locations around the country, with at least 20 locations in
Florida (the Florida institutions will be collectively referred to as the Colleges). The Contractor operates the bookstores
in accordance with written contractual agreements with each college (the Agreements).(FN 1) The Contractor
continues to operate at all but one of the Colleges involved in Predecessor's original request.
Under agreements such as the ones at issue, the existing name (i.e., the college name) of the bookstores is generally
retained. Companies such as the Contractor are generally required to purchase any existing inventory at the
beginning of the contract, and the Colleges are generally required to repurchase or cause to be purchased any
existing inventory at the end of the agreement. It is also the understanding of the Department that under some
agreements the Contractor may be required to make certain contributions to the college, such as contributions to
scholarship funds or by making improvements to the bookstores. The Agreements contain initial terms of differing
duration, followed by optional renewal periods.
In addition, generally, under the Agreements:

The Contractor is granted the exclusive right to buy and sell merchandise and services traditionally offered at
college bookstores. The Contractor may also be granted the right to buy and sell other specified items, such as food
and other miscellaneous items.
The Colleges are required to provide the Contractor with a location on campus in which to operate. Generally no
specific location is named. The Agreements often contemplate additional locations.
The Colleges are generally required to provide some or all of utilities and basic services, such as local telephone,

electrical power, general maintenance, pest control, and janitorial.

The Contractor has the risk of loss or damages on purchases, deliveries, and storage of merchandise; the loss
regarding operations; and damage to the College's real property.
The Contractor is required to make all improvements and purchases at its own expense.
The Contractor generally is given the right to use each College's emblem, logo, seal, or other identifying mark on
items sold and otherwise used in its operations.
The Contractor pays the College a specified amount, which is generally a certain percentage of the Contractor's
gross receipts from sales (minus specified items) at the particular College. In some cases, there is a guaranteed
minimum payment. The Contractor's compensation under the Agreements is any profit that remains after paying the
specified commission.
The Contractor is generally required to permit access to all records and information with regard to its operations.
The Contractor is required to carry liability and other insurance with regard to its operations and to indemnify and
hold the Colleges harmless for liabilities arising out of its operations, and the Colleges are often required to be named
as an additional insured in insurance policies.
The Contractor is required to comply with all laws, ordinances, rules and regulations of federal, states, and local
governments, which includes securing all licenses and permits necessary to performance and paying all applicable
taxes in regard to its operations.
Either party may generally terminate the agreement, without cause, upon 60-120 days written notice.
The Contractor generally does not have the right to assign its interest in the Agreements.
The Agreements generally declare that the Contractor is an independent contractor, and that the agreement shall
not be deemed to create an employment relationship, and that no partnership, joint venture, or agency relationship
exists between the parties. The Contractor is not permitted to use the institution's name or credit in its dealings with
third parties or otherwise bind the Colleges.
The Agreements provide specific requirements with regard to the Contractor's operations, such as: hours of
operation; the types of items of that that must be maintained and sold (the institution generally has the right to approve
items); discounts for faculty, staff, and departments; pricing; textbook buyback; refund and exchange policies;
approval of managerial personnel; and, adherence of the Contractor's employees to general school policies and
regulations.
Requested Advisement
Whether contracts between the Contractor and various colleges and universities constitute nontaxable management

agreements or whether the Colleges have entered into a lease or granted a license to use real property.
Taxpayer's Position
Predecessor, in its request for advisement, offered the following arguments in support of the position that the
Agreements constitute management agreements.(FN 2)
(1) Application of the criteria in TAA 84A-010. The request cited a prior communication of the Department, TAA 84A010, for eight criteria used in determining whether a particular arrangement constitutes a rental of real property.(FN 3)
The request stated that presumably these same criteria should be used to determine whether there has been a grant
of a license to use real property. The request further stated that the majority of the criteria in TAA 84A-010 indicated
that management agreements had been created.
(2) Intent. The request states that the Agreements reflect an intention to enter a management agreement, and that
with two exceptions the Agreements do not refer to rent, lease, or license. It also states that, in general, the
Agreements contain terms and conditions typically found in a management agreement and thus reflect an intention to
create management agreements.
(3) Description of Premises. The request points to the absence of a description of the space to be utilized to operate
the stores. It states further that it is typical in a lease arrangement for a specific premises to be described as the
subject of the lease.
(4) Termination. The request states that the Agreements can be cancelled by the Colleges at any time prior to the
expiration of the stated term, without cause, upon written notice, and that this arrangement is typical in a management
agreement. It further states that the ability to terminate at will is atypical in a commercial lease or license transaction.
(5) Absence of Consideration. The request states that Section 212.031(1)(a), F.S., provides that the tax is levied on
the total rent or license fee charged for such real property. It states that therefore, absent a barter transaction, the tax
is imposed only on the actual charge for the use of real property. The request further states that the Agreements do
not impose a charge for the use of real property but, rather, require [the Contractor] to pay consideration to the
Colleges in connection with managing the stores.
(6) Control. The request states that each institution exercises significant control over the operations covered by the
Agreements, and that such control indicates that the Agreements constitute management agreements rather than
leases or licenses to use real property. The request states that in a typical lease or license arrangement, the lessor or
licensor does not control the manner in which the lessee or licensee conducts its business. It states further that while
a lessor or licensor may control the particular type of use authorized under the arrangement, the means and methods
employed by the lessee or licensee in conducting its authorized use is generally not subject to any control of the
lessor or licensor. The request notes that under the Agreements each institution exercises significant control over the
means and methods to be employed by [the Contractor] in its operations, in particular: (a) the number of employees
and the hiring of certain managerial staff; (b) the calendar of operating hours; (c) the ordering of books and
maintenance of inventory; (d) textbook buy-back policies; (e) the mark-up on new and used textbook sales and other

items; and (f) refund and exchange policies.
Applicable Authority
The declaration of legislative intent for Chapter 212, F.S., Tax on Sales, Use, and Other Transactions, is contained in
Section 212.21(2), F.S., and provides in relevant part:
It is hereby declared to be the specific legislative intent to tax each and every sale, admission, use, storage,
consumption, or rental levied and set forth in this chapter, except as to such sale, admission, use, storage,
consumption, or rental as shall be specifically exempted therefrom by this chapter subject to the conditions
appertaining to such exemption.... (emphasis supplied)
Section 212.031, F.S. provides in pertinent part:
212.031 Tax on rental or license fee for use of real property.
(1)(a) 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....

(c) For 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 for such real property shall 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. Such charges shall be
included in the total rent or license fee subject to tax under this section whether or not they can be attributed to the
ability of the lessor's or licensor's property as used or operated to attract customers. Payments for intrinsically
valuable personal property such as franchises, trademarks, service marks, logos, or patents are not subject to tax
under this section. In the case of a contractual arrangement that provides for both payments taxable as total rent or
license fee and payments not subject to tax, the tax shall be based on a reasonable allocation of such payments and
shall not apply to that portion which is for the nontaxable payments.
(d) When the rental or license fee of any such real property is paid by way of property, goods, wares, merchandise,
services, or other thing of value, the tax shall be at the rate of 6 percent of the value of the property, goods, wares,
merchandise, services, or other thing of value.
(2)(a) 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.

(3) The tax imposed by this section shall be in addition to the total amount of the rental or license fee, shall be
charged by the lessor or person receiving the rent or payment..., and shall be due and payable at the time of the
receipt of such rental or license fee payment by the lessor or other person who receives the rental or payment....
(emphasis supplied)

***
Section 212.02 provides in pertinent part:
212.02 Definitions.
The following terms and phrases when used in this chapter have the meanings ascribed to them in this section,
except where the context clearly indicates a different meaning:

(2) "Business" means any activity engaged in by any person, or caused to be engaged in by him or her, with the object
of private or public gain, benefit, or advantage, either direct or indirect....

(10)
(i) "License," as used in this chapter with reference to the use of real property, means the granting of a privilege to use
or occupy a building or a parcel of real property for any purpose. (emphasis supplied)

Section 212.07(8), F.S., provides:
Any person who has purchased at retail, used, consumed, distributed, or stored for use or consumption in this state
tangible personal property, admissions, communication or other services taxable under this chapter, or leased tangible
personal property, or who has leased, occupied, or used or was entitled to use any real property, space or spaces in
parking lots or garages for motor vehicles, docking or storage space or spaces for boats in boat docks or marinas, and
cannot prove that the tax levied by this chapter has been paid to his or her vendor, lessor, or other person is directly
liable to the state for any tax, interest, or penalty due on any such taxable transactions.
Rule 12A-1.070(4), F.A.C., provides in pertinent part:

(b) The tax shall be paid at the rate of 5 percent prior to February 1, 1988, and 6 percent on or after February 1, 1988,
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.
(c) Ad valorem taxes paid by the tenant or other person actually occupying, using, or entitled to use any real property
to the lessor or any other person on behalf of the lessor, including transactions between affiliated entities, are taxable.
(d) Common area maintenance charges paid by a tenant to the lessor for the privilege or right to use or occupy real
property are taxable.
(e) Utility charges paid by a tenant to the lessor for the privilege or right to use or occupy real property are taxable,
unless the lessor has paid the sales tax to the utility company on such utilities consumed by the tenant, and the

utilities billed by the lessor to the tenant are separately stated on the lessor's invoice to the tenant at the same or
lower price as that billed by the utility company to the lessor.... (emphasis supplied)

Rule 12A-1.070(12), F.A.C., provides:
When a tenant or other person pays insurance for his own protection, the premium is not regarded as rental or license
fee consideration, even though the landlord or other person granting the right to occupy or use such real property is
also protected by the coverage. However, any portion of the premium which secures the protection of the landlord or
person granting the right to occupy or use such real property and which is separately stated or itemized is regarded as
rental or license fee consideration and is taxable.
Rule 12-11.007(1), F.A.C., regarding the effect of advisements, provides in pertinent part:
.... An advisement will be revoked or modified at any time by the Department in the administration of the taxing
statutes, if the applicable statutes, rules, case law, or policies supporting the TAA change or if the circumstances
initially described by the taxpayer in his or her request for the TAA change. If an advisement is revoked or modified,
the revocation or modification shall be prospective only, and such revocation or modification shall not be applied
retroactively against the taxpayer.
Section 212.055, F.S., authorizes the imposition of a discretionary surtax by local governments. The tax levied
pursuant to Section 212.055, F.S., applies to all transactions occurring in the local jurisdiction that are subject to the
state tax imposed on sales, use, services, rentals, admissions, and other transactions by chapter 212, F.S., and
communications services as defined for purposes of Chapter 202, F.S. Section 212.054(2)(a), F.S.
"Agency" refers to a contract, express or implied, by which one party (the principal) confides to another (the agent) the
management of some business to be transacted for the account of the principal and by which the agent assumes to
do the business and render an account of it. See King v. Young, 107 So.2d 751, 753 (Fla. 2d DCA 1958) (quoting 2
Am. Jur., Agency, s. 2, page 13). The agent is distinguished from an independent contractor in that the principal has
the right (whether or not exercised) to control the agent regarding the details of the engagement, rather than only
regarding the result to be achieved. Id.
To "franchise" is to grant another the sole right of engaging in a certain business or in a business with a particular
trademark in a certain area. Black’s Law Dictionary, Abr. 6th Ed., 1991.
Discussion and Response
Because the Department does not take the position in this advisement that the Agreements create a lease, the
following discussion and analysis will only address the instant request as it pertains to a license to use real property.
The position taken in the request for advisement is that the transactions are not taxable based upon the following
reasoning:

(a) that the Agreements constitute a service or management agreement, and do not grant a license to use real
property; and,
(b) that the Colleges have retained controls that are inconsistent with a determination that a license to use real
property has been granted.
Management Agreement or License to Use Real Property
Section 212.031(1)(a), F.S., states 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." Section 212.02(10)(i), F.S., defines
"license" as "the granting of a privilege to use or occupy a building or parcel of real property for any purpose." Section
212.02(2) defines "business" broadly as "any activity" engaged in "with the object of private or public gain, benefit, or
advantage, either direct or indirect." A person who rents, leases, lets, or grants a license for the use of one property is
engaged in business just as much as a person doing so with numerous properties. See Regal Kitchens, Inc. v. Florida
Department of Revenue, 641 So.2d 158, 163 (Fla. 1st DCA 1994). Thus, if the Agreements grant a license to use real
property, the Colleges are in the "business" of granting a license to use real property. The Colleges would not have
entered into the Agreements unless there was a "gain, benefit, or advantage" to the Colleges in doing so. Therefore, if
the Agreements grant a license to use real property, the transaction is taxable pursuant to Section 212.031(1)(a), F.S.
If the Agreements create a management agreement rather than a license, the transaction(s) would not be subject to
tax.
A threshold requirement for imposition of tax under Section 212.031(1)(c), F.S., is that the Colleges be "in the
business" of leasing or granting a license to use real property. The position taken in the request for advisement is that
the Agreements between the Colleges and the Contractor constitute a service or management agreement. A
management agreement is typically in the nature of an employment contract, under which the Contractor would be
considered as in the nature of an agent or employee of the Colleges, charged with managing the Colleges' bookstore
business. Under a management agreement, the relationship between the Colleges and the Contractor with regard to
the ownership and operation of the bookstores would be in the nature of that of a principal and agent or employer and
employee, rather than licensor and licensee. Under a management agreement, the principal (in this case, the
Colleges) entrusts an agent (in this case, the Contractor) with the management of its business (here, the College's
bookstores), to be transacted by the agent for the Colleges' account, with the agent assuming the responsibility to
manage the business and make an account to the principal. See King v. Young, 107 So.2d 751, 753 (Fla. 2d DCA
1958). Under a management agreement, the Contractor, as agent or manager, would step into the shoes of its
principals (the Colleges) and act for them. See Id. If the relationship between the parties is a true management
agreement, there are no separate license payments subject to tax pursuant to Section 212.05(1)(c), F.S. Therefore,
the primary inquiry should be whether a management agreement, and thus a principal/agent type of relationship with
regard to the ownership and operation of the bookstores, was created by the Agreements.
Unless the provisions of an agreement or the actual practice of the parties indicate otherwise, the intent of the parties
to a contract should govern the construction of that contract. See American Home Assurance Co. v. Larkin General
Hospital Ltd., 593 So.2d 195, 197 (Fla. 1992); Keith v. News & Sun Sentinel Co., 667 So.2d 167, 171 (Fla. 1995). In
determining the intent of the parties, the terms of a contract are considered as a whole, and not in isolation. Jerry's

Inc. v. City of Miami, 591 So.2d 1000, 1001 (Fla. 3d DCA 1991). Therefore, the proper focus in determining the
relationship created by the Agreements between the Colleges and the Contractor is upon the collective terms of the
Agreements.
As stated above, a management agreement involves a principal entrusting the management of some business to the
agent or manager, who carries out that business and makes an accounting to the principal. In examining the
Agreements to determine the relationship between the parties, three possibilities present themselves relative to the
Agreements:
(1) The Colleges are in the bookstore business, and the Contractor is engaged to manage that business and make an
account to the Colleges (i.e., a management or principal/agent relationship has been created).
(2) The Contractor is in the bookstore business, and is utilizing the Colleges' real property in the conduct of that
business.
(3) A partnership or joint venture has been entered into between the Contractor and the Colleges.
The paramount consideration when determining whether the Agreements constitute a management agreement
(possibility (1), above) or whether a license to use real property arises (possibility (2), above) is how the Agreements
allocate the risk of economic loss. This inquiry indicates which party, relative to the bookstores and the Agreements, is
in the bookstore business, and indicates whether or not a management agreement has been entered into. Put another
way, this inquiry indicates whether the payments to the Colleges are a return of the operational proceeds of the
bookstore business to the Colleges, as owners of the business, or whether the Contractor is instead paying the
Colleges for the right to use real property.
The Department notes that its analysis is restricted to determining whether, with regard to the bookstores, the
Colleges are exercising the privilege of granting a license to use real property, taxable under Section 212.031(1)(a),
F.S. The distinctions between an employee, an independent contractor, and an agent can be important in a variety of
contexts.(FN 4) This analysis concerns itself solely with whether the Agreements constitute management agreements
and looks to the allocation of the economic risk of loss. For this purpose, the Contractor's designation as an employee,
agent, or independent contractor is immaterial.(FN 5) A management agreement would be a contract under which the
Contractor would be considered as in the nature of an agent of the Colleges, charged with managing the Colleges'
bookstore business.
The payment provisions and allocation of the risk of loss clearly indicate that the Agreements are not management
contracts. The Contractor generally is obligated to purchase the entire inventory at the beginning of the Agreement.
(FN 6) As the Contractor is also generally required to purchase all future inventory, title to the entire inventory remains
in the Contractor. The Contractor has the risk of loss for inventory and other purchases. The Contractor is obligated to
pay the Colleges a sum certain, in some cases a guaranteed minimum amount, regardless of whether or not its
operation of the bookstore is profitable. The Contractor is generally required to make all improvements and purchases
of equipment, furniture, and fixtures at its own expense. The Contractor is required to secure all licenses and permits
necessary to performance, and to pay all applicable taxes in regard to its operations. The Contractor is required to

carry all appropriate insurance with regard to its operations and to indemnify and hold the Colleges harmless for
liabilities arising out of its operations. The Colleges are often required to be named as an additional insured in
insurance policies held by the Contractor. Thus, the Contractor bears all the risks of loss flowing from the Agreements.
(FN 7) Therefore, the contractual obligations running between the Colleges and the Contractor regarding payment and
the allocation of the risk of economic loss clearly demonstrate that the Agreements do not constitute management
agreements. Because an analysis of the allocation of the risk of loss under the Agreements necessarily leads to the
conclusion that they do not constitute management agreements, no other considerations need be addressed.
Accordingly, the Contractor is paying for the right to use the Colleges' real property.
The Department notes further that a manager or management company would typically expect to be paid by the
Colleges. Here, the consideration flows entirely in the opposite direction, often at a guaranteed minimum amount, and
without regard to whether the Contractor makes a profit. In addition, if the Colleges entered into a management
agreement with a manager or management company, typically one would expect that title to the inventory and the risk
of loss would remain with the Colleges. Here, title to the inventory and all risk of loss under the Agreements is with the
Contractor. In a typical license situation, the consideration flows in one direction, from the licensee to the licensor, in
payment for the use and occupation of the property. In a typical license arrangement, the business is run by the
licensee, who bears the risk of loss in that business, paying the licensor no matter what the result of the business
operations. The payment may be a flat fee or a percentage of profits, but it is the licensee who earns the profits and
pays something over to the licensor. Thus, the substance of the Agreements is entirely consistent with the grant of a
license and not consistent with a management agreement.
The request provided additional arguments in support of the position that that the Agreements constitute management
agreements rather than a license to use real property. These arguments are addressed below.
The request cited TAA 84A-010 as establishing eight criteria to consider in determining whether a particular
arrangement constitutes a lease or license or real property. The Department notes that TAA 84A-010 listed those
criteria only with regard to the analysis of whether a particular agreement is a rental or lease of real property. That
communication did not extend the criteria to the analysis of whether a particular agreement constituted a license to
use real property.(FN 8) The presumption that the criteria would extend to a license of real property was, in fact,
offered by Predecessor in the instant request for advisement, which was quoted by the Department in TAA 88-294.
The Department did not, in TAA 84A-010 or 88-294, agree that the listed criteria should be extended to the question of
whether or not a license to use real property had been granted. Thus, the indicia of a lease established by case law
and summarized in TAA 84A-010 are not relevant to the determination whether or not a license has been granted.
The request in addition notes that the Agreements do not specify a particular location for use as a bookstore. The
conveyance and description of particular real property is not necessary to a determination that a license to use real
property has been granted. A lease arises from an agreement pursuant to which one person enters into possession or
occupancy of the premises of another for a consideration, usually the payment of rent, and conveys an interest in the
real property. 34 Fla. Jur., Landlord and Tenant s. 1; see also DeVore v. Lee, 30 So.2d 924, 925 (Fla. 1947). A
description of the demised premises is an essential element of a lease. See 34 Fla. Jur., Landlord and Tenant s. 32. A
"license" for purposes of Chapter 212, F.S., is the "granting of a privilege to use or occupy a building or a parcel of
real property for any purpose." Section 212.02(10)(i), F.S. The terms "lease" and "license" are mutually exclusive. A

license is merely a personal privilege or permit to do something on the land of another, not an interest in real property.
Devlin v. The Phoenix, Inc., 471 So.2d 93 (Fla. 5th DCA 1985). No description of a specific parcel of real property is
required. Here, each institution is required to provide the Contractor with a location on its campus. Thus, the general
absence of a specific description of the premises to be used by the Contractor does not preclude a determination that
that a license to use the Colleges' real property has been granted.
The request states that, unlike an ordinary commercial lease or license transaction, the Agreements can be
terminated by either party without cause upon short written notice, generally 60-120 days. The general rule is that a
license may be revoked at the pleasure of the licensor. Seaboard Air Line Ry. Co. v. Dorsey, 149 So. 759, 761 (Fla.
1932). A license may also expire upon the lapse of the period stated in the grant of the license for its duration, or
pursuant to a specific provision in the agreement. See, e.g., Prescott v. J.S. Betts Co., 88 So. 385 (Fla. 1921). Thus,
the fact that either party may terminate the Agreements upon the requisite written notice is not an obstacle to the
conclusion that a license to use or occupy real property has been granted.
The request also suggests, by referencing the criteria in TAA 84A-010, that a licensee would have the unilateral right
to assign its interest, and that the absence of a reference to this right in the Agreements supports the position that the
Agreements are management agreements. A license is a personal privilege and not an interest in real property, and it
is only assignable with express permission. See Devlin v. The Phoenix, Inc., supra, at 95. Therefore, the absence of a
right to assign indicates only that the licensee may not assign its interest, as is the general rule, and such absence
does not lend support to the requests' position.
Finally, the request suggests that there is no consideration paid under the Agreements for the grant of a license to use
real property but, rather, that the Agreements require the Contractor to pay consideration to the colleges in connection
with managing the stores. The tax imposed under Section 212.031(1)(a), F.S., is not dependent upon how the parties
treat payments. Section 212.031(1)(c), F.S., states that the taxable amount includes "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." Thus, in the case of a license, all that is required is payment by the user or occupier for the right to use or
occupy real property. See Section 212.031(1)(c), F.S. Once it has been concluded that the Agreements grant the
privilege to use or occupy real property, the amount (the "total rent or license fee") paid pursuant to the Agreements
becomes subject to tax.
Control
The request also takes the position that the specific requirements imposed upon the Contractor by the Agreements
show significant control over the Contractor’s operations that is more indicative of a management agreement than a
license. The Department agrees that management agreements, being a form of agency in the nature of employment
contracts, are typically characterized by a high degree of control over the activities of the manager/agent. However, as
it has been determined under an analysis of the economic risk of loss that a management agreement clearly has not
been entered into, the degree of control exercised by the Colleges is of no consequence.
Moreover, there is no restriction on the degree of control that a licensor may exercise over its licensee. A license is a
mere permit to do something on the land of another. See Seaboard Air Line, supra, at 761. While a license implies the

right to do everything without which the act could not be done, a license must be exercised only in the manner and for
the purpose for which it is given. 25 Am. Jur. 2d, Easements and Licenses s. 139. Conditions may be imposed on the
licensee's use of the licensor's land, and violation of those conditions may create a limitation on the duration of
licensee's rights (i.e., the license may be subject to revocation). See, e.g., Jabour v. Toppino, 293 So.2d 123 (Fla. 3d
DCA 1974). Where a conditional or restricted consent to enter land is given, the privilege to enter exists only insofar
as the conditions or restrictions are complied with. Satin v. Hialeah Race Course, Inc., 65 So.2d 475 (Fla. 1953).
Thus, a license neither requires that exclusive control over the premises be granted to a licensee, nor does it require
that a licensee's operations be free of restrictions.
The Department notes, in addition, that both an agent and an independent contractor are subject to control by their
principal or employer. The distinction between an agent and an independent contractor is determined by whether the
person is subject to control with regard to the details of the engagement. 2 Fla. Jur. Agency and Employment s. 5. An
agent acts for and under the control of the principal, and the principal has the right to control both the outcome and the
means used to achieve that outcome. 2 Fla. Jur. Agency and Employment s. 3. Where a principal or employer controls
only the outcome of the endeavor and not the means of achieving the outcome, the other party is an independent
contractor rather than an agent. 2 Fla. Jur. Agency and Employment s. 5. As stated above, the proper focus in
determining the relationship created by the Agreements is upon the collective terms of the Agreements. See
American Home Assurance, supra; Keith, supra; and Jerry's Inc., supra. Here, the Agreements generally declare that
the Contractor shall operate as an independent contractor. Thus, the parties have manifested an intention that
Contractor should be considered an independent contractor, and not an agent of the Colleges.
Historically, the academic institutions themselves owned and operated their own on campus bookstores, as the
Colleges did here. By doing so, they could be certain, for example: that the books required by the students were
ordered; that the faculty communicated to the store all required and suggested texts and materials; that the
administration communicated course enrollment to the bookstore; that books and materials were available to students
on a timely basis; that merchandise with the school name and logo would be available for sale; that store hours would
coincide with student need; that there was a ready market for book buyback and resale; that staff and management of
the store followed college rules and projected a positive image for the college; and, that the bookstore had special
arrangements for students financing their education (like delayed payment or billing against the funds).
An on campus bookstore has a number of advantages to an academic institution, as well as to its students and staff.
The Colleges, like many other academic institutions, have privatized their on campus bookstore operation pursuant to
the Agreements. When institutions decide that they do not want to be in the bookstore business themselves but still
desire an on campus bookstore, they need the bookstore to continue to be as attentive to the needs of the institution,
its staff, and its students as before. Because the bookstore is physically on the institution's campus, the University will
also want to ensure that it has a measure of control over both the activities that take place at the store and the
conduct and behavior of Contractor's employees. Especially in a case such as this, where the original name of the
bookstore continues and contains the name of the institution, the institution will wish to take preventative measures to
insure that the "goodwill" associated with that name is not damaged.
On the other hand, whoever takes over the store would want to capitalize on the goodwill associated with being the
campus bookstore and will forego a great deal of autonomy in order to use the institution's name on the store (as well

as to be able to sell merchandise and supplies with the school logo and seal). Because the on campus bookstore is
located on the institution's campus, usually in a central location, it is uniquely situated to meet the textbook, supplies,
and merchandise needs and desires of students, faculty, staff, and visitors. Again, given this singular sales and
merchandising opportunity, it is not surprising that the Contractor or its competitors would submit to the Colleges
overseeing and establishing some of their operational details.
Many of the provisions cited by the request as evincing "significant control" over the Contractor's operations flow
naturally from the Colleges' need, as discussed above: to ensure that the campus community is properly served
(provisions relating to store hours, manner of service, product presentation, and pricing); to retain control over conduct
and activities taking place on its property (compliance with the Colleges' rules and regulations and the Colleges'
disapproval of textbooks or other items); and, to protect the "goodwill" associated with its name (the Contractor's
employees must adhere to the Colleges' rules, and the Colleges have some oversight of the choice of certain
personnel).
There is no evidence that the Agreements were not arm's-length transactions between two unrelated parties. The
degree of control retained by the Colleges was therefore subject to discussion and negotiation between the parties.
The Contractor entered into the Agreement voluntarily, and by doing so assented to the Colleges having some control
over certain details of its operation. Still, the Contractor has made the business decision that the arrangements will be
beneficial, and worth entering into. Even if the Agreements were viewed as a general transaction (not involving the
unique situation of an on campus college bookstore), as the Agreements in substance are clearly license agreements,
the control cited by the request could properly be viewed as conditions or restrictions on the Contractor's use of the
real property. Alternatively, such conditions or restrictions may also properly be viewed as a limitation upon the grant
in the nature of a government franchise (to operate a bookstore), as will be discussed below. Therefore, a conclusion
is reached that the degree of control retained by the Colleges is not, in fact, inconsistent with a conclusion that a
license to use real property has been granted by the Agreements.
It is noted that the request also argued that the imposition of tax in the instant circumstances is invalid under Section
212.031, F.S., and unconstitutional under Section 1(a), Article VII, of the Constitution of the State of Florida. Because
the Department finds these arguments to be without merit, it declines to respond.
Government Franchise
A franchise is a contract with a governmental entity to conduct business within a particular area, and the grant may
prohibit others from engaging in the same business within the prescribed area for a given period of time (the duration
of the grant). West Coast Disposal Service, Inc. v. Smith, 143 So.2d 352, 353 (Fla. 2d DCA 1962). A non-exclusive
franchise is a mere permit or license. Scenic Hills Utility Co. v. City of Pensacola, 156 So.2d 874, 878 (Fla. 1st DCA
1963). Typically, a governmental entity by contract grants a license to conduct a quasi-governmental business and
sometimes prohibits others from engaging in that business. See id.; 27 Fla. Jur. Franchises From Government s. 1. A
governmental franchise is intangible personal property, and not an interest in real property. Leonard v. Baylen Street
Wharf Co., 52 So. 718 (Fla. 1910). The terms "franchise" and "concession," in the context of the grant of a right or
privilege by a governmental entity, can be used interchangeably. See, e.g., Loxahatchee Recreation, Inc. v. Harrison,
367 So.2d 237 (Fla. 4th DCA 1979). The character and extent of the rights granted in the use of a franchise depend

upon the terms of the grant and the nature and purpose of the franchise. Leonard v. Baylen Street Wharf Co., supra.
Therefore, the control cited by the request may also be viewed as permissible limitations upon the rights of the
Contractor under the grant, in the nature of a franchise, to operate a bookstore on the Colleges' campuses.
The Department finds that a portion of the payments to public institutions is properly characterized and treated as in
the nature of payments for a government franchise. Generally, the subject of a governmental franchise is the right to
carry on any public business, such as a public utility. Day v. City of St. Augustine, 139 So. 880, 883-884 (Fla. 1932).
(FN 9) The legislature by enactment may confer its authority to grant franchises upon counties, municipalities, or state
departments and boards in their respective fields. 27 Fla. Jur. Franchises From Government s. 3. Importantly, the
power to grant franchises must be expressly delegated by the legislature to subordinate bodies for them to grant a
franchise. See State v. Pinellas County Power Co., 100 So. 504 (Fla. 1924); Cable-Vision, Inc. v. Freeman, 324 So.2d
149 (Fla. 3d DCA 1975), appeal dismissed, 336 So. 2d 1180 (Fla. 1976), appeal dismissed, 429 U.S. 1032 (1977).
The recipient of the statutory authority may only grant a franchise when such power is conferred by express terms of a
statute or by necessary implication. Scenic Hills, at 876. Here, the Department is aware of no express provision
contained in the Florida Statutes granting authority to the governing bodies of public institutions to grant franchises to
carry on their bookstore functions. See Section 1001.74, F.S. (Powers and duties of university boards of trustees).
Therefore, while the Department finds that the Agreements may grant authority in the nature of a government
franchise, it finds no true government franchise to have been granted, as the Colleges have not been given the
necessary authority.
The Department notes that any Agreements entered into by a private institution do not, by definition, qualify as being
in the nature of the grant of a government franchise, as no public function has been conferred. However, the
Department finds that a portion of the payments to private institutions may be considered as payment for the
"goodwill" associated with the institution and its bookstore operations, as discussed above.
Because no true government franchise has been granted, the "total rent or license fee" for the grant of the right to use
or occupy the Colleges' real property is subject to tax as discussed below.
Taxable amount
The "total rent or license fee" is subject to tax, and this total includes "base rent, percentage rents, or similar charges."
Section 212.031(1)(c), F.S. Rule 12A-1.070(4)(b) states that the tax is paid upon "all considerations" payable by the
tenant or person occupying, using, or entitled to use any real property "for the privilege of use, occupancy, or the right
to use or occupy." Therefore, in the instant case, it is only the amount paid by the Contractor to the Colleges pursuant
to the Agreements that is actually for "the right to use and occupy" that is taxable.
Under the Agreements, the "total rent or license fee" includes the payments to the Colleges or guaranteed minimum
payments (whichever are, in fact, paid) required under the Agreements. The total rent or license fee includes any
upgrades, improvements, or renovations that the Contractor is required to make by the agreements - upgrades or
improvements undertaken by the Contractor would not be included. The total rent or license fee also includes any
required contributions, including capital contributions or contributions to the Colleges' scholarship or other funds. Here,
the Colleges are generally required to provide utilities and basic services. Where the Contractor is required to pay

utility charges (e.g., electricity, water, trash, and telephone) to an institution for the right to use or occupy its real
property (i.e., where non-payment results in a breach of the agreement), such payments are subject to tax unless: (i)
the institution has paid tax to the provider on the services consumed by the Contractor, and (ii) the utilities billed to the
Contractor are separately stated on the institution’s bill to the Contractor at the same or lower price than that billed by
the utility provider to the institution for the service. See Rule 12A-1.070(4)(e), F.A.C. Similarly, any common area
maintenance charges the Contractor is required to pay for the right to use or occupy the real property are subject to
tax. See Rule 12A-1.070(4)(d), F.A.C. In any agreement where the Contractor is required to pay any ad valorem
property tax to the Colleges or any person on behalf of the Colleges, such payments would be subject to tax. See
Rule 12A-1.070(4)(c), F.A.C. When a tenant or other person purchases insurance for his own protection, the premium
is not considered as rental or license fee consideration, even though the landlord or other person granting the right to
occupy or use the real property is also protected by the coverage. However, any portion of an insurance premium that
secures the protection of the institutions and that is separately stated or itemized is taxable. See Rule 12A-1.070(12),
F.A.C.
It is noted that Section 212.031(1)(c), F.S., states that "payments for intrinsically valuable personal property such as
franchises, trademarks, service marks, logos, or patents are not subject to tax." Here, the Contractor is generally
granted the right in the Agreements to use the institutions' emblem, logo, seal, and other identifying marks in the items
sold and in its operations. These grants clearly fall within the category of intangible personal property excluded from
tax by Section 212.031(1)(c), F.A.C. Importantly, as discussed above, a portion of the payments pursuant to the
Agreements also involves a grant in the nature of a government franchise or payment for goodwill associated with the
Colleges and the bookstores. Both of these are intangible personal property, and not taxable pursuant to Section
212.031(1)(c), F.S. Section 212.031(1)(c), F.S., also provides that "in the case of a contractual arrangement that
provides for both payments taxable as total rent or license fee and payments not subject to tax, the tax shall be based
on a reasonable allocation of such payments and shall not apply to that portion which is for nontaxable payments."
Thus, Section 212.031(1)(c), F.S., requires that a reasonable allocation be made between the portion of payments
made pursuant to the Agreements that is taxable as a license to use real property and the portion that is for the type
of nontaxable personal property that is excluded from tax. Where an allocation is made by the parties' agreement,
such allocation must be reasonable. See Section 212.031(1)(c), F.S. Where an agreement does not make an
allocation, a taxpayer may make a reasonable allocation within its own records of the taxable and nontaxable portions
of payments and maintain records adequate to establish how the taxpayer determined that the allocation was
reasonable. Haas Publishing Companies v. Department of Revenue, DOR 04-10-FOF; 03-2683, 2004. The allocation
must be one of economic substance and reflect market reality (i.e., the allocation must reasonably reflect fair market
value). In addition, there must be a legitimate business purpose for the use of the rights constituting the nontaxable
personal property. See Id. An allocation will not be considered reasonable where no substantial, competent, and
persuasive evidence is provided to establish the respective values. A reasonable allocation may be made by valuing
either the taxable or nontaxable portions of the payments, and then allocating the remaining portion of the payments
to the unvalued portion. The Department is charged with substantiating such allocation, or making such allocation
upon audit if adequate records and information exist to make a reasonable allocation. See Sections 212.031(1)(c) and
212.12(5), F.S.
Here, the Agreements themselves do not make an allocation. As stated above, a reasonable allocation may be made

by valuing either the taxable (real property) or nontaxable (intangible personal property) portions of the payment and
allocating the remainder to the unvalued portion. If valuing the taxable portion, the fair rental value of similar space in
the area should provide guidance. If valuing the nontaxable portion, the taxpayer (or auditor) should look to any
agreements entered into by the particular institution with third parties where the use of the institution’s name, emblem,
logo, or similar mark has been granted.
Effect of this advisement
This advisement revises and modifies TAA 88-294 as provided above. Rule 12-11.007(1), F.A.C., indicates that when
an advisement is revoked or modified, the revocation or modification only applies prospectively from the issuance of
the new advisement, and shall not be applied retroactively against the taxpayer.
Conclusion
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 15 days of the date of this letter.
If you have any further questions with regard to this matter and wish to discuss them, you may contact me directly at
(850) 922-4710.
Sincerely,
Thomas K. Butscher
Senior Attorney
Technical Assistance & Dispute Resolution
TKB\
Record ID: 16363

FOOTNOTE 1. The Department recognizes that is unlikely that the Contractor is still operating under the same
contractual agreements that were reviewed for TAA 88-294. However, the Department understands that the

contractual provisions described below are standard in the industry.
FOOTNOTE 2. The request was quoted at length in TAA 88-294, and it will only be summarized here.
FOOTNOTE 3. The cited criteria are: (1) a contract between lessor and lessee, for the conveyance of a present estate
in the realty, in return for payment of rent; (2) transfer of a present estate in the realty, which includes the lessee's
right to exclusive possession and control of the leased premises, without interference by the landlord; (3) identification
of the specific area to be occupied by the lessee; (4) the right to assign or sublet; (5) a specific term; (6) a written
agreement evincing the intention; (7) the intention of the parties as revealed by the language employed in establishing
their relationship; and (8) other conduct evincing the intention, and the absence of conduct inconsistent with the
intention.
FOOTNOTE 4. Most notably, the liability of the principal for acts of the agent. The doctrine of respondent superior is a
form of implied agency based upon the relationship of employer and employee. See 2 Fla. Jur. Agency and
Employment s. 4. Other important considerations include contributions to unemployment insurance, worker's
compensation, income tax withholding, and employment tax withholding and contributions. See 2 Fla. Jur. Agency and
Employment ss. 131 and 133.
FOOTNOTE 5. The Department acknowledges that the Contractor may be "deemed" an agent of University for a
particular purpose. See Booksmart Enterprises, Inc. v. Barnes and Noble College Bookstores, Inc., 718 So.2d 227
(Fla. 3d DCA 1998) (holding that an on campus bookstore was the agent of a university in its role as custodian of
"public records" under Chapter 119, F.S., the "public records" being lists of instructors' required texts).
FOOTNOTE 6. It is noted that not all of the Agreements speak to the purchase and/or repurchase of inventory.
However, the Department’s understanding of the industry indicates that this is the usual practice.
FOOTNOTE 7. That the Contractor undertakes the entire risk of loss also forecloses any argument that the
Agreements create a partnership or joint venture. Mutual exposure to loss is an essential element to finding that a
partnership or joint venture relationship has been established. See, e.g., Conklin Shows, Inc. v. Department of
Revenue, 684 So.2d 328 (Fla. 4th DCA 1996).
FOOTNOTE 8. Section 212.031, F.S., did not impose a tax upon payments for the grant of a license to use real
property until 1986. See Sections 64 and 66 of Chapter 86-152, L.O.F.
FOOTNOTE 9. The government may grant public franchises to control waters, bridges, wharves, ambulance services,
cable television transmission, and similar services. See 27 Fla. Jur. Franchises From Government s. 2.