Was a 30-year right to use a timeshare suite one week per year a nontaxable real-property interest or a taxable license?

Plain-English summary

Florida treated the offered vacation interest as a taxable timeshare license, not a nontaxable sale of real property. The offering documents themselves described a license that was not coupled with a freehold estate or an estate for years with a future interest in the property.

The purchaser received one week of use each year, or every other year, for 30 years. That limited right did not permit continuous residence longer than six months, so neither long-term transient-accommodation exemption applied.

The purchase charges and required common-expense, maintenance, special, and similar assessments were taxable. The ruling also required collection of applicable discretionary sales surtaxes and tourist-related local taxes.

What this means for you

The label “fee interest” did not control. Florida looked at the actual property rights conveyed and whether the owner could continuously occupy the accommodation for the statutory period.

Common questions

Q: Was this a timeshare estate? No. It lacked the required freehold or future interest.

Q: Did the 30-year contract qualify as a lease longer than six months? No. The purchaser could occupy only one week per year or every other year.

Q: Were required assessments taxable? Yes.

Citations and references

• Fla. Stat. §§ 721.05(29) and (31) — timeshare estates and licenses
• Fla. Stat. § 212.03(1) and (4) — transient rentals and continuous-residence exemptions
• Fla. Admin. Code r. 12A-1.061(3) — taxable timeshare-license and assessment charges
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99A-065

Original ruling text

SUMMARY

QUESTION: Are sales of timeshare units considered to be
sales of real property, which provide an interest in real
property, or licenses to use real property, which provide
no interest in real property? If it is determined that the
sales of the timeshare units are not sales of real
property, then are the sales exempt as transient
accommodations used for continuous residence for more than
six months?

ANSWER - Based on Facts Below: Based upon the documentation
provided by the Taxpayer, the sale of the timeshare unit
provides no interest in the realty and is a timeshare
license. The sale of a timeshare license is subject to
Florida sales tax as a transient rental. The sale of these
timeshare licenses do not qualify as exempt transient
accommodations, because the terms of the agreements do not
give the purchaser the right to continuously reside at the
property for more than six months.

Dec 02, 1999

Re: Technical Assistance Advisement 99A-065
Taxpayers: XXX [hereinafter "Developer"], and
XXX [hereinafter "Owner"]
Sales and Use Tax - Sale of "Fee Interest" (Timeshare Unit)
Sections: 212.05, 212.03, Florida Statutes (F.S.)
Rules: 12A-1.061, Florida Administrative Code (F.A.C.)

Dear :

This is a response to your letter of August 31, 1999, requesting
a Technical Assistance Advisement (TAA) regarding the abovereferenced matter. This response to your request constitutes a
TAA under Chapter 12-11, Florida Administrative Code (F.A.C.),
and is issued to you under the authority of Section 213.22,
Florida Statutes (F.S.).

FACTS

In your letter, you state:

[Developer] develops and manages certain property
("Property") located in [XXX].... Owner intends to lease
property to Developer who will assign [the] lease to a not
for profit corporation organized under the laws of Florida
("Association"). Developer has the right to convey
timeshare rights to the public under the applicable laws
governing timeshare sales. Developer intends to convey a
Fee Interest for years ("Interest") in the Property to a
purchaser ("Holder") pursuant to a purchase agreement
("Agreement") which gives the Holder the right to the use
of a particular suite at the Property for one week a year
for a period of 30 years. The Holder will be permitted to
assign his or her week of the right to use a suite to an
exchange agreement or, upon proper notice, to use the suite
for one or more weeks for the Holder's personal use or
rental to others. Under the proposed terms of the exchange
agreement, the Holder would be entitled, upon proper
notice, to the use of a suite at another property operated
by the Developer. The other property may be located inside
or outside of Florida.

At the time of purchase of the Interest, the Holder may pay
in full or may pay over time. A Holder must also reimburse
Developer and Association for expenses which will be
assessed as his or her share of common expenses. If the
Holder fails to pay these expenses as they become due, the
Holder will be denied the right to use the suite and also
be denied for exchanging it in the pool arrangement. If
the Holder's default continues for the period described in
the Agreement, the Agreement may be canceled by Developer
and the Holder will forfeit all payments made and will have
no further payment obligations. The Developer will have no
other remedies against the Holder for the described
payments.

In the discussion portion of your letter, you assert the
following:

The interest conveyed in the transaction described herein
is the sale of a fee interest for a certain number of
years. Following the expiration period, the fee is
terminated and the subject real property is reverted to the
original owner. In real property terms, the estate is a
fee simple determinable. Consequently, the conveyance falls
under the provisions of [Rule]12A-1.061(6)(d)[,] F.A.C.,
and is therefore, excluded from the operation of the
Florida Sales and Use Tax.

The submitted supporting documentation contained the following,
pertinent information:

The document titled "Exhibit `I' PUBLIC OFFERING STATEMENT TEXT"
provides the following definitions of the real property
interests being offered for sale, on pages 1 and 3:

F. "Biennial Vacation Ownership Interest" means the
ownership of a Vacation Ownership Interest which is an
estate for years for a term of thirty (30) years, which
right is neither coupled with a freehold interest nor
coupled with an estate for years with a future interest in
vacation ownership property as described in the Plan, which
is limited to either the Odd Numbered Years or the Even
Numbered Years and which is one-half (1/2) of a Vacation
Ownership Interest. Every reference in the Plan which
states a number with regard to an Owner of a Vacation
Ownership Interest, including, but not limited to,
assessment amounts shall be deemed to be divided in half
for Owners of Biennial Vacation Ownership Interests.

AA. "Vacation Ownership Interest" or "VOI" means the
ownership of a license which is an estate for years for a
term of thirty (30) years, which right is neither coupled
with a freehold interest nor coupled with an estate for
years with a future interest in vacation ownership
property, as described in the Plan.

These same definitions are used in the document titled "Vacation
Plan for XXX at XXX, A Vacation Ownership Resort."

REQUESTED ADVISEMENTS

1) Whether the sale of the "Fee Interest" described above (i.e.,
timeshare unit) is subject to Florida sales and use tax?

2) Whether the sale of the "Fee Interest" described above
qualifies as a transfer of non-transient accommodation such that
it is not subject to Florida sales and use tax, as provided in
Section 212.03(4), F.S.?

LAW and DISCUSSION

The applicable statutory and administrative provisions relevant
to the issues under advisement are as follows:

Section 721.05(29) and (31), F.S., provide:

(29) "Timeshare estate" means a right to occupy a timeshare
unit, coupled with a freehold estate or an estate for years
with a future interest in a timeshare property or a
specified portion thereof. The term shall also mean an
interest in a condominium unit pursuant to s. 718.103.

(31) "Timeshare license" means a right to occupy a
timeshare unit, which right is neither coupled with a
freehold interest, nor coupled with an estate for years
with a future interest, in a timeshare property.

Section 212.03(1) and (4), provide:

(1) It is hereby 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 to use any living quarters or sleeping or
housekeeping accommodations in, from, or a part of, or in
connection with any hotel, apartment house, roominghouse,
or tourist or trailer camp. However, any person who rents,

leases, lets, or grants a license to others to use, occupy,
or enter upon any living quarters or sleeping or
housekeeping accommodations in apartment houses,
roominghouses, tourist camps, or trailer camps, and who
exclusively enters into a bona fide written agreement for
continuous residence for longer than 6 months in duration
at such property is not exercising a taxable privilege. For
the exercise of such taxable privilege, a tax is hereby
levied in an amount equal to 6 percent of and on the total
rental charged for such living quarters or sleeping or
housekeeping accommodations by the person charging or
collecting the rental....

(4) The tax levied by this section shall not apply to, be
imposed upon, or collected from any person who shall have
entered into a bona fide written lease for longer than 6
months in duration for continuous residence at any one
hotel, apartment house, roominghouse, tourist or trailer
camp, or condominium, or to any person who shall reside
continuously longer than 6 months at any one hotel,
apartment house, roominghouse, tourist or trailer camp, or
condominium and shall have paid the tax levied by this
section for 6 months of residence in any one hotel,
roominghouse, apartment house, tourist or trailer camp, or
condominium.... (Emphasis Supplied.)

Rule 12A-1.061(3), F.A.C., provides, in pertinent part:

(3) RENTAL CHARGES OR ROOM RATES.
(e) Rental charges or room rates include assessments
required to be paid by a guest or tenant to the owner, the
owner's representative, or the owner's designated payor,
under the terms of an agreement for the use or possession,
or the right to the use or possession, of transient
accommodations. Such assessments may include charges for
maintenance fees, membership dues, or similar charges.

(h) The following is a non-inclusive list of charges
separately itemized on a guest's or tenant's bill, invoice,
or other tangible evidence of sale that are NOT rental
charges or room rates for transient accommodations:

***

15. Consideration paid by a timeshare owner for purchase of
    a timeshare estate, as defined in s. 721.05, F.S.
    Consideration paid under a timeshare license, as defined in
    s. 721.05, F.S., are rental charges or room rates and are
    subject to tax. (Emphasis Supplied.)

DISCUSSION & DETERMINATION

Sales of Fee Interests in a Timeshare Property

Florida does not impose sales tax on sales of real property.
Transfers of timeshare estates, that transfer a right to occupy
with a freehold estate or an estate for years with a future
interest in a timeshare property, are transfers of real property
and not subject to sales tax. See Section 721.05(29), F.S., and
Rule 12A-1.061(3)(h)15., F.A.C. However, transfers of timeshare
licenses, that convey a right to occupy without a freehold
estate nor an estate for years with a future interest in a
timeshare property, are not transfers of real property. See
Section 721.05(31), F.S., and Rule 12A-1.061(3)(h)15., F.A.C.
The sale of a timeshare license is the sale of a right to use
living quarters, or a sleeping or housekeeping accommodation,
subject to the provisions of Section 212.03(1), F.S.

In the instant case, Taxpayer is not selling real property.
Rather, Taxpayer is selling licenses to use living quarters or
sleeping accommodations in timeshare units to the public.
Taxpayer's own supporting documentation describes the interest
as a license and defines the interest as a timeshare license, as
defined in Section 721.05(31), F.S.

Thus, Taxpayer is exercising the taxable privilege of granting a
license to use living quarters or sleeping accommodations.
Therefore, all charges made to the public (licensee\owner) for
the privilege of owning any vacation ownership interest or
biennial vacation ownership interest are subject to Florida
sales tax. Further, all charges by Taxpayer for annual
assessments for common expenses, maintenance assessments,
special assessments, or any other charges made to the
licensee\owner when such charges are required to be paid as a

condition of the use of the property, are subject to tax. See
generally, Rule 12A-1.061(3), F.A.C. Lastly, Taxpayer is
required to collect and remit any locally imposed discretionary
sales surtaxes and tourist development taxes, tourist impact
taxes, and convention development taxes in addition to Florida
sales tax.

Exemptions from Sales Tax Imposed upon Sales of Fee Interests in
a Timeshare Property

Taxpayer has requested that the Department determine that the
sale of the involved interest is exempt from sales tax, since
the term of the agreement exceeds six (6) months. Section
212.03(4), F.S., provides that there are two types of exemptions
available for the rental or lease or license of sleeping or
housekeeping accommodations. One is for leases under a bona
fide written lease for longer than six (6) months in duration
for continuous residence. The second is for rentals by persons
who live continuously for longer than six (6) months at one
location and who have paid the transient rentals taxes for the
first six months of residence.

In the instant case, Taxpayer is providing accommodations for
one week a year, for vacation ownership interests, and one week
every other year, for biennial vacation ownership interests. In
both cases, the licensee\owner does not have the right to
continuously reside at the property for six (6) months or
longer. Since the licensee\owner is unable to continuously
reside at the property for more than one week a year or every
other year, the transaction does not come under either exemption
found in Section 212.03(4), F.S.

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 requests
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 s. 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.

Sincerely,

Jennifer J. Silvey
Attorney
Technical Assistance & Dispute Resolution

Control #38832
JJS/