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Sales and Use Taxx TAA 14A-015 Rental of Real Property



July 8, 2014

Re: Technical Assistance Advisement – TAA 14A-015 Florida Sales and Use Tax

Rental of Real Property
Section 212.031, Florida Statutes (“F.S.”) Petitioner: XXXX (“Taxpayer”)

Dear XXXX:

This letter is a response to your petition received on June 25, 2013, for the Department's issuance of a Technical Assistance Advisement ("TAA") concerning the above-referenced petitioner and matter. Your petition has been carefully examined, and the Department finds it to be in compliance with the requisite criteria set forth in Chapter 12-11, Florida Administrative Code (“F.A.C.”). This response to your request constitutes a TAA and is issued to you under the authority of section (“s.”) 213.22, F.S.


The following facts are based on documents provided by the Taxpayer and verbal communications with the Taxpayer.

Taxpayer operates a veterinary medicine practice in XXXX County. His practice has operated, in part, through three different business entities that are discussed in this TAA. According to Taxpayer, all corporations involved in the merger are S-corporations.

Taxpayer formed XXXX (“P.A.”), in 1999 as a solo veterinary practice. P.A. is not a registered sales and use tax dealer with the Department.

Another veterinarian, XXXX (“Colleague”), formed XXXX (“Landlord”) in 2002. Landlord was formed to hold real property at which Colleague and Taxpayer would operate their individual practices. In 2002, Landlord purchased real property in XXXX, Florida, for this purpose. Landlord is listed as the owner of that realty with the XXXX County Property Appraiser’s office.

In the years following the initial filing, Taxpayer was listed as an officer and director of Landlord. As of June 2013, Taxpayer was listed as the only officer and director of Landlord. Landlord is currently registered as an active sales and use tax dealer with the Department. Colleague and Taxpayer formed XXXX (“Hospital”), in January 2004, in order to operate an emergency veterinary practice together at the location in XXXX owned by Landlord. Colleague and Taxpayer also continued to operate their own separate veterinary practices at the location owned by Landlord. In Taxpayer’s case, he continued to operate P.A. As of June 2013, Taxpayer was listed as the only officer and director of Hospital. Hospital is registered as an active sales and use tax dealer with the Department.

Prior to July 1, 2013, Landlord leased the real property in XXXX to Hospital and P.A. According to Taxpayer, there were no lease agreements. There was no information provided stating whether Colleague paid rent to Landlord. Landlord began filing sales and use tax returns with the Department in March 2004, shortly after the incorporation of Hospital in January 2004.

Taxpayer stated that in December 2012 he purchased Colleague’s interests in Landlord and Hospital. Subsequently, he stated that, in order to simplify his business affairs, he desired to merge the three entities into one entity. Merger documents filed with the Department of State in June 2013 show that Landlord and P.A. merged into Hospital with an effective date of July 1, 2013.


Whether the merger of Landlord and P.A. into Landlord eliminates their obligation to pay sales tax since there is no rental of real property?

Taxpayer seeks a statement declaring that if all of the entities are merged into one entity, Hospital, there would be no obligation to pay sales tax because there is no rental of the real property.


Section 212.031, F.S., and Rule 12A-1.070, F.A.C., regulate the application of sales and use tax on the rental, lease and license to use real property. Section 212.031(1)(a), F.S., provides 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" with reference to the use of real property as the granting of a privilege to use or occupy a building or a parcel of real property for any purpose. A license may be created by a written or oral agreement or by implication based on the actions of the parties. See 20 Fla. Jur. 2d § 84. Similarly, for there to be a lease of real property, there need not be a written lease. See Regal Kitchens, Inc. v. Department of Revenue, 641 So. 2d 158 (Fla. 1st Dist. Ct. App. 1994).

In this case, there is no question that a taxable lease or license of real property existed between the entities. Taxpayer has stated that, although there were no written lease agreements, Hospital and P.A. rented the real property from Landlord, and tax was collected and remitted on the rent payments by Landlord. What requires determination is whether any tax is due now that the party previously leasing the real property, Landlord, is no longer registered as an active business entity with the Department of State.

Section 607.1106, F.S., provides, in pertinent part, the following:

(1) When a merger becomes effective:
(a) Every other corporation party to the merger merges into the surviving corporation and the separate existence of every corporation except the surviving corporation ceases;
(b) The title to all real estate and other property, or any interest therein, owned by each corporation party to the merger is vested in the surviving corporation without reversion or impairment; ....

As required by s. 607.1106, F.S., once Landlord merged into Hospital, the separate existence of Landlord ceased. Under s. 212.031(1)(c), F.S., a tax is levied on the total rent or license fee charged by the person charging or collecting the rental or license fee. However, in this case, the party that was previously charging and collecting the rental or license fee, Landlord, ceases to exist as a separate entity.

Moreover, by operation of law, once Landlord merged into Hospital, the title to real estate owned by Landlord was vested in the surviving corporation, Hospital, without reversion or impairment. Also, the merger agreement provides that the real property of Landlord was transferred to Hospital. Hence, Hospital is now the owner of the real property previously owned by Landlord.

As stated before, s. 212.031(1)(c), F.S., states that tax is levied on the total rent or license fee charged by the person charging or collecting the rental or license fee. Pursuant to s. 83.43(6), F.S., “rent” means the periodic payments due the landlord from the tenant for occupancy under a rental agreement and any other payments due the landlord from the tenant as may be designated as rent in a written rental agreement.

In this case, because of the merger, Hospital is the only remaining active entity. As a result, a landlord/tenant relationship does not exist, and a rent payment is no longer being made. Without a rent payment being made, no taxable rent is due. Therefore, no sales or use tax is due from Hospital on its occupancy of the real property previously owned by Landlord, because Hospital is not making any taxable rent payments. No sales or use tax is due from the two inactive entities, Landlord and P.A., because they are neither charging nor paying rent. 1


Based on the documents provided by the Taxpayer and the verbal communication with the Taxpayer, no sales or use tax is due from Hospital on its occupancy of the real property. No sales or use tax is due from the two inactive entities, Landlord and P.A.

This response constitutes a Technical Assistance Advisement under s. 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 s. 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 10 days of the date of this letter.


David J. Brennan, Jr.
Senior Attorney
Technical Assistance & Dispute Resolution

Record ID: 147372

End Notes:

1 Taxpayer has stated that at certain points in time, the rent paid by P.A. was paid to Hospital, who in turn paid rent to Landlord. However, because P.A. and Landlord are no longer active business entities, and Hospital is the remaining active entity with ownership of the real property, there is still no sales or use tax due from Hospital on its occupancy of the real property.

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