Sales and Use Tax TAA 19A-003 Admissions
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
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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”)
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. 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. 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 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. 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 easementThe 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 to use the Club property that is part of the common areas. The easement will be a covenant that runs with the land. 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. 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.”).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. 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?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: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: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 a3. Mandatory dues and fees paid to a condominium association, homeowners’ association, or cooperative association when they are required to be paid as a 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.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. 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. 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. 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.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. 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,
Chuck Wallace | Technical Assistance & Dispute Resolution | (850) 717‐7541 | AMS #: 7000127314
