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TAA 13A-017 Lease of Tangible Personal Property

SUMMARY

QUESTION: Whether lease of furnishings by Taxpayer for subsequent re-lease to its customers is subject to tax.

ANSWER: No. Taxpayer demonstrated that the re-lease of furnishings to customers under Rule 12A-1.071(6), F.A.C., is not taxable, and that Taxpayer’s business model is distinct from the rental of furnished accommodations by a hotel or other transient rental facility, which would be taxable as provided by Rule 12A-1.025, F.A.C. Taxpayer is properly collecting and remitting sales tax from its lessees.

August 20, 2013

Subject: Technical Assistance Advisement 13A-017
Sales and Use Tax
Lease of Tangible Personal Property
Section 212.07, Florida Statutes (“F.S.”)
Rule 12A-1.071(6), Florida Administrative Code (“F.A.C.”)

XXX (“Petitioner” or “Taxpayer”)
FEI Number: XXX

Dear

This letter is a response to your petition dated July 16, 2013, for the Department’s issuance of a Technical Assistance Advisement (“TAA”) to Petitioner, concerning the lease and re-lease of tangible personal property. 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
Taxpayer is a business which provides temporary residential accommodations to individuals who are in need of short term housing. The housing provided can extend in duration from one month to several years, depending on the individual’s need. Taxpayer provides both furnished and unfurnished accommodations and also leases furnishings to customers who already have accommodations but require furniture and homegoods.

Taxpayer provides these furnishings independently of the provision of accommodations. Although a customer may be billed for housing and furnishings at the same time, these are separately itemized charges. Additionally, Taxpayer does not maintain an inventory of furnishings to use with multiple or successive customers. Taxpayer works with a customer to determine what furnishings are needed for that customer, and then it leases the necessary furnishings from a supplier.
Taxpayer is registered with the State as a dealer, and furnishes a resale certificate to its suppliers when leasing the selected tangible personal property. The duration of the lease of furnishings from Taxpayer’s supplier generally matches the duration of the lease for the customer’s accommodations.

While Taxpayer does provide short-term furnished housing like hotels and other transient rental providers do, its business model is distinguishable from a hotel in several ways. First, Taxpayer separately itemizes charges for furniture rentals in its leases. Next, such charges are entirely at the customer’s option. Further, Taxpayer allows its customers to choose how much, what type, and what style of furnishings will be provided, rather than providing a “one size fits all” package. Finally, and most importantly, Taxpayer does not lease the furniture for its own consumption. Taxpayer does not use the furniture to furnish transient accommodations which are rented “as is” to a series of customers, as a hotel does. Instead, Taxpayer leases the furnishings solely for the purpose of re-lease to specific and identifiable customers.

Taxpayer collects and remits sales tax on all rental charges charged to its lessees.

Requested Advisement

Are Taxpayer’s leases of furniture from suppliers exempt from tax as tangible personal property leased for re-lease to third parties?

Applicable Law and Discussion

Unless a specific exemption applies, Chapter 212, Florida Statutes (“F.S.”), provides that it is the legislative intent that the sale of tangible personal property is subject to tax. By definition, the term “sale” includes the “lease” of tangible personal property. See s. 212.02(15), F.S. Further, the lease of tangible personal property used by a hotel or other transient rental business is specifically taxable under Rule 12A-1.025, F.A.C.

Taxpayer has provided documentation to distinguish its business model from that of a transient rental provider. Thus, the rule for tangible personal property leased and used by hotels or other such businesses does not apply. Instead, the applicable rule in this case is the rule for the lease of tangible personal property for the purpose of re-leasing the property to a third party.

Rule 12A-1.071(6), F.A.C., provides that a lease of tangible personal property for the purpose of leasing the property to a third party is exempt from tax. Taxpayer provided sample leases with customers and sample leases with furniture providers, as well as explanatory materials for its business model. Taxpayer showed that each furniture lease from its provider is made on behalf of a specific customer, and that Taxpayer maintains no independent inventory of furniture.

Based on this information, Taxpayer leases furniture specifically and solely for re-lease to its customers. As such, the leases are therefore properly exempt under Rule 12A-1.071(6), F.A.C. Provided that Taxpayer continues to comply with the general rules for resale transactions found in Rule 12A-1.039, F.A.C., the leases with Taxpayer’s suppliers should be treated as sales for resale, and tax should not be collected.

Conclusion

The lease of tangible personal property by Taxpayer from its suppliers for the purpose of re-lease to its customers is not subject to sales tax. Taxpayer should continue to collect and remit sales tax from its lessees.

This response constitutes a Technical Assistance Advisement under section 213.22, F.S., which is binding on the Department only under the facts and circumstances described in the request for this advice, as specified in section 213.22, F.S. Our response is predicated on those facts and the specific situation summarized above. You are advised that subsequent statutory or administrative rule changes, or judicial interpretations of the statutes or rules, upon which this advice is based, may subject similar future transactions to a different treatment than expressed in this response.

You are further advised that this response, your request and related backup documents are public records under Chapter 119, F.S., and are subject to disclosure to the public under the conditions of section 213.22, F.S. Confidential information must be deleted before public disclosure. In an effort to protect confidentiality, we request you provide the undersigned with an edited copy of your request for Technical Assistance Advisement, the backup material and this response, deleting names, addresses and any other details which might lead to identification of the taxpayer. Your response should be received by the Department within 10 days of the date of this letter.

Respectfully,

Kimberly Bevis
Senior Attorney
Technical Assistance & Dispute Resolution
850-717-7170

Record ID: 148438

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