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Sales and Use Tax TAA 18A-001 - Commercial Lease for Property Used for Qualified Motion Picture Productions

QUESTION: WILL THE TAXPAYER’S LEASE BE SUBJECT TO SALES AND USE TAX?

ANSWER: NO. PROPERTY LEASED QUALIFIES FOR EXEMPTION.

January 10, 2018

Subject: Technical Assistance Advisement (“TAA”)
TAA 18A-001
Sales and Use Tax
Section 212.031, Florida Statutes (F.S.)
XXXX (the Taxpayer)
FEI Number: XXXX
BP Number: XXXX

Dear XXXX:

This letter is a response to your petition dated November 2, 2017, for the Department’s issuance of a Technical Assistance Advisement (TAA) to Petitioner, regarding the taxability of a real property lease. 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.

Issue

The issue is whether a real property lease (the Lease) between the Taxpayer and XXXX, (Lessor) is subject to Florida’s sales and use tax.

Facts

Your TAA request provides, in part, the following:

[The Taxpayer] is a global XXXX business wholly-owned by XXXX, which in turn is owned and controlled by XXXX.
[The Taxpayer] is comprised of a U.S. national XXXX, a group of XXXX serving the major U.S. markets, a XXXX, the XXXX in the U.S., XXXX operation including XXXX and XXXX and an international XXXX arm that XXXX mostly XXXX worldwide to more than XXXX and in over XXXX.

Through its XXXX and XXXX, [the Taxpayer] XXXX a high level of XXXX and XXXX aimed at XXXX and XXXX in the United States and worldwide, consisting of XXXX. More than XXXX and XXXX and or XXXX is XXXX and XXXX by [the Taxpayer].
[The Taxpayer] is headquartered in XXXX and conducts the majority of XXXX activities at its facilities in the XXXX.

In XXXX, after an extensive multi-state search [the Taxpayer] committed to base its XXXX headquarters operations in XXXX. [The Taxpayer] selected a site of approximately XXXX upon which to construct a building consisting of approximately XXXX and XXXX (the “Building”), located in XXXX. [The Taxpayer] intends to bring under one roof, multiple XXXX from several prior locations XXXX.
A lease transaction was entered into pursuant to which XXXX would improve the property and construct the building. This lease (hereinafter called “the Lease”) was entered into in XXXX, by and between [Lessor], as the landlord, and [The Taxpayer], as tenant. The lease has an initial term of XXXX years; however, [the Taxpayer] has the right, at its sole option, to extend the initial term of the Lease for XXXX additional successive period(s) of XXXX years.

Substantially all of the property is essential to [the Taxpayer]’s XXXX operations and is substantially used as part of the XXXX of its XXXX and XXXX. [The Taxpayer] will apply through the XXXX for the XXXX as a XXXX pursuant to XXXX [1], once the application window opens XXXX. [The Taxpayer] also intends to apply to the Department for XXXX at that time, pursuant to XXXX. . . .

Article 2., labeled, “USE”, of the Agreement, provides in pertinent part:

Tenant may use the Premises for general, executive and administrative offices and for XXXX and other related uses and uses incidental or ancillary thereto, including, without limitation, office space associated with the XXXX and XXXX, including broadcast, distribution, sales and marketing, of XXXX services in connection therewith and for ancillary uses connected to the foregoing (the “Intended Use”). At the present time, it is anticipated that the following uses, without limitation, shall be deemed to be ancillary and permitted uses: (a) a cafeteria, dining room, kitchen, pantries and other reasonable food service and preparations installations, (b) vending machines, (c) libraries, (d) day care facilities, (e) health and recreation facilities, (f) board rooms, conference rooms and training rooms and facilities, (g) health care centers and first-aid rooms, (h) messenger and mail room facilities, (i) computer and communications systems, including without limitation XXXX, (j) employee lounges, (k) file rooms, (1) XXXX, (m) XXXX XXXX, and (n) security rooms.

Landlord expressly acknowledges that Tenant will be running and is hereby authorized to run a XXXX at the Premises. Subject to Legal Requirements (as hereinafter defined), Tenant shall have access to and use of the Premises 7 days per week, 24 hours per day and 365 days per year.

* * *

Tenant may use the Premises for Tenant’s Intended Use, but not otherwise.

Applicable Law & Discussion

Section 212.031, Florida Statutes provides in pertinent part:
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 unless such property is:

* * *

XXXXXXXX XXXXXXXXX XXXXXXXXXXX XXXXXXXXXX
XXXXX XXXXXXXXXX XXXXXXX XXXXXXXXXX XXXXXX

XXXXXX XXXXX XXXXXXX XXXXXXXXX XXXXXXXXXXX
XXXX XXXXXXXXX XXXXXXX XXXXXXXXX XXXXXXXXX
XXXXX XXXXXXXX XXXXXXXX XXXXXXXX XXXXXXXXX

XXXXXXXXX XXXXXXX XXXXXXXX XXXXXXXX XXXXXX
XXXXX XXXXXXX XXXXXXX XXXXXXXXXX XXXXXXXXX
XXXXXX XXXXXXXX XXXXXXXX XXXXXXXXX XXXXXXX
XXXXXXXX XXXXXXXXX XXXXXXXXXXXX XXXXXXXXX
XXXXX XXXXXXX XXXXXXXX XXXXXXXXXX XXXXXXXX
XXXXXXXX XXXXXXXX XXXXXXXX XXXXXXXX XXXXXX
XXXXXX XXXXXXXX XXXXXX XXXXXXXX XXXXXXXXXX
XXXXXXXXX XXXXXXXX XXXXXXX XXXXXXXX XXXXXX
XXXXXXXX XXXXXXXXX XXXXXXXX XXXXXXX XXXXXX
XXXXXX XXXXXXX XXXXXXXXX XXXXXXX XXXXXXXXX
XXXXXXXX XXXXXXXXXX XXXXXXX XXXXXXXX XXXXX
XXXXXXXXXX XXXXXXXXXX

Section XXXX, F.S., provides in pertinent part:

XXXXXXXXX XXXXXXXXXXXXX XXXXXXXXXXXX XXXXXXXXXX
XXXXXX XXXXXXXXXXX XXXXXXXXXXXX XXXXXXXXX XXXXXX
XXXXXXX XXXXXXXXXXXXX XXXXXXXXXXXXX XXXXXXXXXXX
XXXXXXXXX XXXXXXXXXXXXXXX XXXXXXXXXXXX XXXXXXXX
XXXXX XXXXXXXX XXXXXXXX XXXXXXXXX XXXXXXXXXXXXX
XXXXXXXXX XXXXXXXXX XXXXXXXX XXXXXXXXXX XXXXXXX
XXXXXXX XXXXXXXX XXXXXXXX XXXXXXXX XXXXXXX XXXX
XXXXXXXXXX XXXXXXXXXX XXXXXXX XXXXXXXX XXXXXXXX
XXXXXX XXXXXXXXXX XXXXXXXXX XXXXXXXX XXXXXXXXXX
XXXXXXXXXX XXXXXXXX

The subject real property lease indicates the exempt purpose per sections 212.031(1)(a)X., F.S. and XXXX, F.S.

Conclusion

The Lease between the Taxpayer and the Lessor is not subject to Florida’s sales and use tax. Accordingly, the Taxpayer should provide a copy of its XXXX (XXXX) to the landlord.

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,
R. Clay Brower
Technical Assistance & Dispute Resolution
(850) 717-6306
Control No: 28978

End Notes:

1 The Taxpayer has since received a XXXX (XXXX), dated XXXX, from the Department.

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