Sales and Use Tax TAA 17A-011 Musical Festival Sales
May 23, 2017
TAX: Sales and Use Tax
TAA NUMBER: 17A-011
ISSUE: Whether the “profit split” paid by the Concessionaire to the
Taxpayer from sales tax that occurred at the 2015 Music Festival was subject
to sales tax.
STATUTE CITES: Sections 212.02 and 212.031, Florida Statutes (F.S.) Rule 12A-1.070, Florida
Administrative Code, (F.A.C.)
QUESTION: Was the “profit split” paid by the Concessionaire to the Taxpayer
from sales tax that occurred at the 2015 Music Festival subject to sales tax?
ANSWER – Based on the Facts Below: The 2015 Agreement was a license to use real
property granted to a food and beverage concessionaire at a publicly owned
recreational facility. The “profit split” paid by the Concessionaire
to the Taxpayer from sales that occurred at the 2015 Music Festival was
exempt pursuant to s. 212.031(1)(a)10., F.S.
Re: Technical Assistance Advisement 17A-011 Sales and Use Tax– Concessionaire
Lease/License Sections 212.02 and 212.031, Florida Statutes (F.S.) Rule
12A-1.070, Florida Administrative Code, (F.A.C.) XX (the Taxpayer)
Dear XX:
This is in response to your letter dated August 30, 2016, requesting this
Department’s issuance of a Technical Assistance Advisement (“TAA”)
pursuant to section 213.22, F.S., and Rule Chapter 12-11, F.A.C. An examination
of your letter has established you have complied with the statutory and
regulatory requirements for issuance of a TAA. Therefore, the Department
is hereby granting your request for a TAA.
Facts
Your letter dated August 30, 2016, provides that following in part:
. . . Taxpayer’s principal business is putting on the XX Music Festival
(“Festival”).
. . . [Festival] is a multi-day, multi-stage music festival taking place
on XX beach (“City Beach”), featuring some of the biggest
names in country, rock and roots music. [Festival] brings likeminded fans
together for an unforgettable beach weekend experience that pairs music
with meaning to raise awareness for marine conservation. [Festival] works
hand in hand with the XX (“Foundation”) to increase public
awareness about the issues impacting the world’s oceans and to support
scientific research, education and ocean conservation initiatives.
. . . It is our position that the taxpayer has overpaid sales tax to the
Florida Department of Revenue since the inception of [Festival] in 2013.
. . . Sales that occur during the weekend of the festival include alcoholic
beverages, non- alcoholic beverages, food, merchandise, etc. Alcoholic
beverage sales are the largest portion of sales during the festival and
the main issue at hand. A master concessionaire ([the Concessionaire)]is
used to run the various bars and is the point of sale contact with the
customers. The [Concessionaire] collects and remits sales tax on the alcoholic sales.
. . . The key issue for the taxpayer is the profit split from the alcohol
sales between the taxpayer and [Concessionaire]. This transaction was
originally treated as commercial rent and taxed accordingly. * * * On
February 15, 2017, in response to the Department’s request for supporting
documentation, you provided the following via e-mail:
A copy of a “2015 Concessions Agreement” between the Taxpayer
and XX (“Concessionaire”), executed April 9, 2015;
A copy of the 2015 [Festival] Concessions Recap; and
The 2015 Concessions Agreement with Concessionaire provides the following in part:
1. [The Taxpayer] hereby grants and leases unto [Concessionaire] certain
rights, privileges, and space during the 2015 [Festival] (herein after
called “Festival”) to be held April 11 & 12, 2015 at XX
(the “Premises”) at which [the Taxpayer] chooses to contract
with [Concessionaire] to conduct, operate, and sell upon the Premises,
herein after designated by Grantor, such business and articles that are
exhibited below.
2. Privileges granted under this contract give [Concessionaire] permission
to conduct or sell beverages including beer, wine, liquor, soft beverages,
and water on the Premises. . . .
3. The use of premises or space granted to [Concessionaire] under this
contract is described as follows: trailers, vehicles, food trucks, and
tents. Said trailers and tents to be located on such part of the [the
Taxpayer’s] premises and will be designated by [the Taxpayer]. . . .
15. In exchange for the exclusive rights to the sale or giveaway of all
beverage consumables to the general public, [Concessionaire] agrees to
the following terms:
. . . e) [Concessionaire] agrees to remit 40% of the gross-net water sales.
. . . Beverage commissions for [Festival] will be paid out at 50% of total
gross-net beverage revenue earned at the conclusion of Festival with any
additional commission owed to be paid within five (5) business days of
the conclusion of [Festival] according to the percentages within each
of the following tier levels:
Gross-Net Beverage Revenue % Paid to Promoter
$0 to $1,100,000 50%
$1,100,001 to $1,500,000 53%
$1,500,001+ 55%
* * *
A “Public Meeting Notice,” obtained from the City’s website,
XX, provides the following regarding the Festival, in part:
. . . [T]he [Festival] returns to the sands of [the Beach] April 11 –
12 with multiple award-winning recording and performing artists . . . .
Please be aware that the sidewalk and parking lots extending [through]
. . . XX Park will be closed at various points beginning April 1 through
April 16 for [Festival]. . . .
The “Public Meeting Notice” includes a map that identifies
the “Event Site” to be in the middle of XX Park.
Information regarding XX Park obtained from the same website provides
the following in part:
Park Facilities and Amenities
• Boat Ramp — non-motorized • Grills • Picnic Tables
• Outdoor Showers • Restrooms • Basketball Full Court •
Playground • Volleyball Court
* * *
In an e-mail dated May 9, 2017, the Taxpayer confirmed that “all
bars, stages, beer stands, etc., take place on publicly owned property.”
The Taxpayer also confirmed that it rents the festival area from the City
of XX and has entered into an agreement with the Concessionaire to sell
alcoholic beverages, food, water, and concert merchandise at the Festival.
Requested Advisement
You request an advisement that provides the “publicly owned recreational
facility exemption” provided in s. 212.031(1)(a)10., F.S., is applicable
to the agreement between the Taxpayer and the Concessionaire and that
payment of the “profit split” between the Taxpayer and Concessionaire
is not subject to sales tax. The response will address the Taxability
of the “profit split” paid by the Concessionaire to the Taxpayer
from sales tax occurred at the 2015 Music Festival.1
Applicable Authority and Discussion
Section 212.031, F.S., imposes sales tax on the privilege of engaging
in the leasing of or the granting of a license to use, real property for
any purpose, unless specifically exempt. A “license” to use
real property is defined in s. 212.02(10)(i), F.S., as “. . . the
granting of a privilege to use or occupy a building or a parcel of real
property for any purpose.” Section 212.031(1)(c), F.S., provides
that “[f]or the exercise of such privilege, a tax is levied in an
amount equal to 6 percent of and on the total rent or license fee charged
for such real property by the person charging or collecting the rental
or license fee.” The “total rent or license fee charged”
is defined to include “payments for the granting of a privilege
to use or occupy real property for any purpose and shall include base
rent, percentage rents, or similar charges.”
The guiding principles are that, to constitute a payment of rent, the
payment must be required by the lease or license as a condition of occupancy
of the property, and the payment must benefit the landlord. A payment
is considered to be in exchange for the right to occupy real property
if a failure to make such payment results in the loss of the right to occupy.
Section 212.031(1)(a)10., F.S., provides an exemption for real property
leased, subleased, licensed, or rented to a person providing food and
drink concessionaire services within the premises of a convention hall,
exhibition hall, auditorium, stadium, theater, arena, civic center, performing
arts center, or publicly owned recreational facility. The cited exemption
presupposes the existence of a “recreational facility,” and
it exempts only that portion of the premises within such facility that
is leased or licensed to a person providing food and drink concessionaire services.
Rule 12A-1.070, F.A.C., is the Department’s administrative rule
implementing the provisions of s. 212.031, F.S. Subparagraph (1)(b)3.
of the rule provides in part:
For purposes of this rule, the term “retail concessionaire,”
which may be either a lessee or licensee, shall mean any person who makes
sales of food or drink directly to the general public within the premises
of a . . . publicly owned . . . recreational facility . . . .
No definition of “recreational facility” is provided by statute.
Thus, it is necessary to look to look to principles of statutory construction.
Words of common usage, when used in a statute, should be construed in
their plain and ordinary sense. Pederson v. Green, 105 So.2d 1 (Fla. 1958).
1 All parties agree that sales tax is due on the sale of alcoholic beverages,
food, water, and merchandise sold by the Concessionaire.
The word “recreation” is defined in Webster’s New Twentieth
Century Dictionary, Unabridged, Second Edition, 1968, as follows:
1. refreshment in body or mind, as after work, by some form of play, amusement,
or relaxation. 2. Any form of play, amusement or relaxation used for this
purpose, as games, sports, hobbies, reading, walking, etc.
The word “facility” is defined in The Random House Dictionary
of the English Language, The Unabridged Edition, as “something designed,
built, installed, etc., to serve a specific function affording a convenience
or service. . . .” The festival is held at XXX which is owned by
the City. The facilities provided by the City at XX Park include grills,
tables, showers, public restrooms. XX Park falls within the plain and
ordinary meaning of “recreational facility,” as it is established
to be used for “play, amusement, or relaxation” to the City’s
residents and guests. The Agreement provides that the Taxpayer “grants
and leases . . . space” to the Concessionaire in order to sell beer,
wine, liquor, soft beverages, and water during the music festival. In
exchange, the Concessionaire pays the Taxpayer a percentage of the “gross-net
beverage revenue” received during the festival.
Conclusions
The 2015 Agreement was a license to use real property granted to a food
and beverage concessionaire at a publicly owned recreational facility.
The “profit split” paid by the Concessionaire to the Taxpayer
from sales that occurred at the 2015 Music Festival was exempt pursuant
to s. 212.031(1)(a)10., 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 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 that 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 15 days of the
date of this letter.
Sincerely,
Brinton Hevey
Technical Assistance Advisement
Tax Law Specialist Technical Assistance and Dispute Resolution 850/717-6839
Record ID: 212736
End Notes:
1 All parties agree that sales tax is due on the sale of alcoholic beverages,
food, water, and merchandise sold by the
Concessionaire.