[RPPTL LandTen] FW: Sales Tax on Improvements

Tue Oct 11 11:00:05 PDT 2011

Dear members, please see the attached and email message below regarding proposed DOR rule changes affecting taxation of certain leasehold related improvement/maintenance items.  Please provide me with any particular comments directly to my email.

Thanks

Neil

[http://www.shutts.com/shutts100.jpg]
Neil B. Shoter
Partner / LEED Accredited Professional
________________________________
Shutts & Bowen LLP
1100 CityPlace Tower, 525 Okeechobee Boulevard | West Palm Beach, FL 33401
Direct: (561) 650-8535 | Fax: (561) 822-5525
E-Mail<mailto:NShoter at shutts.com> | Biography<http://www.shutts.com/attorneys-Neil-Shoter.html> | V-Card<http://www.shutts.com/vcard-181.vcf> | Website<http://www.shutts.com/>

________________________________
From: Freedman, Robert S. [mailto:rfreedman at carltonfields.com]
Sent: Tuesday, October 11, 2011 1:50 PM
To: Fields, Alan, Co-Vice Chair to Real Property Problems Study ; Frazier, S. Katherine, Chair - Real Property Problems Study; Hancock, Patricia J., Co-Vice Chair - Real Property Problems Study; Frank, Scott, Co-Vice Chair - Landlord & Tenant; Granet, Lloyd, Co-Vice Chair - Landlord & Tenant; Neil B. Shoter; Hutson, Denise, Co-Vice Chair - Residential Real Estate & Industry Liaison Committee; Jones, Frederick W., Chair - Residential Real Estate & Industry Liaison Committee; William J. Haley, Co-Vice Chair - Residential Real Estate & Industry Liaison Committee
Cc: Margaret A. Rolando; Freedman, Robert S.
Subject: FW: Sales Tax on Improvements

Greetings to all.  Please see Neil’s email below and advise as to any comments that your Committee may have with this proposed rule by the end of business next Wednesday, October 19th.  Please copy all who are on this email so that we share comments and thoughts.  Thanks.  Rob

From: Neil B. Shoter [mailto:NShoter at shutts.com]
Sent: Monday, October 10, 2011 4:20 PM
To: Freedman, Robert S.
Cc: Michael J. Gelfand
Subject: Sales Tax on Improvements

Rob, I have been informed today of a proposed DOR Rule change affecting sales tax that I intend to circulate to the Landlord/.Tenant Committee for comments.   A summary is as follows:

It has come to our attention that the Department of Revenue ("DOR") is proposing to amend Rule 12A-1.070 F.A.C. to allow the taxation of tenant improvements and maintenance of leaseholds (everything but purely residential dwellings) to be subject to sales tax. Hypothetically, that means if your tenant changes the light bulbs the value of the new light bulbs has accreted to the building then the leaseholder is responsible for the collection and remittance of the tax as  percentage of the "amount of dollars worth of light bulbs." If the owner was unaware of any improvements, it appears that the owner may still be liable for sales tax (and the accompanying penalty and interest for not reporting it). It also seems that DOR can assess the tax mid-lease, before the tenant has the opportunity to remove the improvements when the lease expired. A good example might be a restaurant that upgrades its walk-in-freezer, DOR could come in during mid-lease and assess a sales tax, penalty, and accrued interest to the owner of the property, even though the Restaurateur-tenant had the intention of removing the walk-in-freezer after the lease expired and the Restaurateur moved into a larger place, elsewhere, before the original walk-in-freezer was re-assembled and put back in place.

A DOR hearing was held on September 21, 2011: http://dor.myflorida.com/dor/rules/pdf/agenda_wksp_930_092111.pdf
See page 4, for reference to Rule 12A-1.070 F.A.C.

This proposed rule change may contradict the current section 212.031(2)(b), Florida Statutes. DOR may intend to  lobby for the statute to be amended, as well.
http://www.leg.state.fl.us/STATUTES/index.cfm?App_mode=Display_Statute&Search_String=&URL=0200-0299/0212/Sections/0212.031.html
(2)(a) The tenant or person actually occupying, using, or entitled to the use of any property from which the rental or license fee is subject to taxation under this section shall pay the tax to his or her immediate landlord or other person granting the right to such tenant or person to occupy or use such real property.
(b) It is the further intent of this Legislature that only one tax be collected on the rental or license fee payable for the occupancy or use of any such property, that the tax so collected shall not be pyramided by a progression of transactions, and that the amount of the tax due the state shall not be decreased by any such progression of transactions.

[http://www.shutts.com/shutts100.jpg]

Neil B. Shoter
Partner / LEED Accredited Professional
________________________________
Shutts & Bowen LLP
1100 CityPlace Tower, 525 Okeechobee Boulevard | West Palm Beach, FL 33401
Direct: (561) 650-8535 | Fax: (561) 822-5525
E-Mail<mailto:NShoter at shutts.com> | Biography<http://www.shutts.com/attorneys-Neil-Shoter.html> | V-Card<http://www.shutts.com/vcard-181.vcf> | Website<http://www.shutts.com/>

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