STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FLORIDA EXPORT TOBACCO CO., INC., )

)

Petitioner, )

)

vs. ) CASE NO. 80-1785

) STATE OF FLORIDA, OFFICE OF ) COMPTROLLER, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, held a public hearing in the above styled case on December 5, 1980, at Miami, Florida.

APPEARANCES

For Petitioner: Charles K. George, Esquire

Ingraham Building, Suite 236

25 Southeast 2nd Avenue Miami, Florida 33131

For Respondent: E. Wilson Crump, II, Esquire

Assistant Attorney General Department of Legal Affairs The Capitol, Room LL04 Tallahassee, Florida 32301

By Petition filed September 3, 1980, Florida Export Tobacco Co., Inc., Miami International Airport Pharmacy, Inc., International Pharmacies, Inc., and Sirgany International, Inc., seek to reverse the Comptroller's denial of a refund of sales taxes paid by Petitioners. As grounds for the refunds requested it is alleged that the payments of monthly surcharges to the Aviation Department based upon the gross sales of these tenants are not rental payments subject to sales tax.

At the hearing Petitioners were not prepared to present evidence but after a general discussion it was agreed that no factual dispute was involved and that the case proceed with only Petitioner, Florida Export Tobacco Co., Inc., as the legal determination would be applicable to all of the Miami International Airport tenants. It was further agreed that the parties would submit the testimony of the Aviation Director, Dade County by deposition to the Hearing Officer, or in the alternative, submit a stipulation of facts. Upon completion of the deposition the parties would submit briefs to the Hearing Officer, who would then submit this Recommended Order. Although the deposition was delayed more than a month from the time allotted, this deposition has been received as has a brief submitted by Respondent. After reviewing the deposition and lease attached thereto, the following is submitted.

FINDINGS OF FACT

1. Florida Export Tobacco Co., Inc., Petitioner, operates, as a concessionaire, duty-free stores at Miami International Airport. The premises are owned by the Dade County Aviation Department and the stores are leased to Petitioner pursuant to the terms of a lease and concession agreement dated 19 July 1977, effective 1 August 1977 and continuing until 30 September 1987. (Exhibit 1 to Deposition)

   
   

2. Pursuant to this agreement Petitioner occupies six stores and additional warehouse space at the Terminal Building and the International Satellite Facility.

   
   

3. Article II in Exhibit 1 entitled Rental Charges and Payments provides for rental payments for each store and space occupied based upon a fixed fee of

   $X per square foot per year with the dollar per square foot cost varying with the space occupied. In addition to this minimal rental fee, Section 2.03 of this agreement provides:

   
   

   County Profit Participation: As additional consideration for the rights and privileges granted Concessionaire herein, Concessionaire shall pay the County a portion of its profits. As

   a convenience and in order to eliminate requirements for detailed auditing of expenditures, assets and liabilities and in order to provide an even flow of annual revenues for budgeting and bond financing purposes, said portion of the profits of the Concessionaire shall be calculated as the amount by which sixteen percent of the monthly

   gross revenues, as defined in Arti- cle 2.07, exceeds the sum of monthly

   rental payments required by Articles 2.01 and 2.04. Concessionaire shall pay such

   portion of its profits to County by the twentieth (20th) day of the month following the

   month in which the gross revenues were received or accrued. For the period October 1, 1982 through September 30, 1987, the percent of monthly gross revenues to

   be paid by Concessionaire as a portion of its profits shall be eighteen percent, payable and calculated in the same manner as above.

   
   

4. The lessor provides air conditioning, garbage and sewage disposal facilities, security, and many other services to the lessee in addition to the space leased.

   
   

5. From October 1976 through September 1977 Petitioner paid $40,499.66 in additional sales tax over the guaranteed minimum amount; for the year ending September 1978 this additional sales tax was $66,284.85; for the year year ending September 1979 this additional sales tax was $93,837.15; and for the year

   ending September 1980 this additional sales tax was $137,521.87. (Exhibit 2 to the Deposition)

   
   

6. As the owner of the facility Dade County has the option of operating the various facilities and services available to the public or having these operated by a concessionaire. Dade County has opted for the manner it believed more profitable to the county and in the case of the duty free stores this has resulted in leasing the space to a concessionaire. The hotel at the airport is operated by the Aviation Department under a management contract.

   
   

7. It is Petitioner's and Dade County's position that a sales tax should not be paid on the county profit participation charges because, if the Aviation Department operated the stores there would be no sales tax on any rental income and the County operates the facilities at the airport so as to maximize profits to the county. Therefore by requiring the concessionaire to pay sales tax, this reduces the profit available to share with the County.

   
   

   CONCLUSIONS OF LAW

   
   

8. The Division of Administrative Hearings has jurisdiction over the parties to and the subject matter of these proceedings.

   
   

9. Sales tax on rental of commercial facilities is established by Section 212.031, Florida Statutes, which provides in pertinent part:

   
   

   (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, or letting any real property .

   (c) For the exercise of such privi- lege a tax is levied in the amount equal to 4 percent of and on the total rent charged for such real property by the person charging or collecting the rental.

   (2)(a) The tenant actually occupying, using or entitled to use of any property the rental from which is subject to taxa- tion under this section shall pay the tax to his immediate landlord or other person granting the right to such tenant to occupy or use such real property.

   
   

10. Regulations pertaining to the collection of sales tax on rentals of real property are contained in Rule 12A-1.70, Florida Administrative Code, which provides in pertinent part:

    
    

    1. The tenant actually occupying, using or entitled to use any such property shall pay the tax to his immedi-

       ate landlord or such other person granting the right to such tenant to occupy or use such property.

    2. The tax shall be paid by the tenant on all considerations due and

       payable for the privilege of occupancy . . .

       (9) When the owner of a business, or

       the operator of a business who is a lessee, provides floor space to any person, and in addition thereto and in connection there- with also provides certain services to such person such as display, delivery, wrapping, packaging, telephone, credit, collection or accounting, the amount charged by the lessee to such person constitutes the rental of real property, and where the charges for such services are not separately stated in the agreement and on the invoices or other billings, the total consideration paid under the agreement is taxable. Where the charges for such services are separately stated in the agreement and on the invoices or other billings, only those charges for floor space

       are taxable. When the operator of a business is a lessee, he may take credit in accordance with the provisions of sub-paragraph (7) of this rule, for the tax paid on the floor space which he subleases.

       
       

11. Here the consideration paid by Petitioner, and the total rent charged by the lessor, for the use and occupancy of the premises is the fixed square foot charge plus the sum paid as the county profit participation. There is no separate breakdown for any additional services for which the county profit participation is included. Section 2.03 of this lease between Petitioner and Dade County, Aviation Department could be restated to read, "The rental for each store occupied by the tenant is 16 percent of the gross revenues of the store with a minimum rental of $X per month." The fact that the total amount of the rental payments due cannot be known until after the end of the month does not change the nature of these payments as consideration for the use and occupancy of real property.

    
    

12. Continued use and occupancy of the premises is conditioned upon Petitioner paying to the Aviation Department a percentage of its gross revenues, in accordance with the terms of the lease and concession agreement. Liability of the transaction to sales tax is determined by the form and face of the instrument representing the transaction. Lee v. Kenon, 78 F.2d 425 (1935) cert. den. 56 S.Ct. 170.

    
    

13. All consideration paid by petitioner including the percentage of gross revenues is rent and subject to sales tax. Identical issues were involved in Quick v. State, Case No. 72-632, Leon County Circuit Court, where the plaintiff operated a food concession in the Municipal Auditorium of West Palm Beach. The Court there held that all the payments made to the city, including 20 percent of gross sales, constituted "rent" upon which 4 percent tax was due under Section 212.031, Florida Statutes.

    
    

14. From the foregoing it is concluded that the county profit participation sum paid to the Dade County Aviation Department by Petitioner is part of the rent paid for the facilities occupied and is subject to sales tax. It is therefore

RECOMMENDED that the petitioner's request for refund of sales taxes be denied.

Entered this 17th day of March, 1981.

K. N. AYERS, Hearing Officer Division of Administrative Hearings The Oakland Building

2009 Apalachee Parkway

Tallahassee, Florida 32301

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 17th day of March, 1981.

COPIES FURNISHED:

Charles K. George, Esquire Suite 236, Ingraham Building

25 S. E. 2nd Avenue Miami, Florida 33131

E. Wilson Crump, II, Esquire Assistant Attorney General Department of Legal Affairs The Capitol, Room LL04 Tallahassee, Florida 32301

Docket for Case No: 80-001785

Orders for Case No: 80-001785