vs. ) CASE NO. 79-1335
Respondent. )
Pursuant to notice, an administrative hearing was held before Michael R. N. McDonnell, Hearing Officer for the Division of Administrative Hearings, at 9:00 a.m., on September 19, 1979, in Room 349, Orange County Courthouse, 65 East Central Boulevard, Orlando, Florida.
For Petitioner: W. Kelly Smith, Esquire
Robert E. Meale, Esquire Suite 1444, CNA Tower
On or about April 4, 1979, Respondent, Department of Revenue (hereafter DOR) issued a Notice of Proposed Assessment of Tax, Penalties and Interest under Chapter 212, Florida Statutes, against Petitioner, Wet 'N Wild, Inc. (hereafter Wet 'N Wild). After a series of informal conferences, the parties amicably settled certain disputes regarding portions of the proposed assessment.
However, the parties were unable to resolve their dispute regarding the proposed assessment of an excise tax upon Wet 'N Wild's leasehold payments. Wet 'N Wild declined to pay the tax and timely filed a petition for an administrative hearing.
At the final hearing, the sole issue contested was whether the DOR could lawfully levy an additional excise tax upon Wet N' Wild's leasehold payments.
Wet 'N Wild operates a water-oriented recreational amusement park known by the same name. The park is situated on about twelve acres of land, including a portion of a small lake, in Orange County, Florida. The park consists primarily of several in-ground pools and waterslides, as well as a beach on the lake.
By a Purchase and Lease Agreement dated March 15, 1976, Wet 'N Wild agreed to sell to Mark IV Properties, Inc. (hereafter Mark IV), a California corporation, the subject twelve acres of land, including all buildings, improvements and fixtures attached to that land. Mark IV simultaneously agreed to lease the improved land back to Wet 'N Wild for a period of twenty years with an option to renew the lease for an additional ten years.
The conveyance subsequently took place, pursuant to the terms of the Purchase and Lease Agreement. By a Lease Agreement dated February 28, 1977, Mark IV then leased the park to Wet 'N Wild, as had been agreed. The Lease Agreement requires that Wet 'N Wild pay rent in accordance with a monthly rental schedule incorporated as an exhibit to the Lease Agreement. Additionally, the Lease Agreement requires Wet 'N Wild to pay the ad valorem taxes on the land.
Wet 'N Wild leases the park from Mark IV on a turnkey basis. All of the pools and the waterslides now present on the land were conveyed by Wet 'N Wild to Mark IV pursuant to the Purchase and Lease Agreement. The only significant addition to the park since that conveyance is the so-called Kamikaze Slide. This waterslide was separately conveyed to Mark IV upon its completion in November 1978. Two provisions in the Lease Agreement at least implicitly acknowledge Mark IV's ownership interest in the pools and waterslides. First, the lease requires Wet 'N Wild to maintain fire and extended hazard insurance on the improvements. Second, Mark IV is obligated to replace or repair the improvements in the event of their partial or total destruction, and, pending completion of the repairs or replacements, the rent is proportionately reduced.
All of the pools and waterslides are fixed to the land in such a fashion that their removal would cause substantial injury to the premises. For example, the Kamikaze Slide is a six-story high waterslide emptying into a concrete pool of water built into the ground. The slide is supported by large steel beams and poles anchored deeply into the ground. The other pools and waterslides, all of similar physical dimensions, are equally affixed to the property.
Wet 'N Wild derives its primary source of income from entrance fees which guests pay to enter, use and occupy the park. Once having paid this fee, a guest is entitled to the use and occupancy of the park without further charge. The sole exception is a rental fee paid for the use of small boats on the lake, for which rental of tangible personal property Wet 'N Wild collects and remits to the DOR a separate tax. The guest is denied access to incidental areas of the park, such as those reserved for operating machinery or maintenance.
From its inception, Wet 'N Wild has duly collected and remitted to the Department an excise tax on entrance fees. The revised proposed assessment is computed exclusively on the basis of the lease payments, including ad valorem tax payments, made by Wet 'N Wild under the Lease Agreement.
CONCLUSIONS OF LAW
It is DOR's position that the tax Wet 'N Wild is collecting is an admissions tax. However, the basis for DOR's proposed assessment is that Wet 'N Wild has failed to pay a tax on the lease of the amusement park. Wet' N Wild contends that the imposition of the rental tax constitutes pyramiding.
Section 212.04, Florida Statutes, imposes a four percent tax on the privilege of selling or received anything of value by way of admissions. Rule
12A-1.05(1), Florida Administrative Code, states, "Every dealer is exercising a taxable privilege who sells or receives anything of value by way of admissions." In this case, Wet 'N Wild charges an admission fee to its guests. It then passes the tax on to its guests and merely collects the tax on admissions. Wet 'N Wild has been properly collecting and remitting admissions tax.
However, Wet 'N Wild is not remitting any tax on the lease it entered with Mark IV. Section 212.031(1), Florida Statutes, states that every person who engages in the business of renting, leasing, or letting any real property is exercising a taxable privilege, unless the property fits within certain exceptions. Subsection (2) requires the tenant to pay this tax to its landlord. In a lease, the privilege of renting is the lessor's. However, the lessee is ultimately responsible for the tax as the lessor merely collects the tax. Rule 12A-1.70(15), Florida Administrative Code.
Wet N' Wild contends that the imposition of both an admissions tax and a rentals tax constitutes pyramiding, and argues that the compensation paid by Wet 'N Wild for the lease and the compensation paid by guests for the entry ticket are both for the occupancy or use of the park.
The evidence supports DOR'S position that two taxable privileges are involved. Wet 'N Wild's witness, Mr. Shawen, stated that upon entry to the park, a guest merely pays a sum of money and gets a receipt or ticket. No other document, including any lease or sub-lease agreement is executed. Petitioner imposes certain limitations on hours in which guests may enter the park, areas within the park are closed to guests, and other limitations are imposed on guests for their safety. There are limitations which are not found in classic lease situations.
In Ryder Truck Rental, Inc. v. Bryant, 170 So.2d 822 (Fla. 1964), the Florida Supreme Court held that the tax imposed on a sale of a motor vehicle and again on the rental of the vehicle did not constitute pyramiding. In that case, the Petitioner purchased trucks solely for the purpose of renting them to customers. The Court addressed the issue of taxation of different privileges:
. . . the appellants, who are assessed for the tax on the rental, pay the tax for the privilege of engaging in an entirely different business or occupation from that of the person or firm from whom they purchased the vehicles; and, finally, the ultimate sales is still another, and different, transaction. In each case the tax is passed on by the taxpayer to his or its customers:
the Motor-vehicle dealer passes the sales tax on to the appellant-purchaser; the appellant- renter of the vehicle passes the tax on the rental to his or its lessee or rentee; and when the vehicle is sold by the appellant at the end of its useful life, the sales tax is again passed on to the purchaser. Clearly, then, there is no "pyramiding" or duplication of the tax since each is on a separate and distinct taxable privilege. 170 So.2d at 825.
In 1969, the Idaho Supreme Court addressed this issue in a case with a factual situation similar to the instant case. In Boise Bowling Center v.
State, 93 Idaho 367, 461 P.2d 262, (Idaho 1969), the Petitioners were bowling alley proprietors who leased certain bowling equipment for use in their place of business. The State of Idaho imposed a tax on the rental of the equipment and a tax on the fees charged to guests for the use of the equipment. The Court stated:
Lastly we turn to respondents' (proprietors') contention that the imposition of the sales tax on the transaction between themselves and
A.M.F. constitutes "double taxation" since the statute also imposes a tax on the transaction between the proprietor and his customer (bowling patron). It is evident that two transactions have occurred simultaneously.
The first is the proprietors' rental of the pinsetting equipment from A.M.F. The second is the sale of bowling services by the proprietor of the bowling establishment to his customers. These are two entirely distinct transactions which are being subjected to taxation. The first relates to the privilege of renting tangible personal property within the state. The second relates to the privilege of using bowling facilities (a unique combination of property and services) for recreational purposes.
There are two entirely different taxpayers in each transaction; the proprietors in the first, his customers in the second. A sales tax is not a tax on property but rather an excise tax--a levy on certain transactions designated by statute. Leonardson et al. v. Moon et al., 92 Idaho 796, 451 P.2d 542 (1969). There is no double taxation when two separate and distinct privileges are being taxed even though the subject matter to which each separate transaction pertains may be
identical. 461 P.2d at 265. [Emphasis supplied].
Wet 'N Wild argues that because of the nature of improvements to the real property which comprises the amusement park, the patrons are paying for the occupancy and use of the land. The guests, however, merely purchase an admission ticket. Section 212.02(16), Florida Statutes, defines admissions as admitting for the privilege of entering or staying. The guest is paying to enter, stay for a limited number of hours, and participate in amusement activities. This is quite different from the occupancy and use of the real property which Wet 'N Wild engages in as the lessee in a lease agreement.
Wet 'N Wild cites three statutes which prohibit pyramiding of taxes in Chapter 212: Subsection 212.031(2)(b), which prohibits pyramiding of rental tax; Subsection 212.081(3)(b), a general prohibition of pyramiding of excise taxes; and Subsection 212.12(12), a broad statute prohibiting duplication of tax. None of these statutes were violated by DOR's proposed assessment. Based on the concept of separate taxable privileges, DOR's proposed assessment for tax on the lease between Wet 'N Wild and Mark IV is correct. Two distinct, taxable privileges are involved in this case: the privilege of receiving value by way of admissions and the privilege of leasing real property. It is, therefore,
DONE AND ENTERED this 31st day of October 1979 in Tallahassee, Florida.
MICHAEL R. N. McDONNELL
Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32399-1550
Filed with the Clerk of the Division of Administrative Hearings this 31st day of October 1979.
W. Kelly Smith, Esquire Robert E. Meale, Esquire Suite 1444, CNA Tower
Barbara Staros Harmon, Esquire Assistant Attorney General Room LL04, The Capitol Tallahassee, Florida 32301
