Florida determined that an LLC subsidiary can pass on profits to its LLC parent without any portion being subject to sales tax as a payment for rent.

A Florida LLC company requested a Technical Assistance Advisement on the taxability of profits being given to a parent LLC by an LLC subsidiary when the subsidiary is located in a building owned by the parent. In Florida, rent payments are subject to sales tax. In this case, the company was claiming that no rent was being paid by the subsidiary to the parent. Under specific conditions, the Florida Department of Revenue found that profits could be given to the parent without creating a tax transaction in the situation described. The department indicated that the transaction would be exempt if the distributions do not coincide with property expense obligations by the owner of the property, the distributions do not match financial obligations for the property, and that the profits distributed are actual profits not linked to the financial responsibility of the property. (Florida Department of Revenue, TAA 04A-032, May 18, 2004.)

Posted on August 5, 2004