Only Expenses That Comprised Rent Were Taxable in Florida

The Florida Department of Revenue does not have the authority to assess sales and use taxes on the total amount the taxpayer billed his tenants/clients as base rent, as that amount encompassed more than just the total rent charged. The taxpayer develops and leases special purpose medical centers and provides administrative and other services to physician groups. Under agreement, the taxpayer provides the physician groups with a monthly financial summary and invoice, broken down as the base rent, the service fee, and the sales tax due. Included in the base rent are center expenses, such as salaries, benefits, and utilities. After conducting an audit, the Department issued a notice of proposed assessment which included additional sales tax due on items included in the base rent amount. It was clear that the taxpayer’s agreement with the physician groups provided for both payments taxable as total rent and payments not subject to the sales and use taxes, such as salaries and benefits. Therefore, the Department only has authority to assess taxes on the center expenses that are taxable as total rent, not on the total amount billed as base rent. (USCarido Vascular, Inc. v. Florida Department of Revenue, Florida Court of Appeal, First District, No. 1D07-3811, September 23, 2008)

Posted on October 9, 2008