What is a taxable rental?
According to Florida Administrative Code (12A-1.061), unless otherwise exempt, "every person is exercising a taxable privilege when engaging in the business of renting, leasing, letting, or granting licenses to others to use transient accommodations, unless the rental charges or room rates are specifically exempt".
Anyone who has entered into a bona fide written lease for greater than 6 months is exempt from sales tax and tourist development tax on the lease payments. If there is no written agreement, the owner is required to collect and remit the state sales tax and tourist tax for the first six months. The seventh month and every month thereafter will be exempt provided the same renter continues to reside at the same location.
"Transient accommodation" means each living quarter or sleeping or housekeeping accommodation in any:
- hotel or motel
- apartment house
- multiple unit structure (e.g., duplex, triplex, quadraplex, condominium)
- rooming house
- tourist or mobile home court (e.g., trailer court, motor court, recreational vehicle camp, fish camp)
- single family dwelling
- garage apartment
- beach house or cottage
- cooperatively owned apartment
- condominium parcel
- timeshare resort
- mobile home or any other house
- boat that has a permanent, fixed location at a dock and is not operated on the water away from the dock by the tenant (e.g., houseboat permanently moored at a dock, but not including cruise liners used in their normal course of business)
- vehicle, or other structure, place, or location held out to the public to be a place where living quarters or sleeping or housekeeping accommodations are provided to transient guests for consideration.
- Each room or unit within a multiple unit structure is an accommodation. F.A.C. 12A-1.061(2)(f)
The property owner is responsible to ensure that all proper taxes are collected and remitted to the proper agency, even if the owner has an agreement with a management company. If taxes are due and not remitted, the property owner will become personally liable to pay the tax. A lien in the amount of all unremitted tourist taxes, and applicable penalties and interest will be placed on the tangible personal property of the property owner.
According to Florida law, any person who enters into a bona fide written lease, for continuous residence of a transient accommodation for longer than six months, is exempt from Florida sales tax and local tourist development tax. A “bona fide written lease” is a written document that clearly demonstrates it is intended for the renter to have exclusive use of the rental property. There are several elements, which will be considered to validate the lease document and demonstrate the parties’ intent. These elements include:
- the length of the lease, including the beginning and ending date;
- a statement giving the lessor the complete and exclusive use of the property for the entire duration of the lease;
- execution in good faith, without deceit or fraud;
- a sufficient description of the leased property;
- a statement that the lease contains the complete and sole agreement;
- a provision that the lessee will pay an agreed amount of rent;
- a statement containing the due date, frequency and address for payment of the rent;
- a statement specifying what conditions will result in early termination of the lease, the rights and obligations of the parties at termination and any penalties that will result from early termination;
- signatures of the named parties, lessee and lessor.
These are the things that may be reviewed to determine whether a lease is bona fide and the rental transaction, therefore, exempt from tax.
- The Department of Revenue and the Tax Collector can examine the lease document, as well as all surrounding facts and circumstances, to determine the parties’ intent at the time of execution of the lease. This is important because even though all nine above elements are contained in a written document, it may be determined that the length of the lease was false and that by either separate verbal agreement or by prior experiences, it is really a short term, taxable rental.
- A “significant change in circumstances” that could not have been known at the time of the rental will generally not endanger the legitimacy of the lease. A significant change could be an illness, death, bankruptcy, loss of job, transfer, etc.
- If the lessor has a pattern of leases being terminated early, with no significant reason as suggested and no penalty to the lessee, it could be construed that there was no intent to have a long-term rental, making the entire transaction taxable. This could result in assessments for back periods plus penalties and interest.
According to Florida Law, all records must be made available for review by the Tax Collector and available for audit by the Clerk of Circuit Court.
For an informal review by the Tax Collector, a reasonable period of time will be given to allow the records to be returned to Seminole County.
For a formal audit, the Clerk of Court follows Florida Law for providing the required statutory notice of audit.
Since you may be audited for 5 years after the rental has occurred, you must keep all records for a minimum of 5 years.
According to Florida Law, all tourist records are confidential - including the registration form, all tax returns that have been filed, audit documentation and any tourist tax record that may identify the rental property or its owner.
The Tax Collector is required to share all tax information with the Clerk of Circuit Court (who is responsible for local auditing) and the Department of Revenue (who is responsible for state auditing).