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					                                        SUMMARY

QUESTIONS:

     1. Whether the Taxpayer qualifies for the interstate or foreign commerce partial
        exemption pursuant to Sections 212.08(4) and (8), F.S., as limited by the stipulation
        entered into by the Department in Atlantic Coast Line Railroad Co. v. State Revenue
        Commission, Leon County Circuit Court (March 25, 1965) (the Atlantic Coast Line
        Stipulation), for sales tax otherwise due on acquisition of the Vessel, parts, fuel, other
        items appropriate for the intended use of the Vessel, repairs, and maintenance.

     2. Whether the form of XXX will be exempt from sales and use tax as a service
        transaction pursuant to Rule 12A-1.071(15) and (9)(d), F.A.C.

     3. Whether the form of XXX creates a bailment for Florida sales and use tax purposes
        and therefore is not subject to sales and use tax.

     4. Whether the form of XXX is exempt from tax pursuant to Section 212.031(5), F.S.,
        where the Taxpayer pays sales tax on charges to moor the vessel.

     5. Whether, if a XXX is executed by the Taxpayer and a dealer outside of Florida and
        payment is made by the dealer to the Taxpayer outside Florida and prior to
        commencement of the dealer‟s voyage segment(s), the XXX will be beyond the scope
        of Florida‟s jurisdiction to impose sales and use tax.

     6. If the Department determines that the XXX is a taxable agreement, whether the tax
        must be prorated pursuant to Section 212.08(8), F.S., based upon the decisions in
        Department of Revenue v. New Sea Escape Cruises, Ltd., 894 So.2d 954 (Fla. 2005),
        and Deerbrooke Investments, Inc. v. Department of Revenue, 919 So.2d 691 (Fla. 4th
        DCA 2006).


ANSWERS – Based on Facts Below:

     Issue 1. The Taxpayer is entitled to the benefits of Section 212.08(8), F.S. Consistent
     with the requirements of Rule 12A-1.0641(4)(b), F.A.C., the Taxpayer will register as a
     Florida sales and use tax dealer and obtain a Direct Pay Permit prior to accepting delivery
     of the Vessel, and will tender the selling dealer an affidavit stating that the Vessel is for
     the exclusive use designated in Section 212.08(8), F.S. Because the Taxpayer will take
     delivery of the Vessel outside Florida, the Taxpayer‟s purchase and use of the Vessel will
     not be subject to Florida sales or use tax. See Section 212.08(8)(a), F.S. Vessel parts and
     other items purchased in Florida that are appropriate to perform the purposes for which
     the Vessel is designed or equipped will be subject to tax based upon the Taxpayer‟s
     mileage apportionment factor. See Rule 12A-1.0641(5), F.A.C. The purchase of fuel in
     Florida and the charge for any repairs or maintenance performed in Florida will likewise
      be subject to tax based upon the Taxpayer‟s mileage apportionment factor. See Rule
      12A-1.0641(5)(b) and (6), F.A.C.

      Issues 2., 3., and 4. The XXX is subject to tax under Chapter 212, F.S., and is not a
      nontaxable service transaction pursuant to Rule 12A-1.071(15), F.A.C., a nontaxable
      bailment, or exempt pursuant to Section 212.031(5), F.S.

      The intent of the parties to a contract governs its construction. The parties‟ unambiguous
      intent, as evidenced by their agreement, is to enter into a lease transaction regarding XXX
      aboard the Vessel. The form in which the parties cast a transaction generally determines
      its tax consequences, and here the form of the XXX, as evidenced by the parties‟
      agreement and unambiguous intent, is a taxable lease, license, or rental of tangible
      personal property.

      The form and subject matter of the XXX is the “lease” and “occupancy” of a specified
      square footage of XXX aboard the Vessel - dealers are not chartering or hiring the
      Vessel, bailing their inventory with the Taxpayer, or subleasing Florida real property.
      With regard to the Taxpayer‟s “substance over form” argument, the Taxpayer has not in
      the instant circumstances presented proof that the terms of the XXX do not reflect the
      intentions of the parties.

      Issue 5. Payments by dealers to the Taxpayer pursuant to the XXX are within Florida‟s
      jurisdiction for tax purposes. With regard to the lease of XXX during the Florida
      segments, the Taxpayer is engaging in the taxable privile ge of leasing or renting tangible
      personal property in Florida. It is immaterial where the XXX was entered into or at what
      point in time payment is made. The imposition of tax is not barred by the Due Process
      Clause.

      Issue 6. Based upon the decisions in New Sea Escape and Deerbrooke, the Department
      determines that the tax due with regard to the XXX is entitled to the partial exemption in
      Section 212.08(8)(a), F.S.


                                        July 20, 2007


Re:   Technical Assistance Advisement 07A-023
      Sales and Use Tax – Partial Exemption for Vessels Used to Transport Persons or Property
      in Interstate Commerce; Lease, License, or Rental of Tangible Personal Property
      Sections 212.02, 212.03, 212.031, 212.05, and 212.08, Florida Statutes (F.S.).
      Rules 12A-1.061, 12A-1.0641, 12A-1.070, and 12A-1.071 Florida Administrative Code
      (F.A.C.).

      XXX (the Taxpayer)
      FEIN: XX
Dear :

This correspondence is in response to your letter of October 6, 2005, requesting that the Florida
Department of Revenue (“Department”) issue a Technical Assistance Advisement (“TAA”)
pursuant to section 213.22, F.S., and Rule Chapter 12-11, F.A.C., regarding the taxability of
certain activities of a exposition vessel. An examination of your request and supporting
documentation has established compliance with the requirements for the Department‟s issuance
of a TAA. Therefore, the Department grants your request and issues this TAA under the
authority of section 213.22, F.S.

                                              Facts

The Taxpayer is a Florida limited liability limited partnership doing business as “XXX.” The
Taxpayer has developed a concept to bring XXX to markets along the east coast of the United
States, including Florida.

Taxpayer has contracted for the construction of a custom-built exposition vessel (the Vessel).
The Vessel will provide XXX dealers with XXX from which to exhibit inventory and solicit
sales in multiple markets. The Vessel will be owned and operated by the Taxpayer and is
scheduled to begin operations in December 2006. The vessel is being constructed by XXX in
XXX. The Taxpayer will accept delivery of the Vessel outside Florida.

The Vessel will follow an annual, predetermined route along the eastern seaboard of the United
States, stopping in designated ports-of-call, including approximately 16 in Florida. Voyages will
be divided into 2-5 weeks segments and dealers may subscribe to some or all segments.

The Vessel will contain XXX and XXX, and will house XXX for dealers. The Vessel will also
include XXX, a XXX, and XXX. Sleeping accommodations will be provided only for the Vessel
crew, which will be employed by the Taxpayer. The Vessel will not be rated to carry overnight
passengers.

Admission to the vessel at each port-of-call will be strictly by formal invitation extended by the
dealers, the XXX marketing team, and other associated organizations. No admission fee will be
charged.

Dealers will request XXX space on the Vessel by completing a XXX form (XXX form), a copy
of which was provided with your letter as Exhibit “A”. Once a dealer‟s request has been
accepted by the Taxpayer, the dealer will enter into a XXX (XXX – which includes by reference
the provisions of the XXX cited below) with the Taxpayer, a copy of which was provided with
your letter as Exhibit “B”. Dealers will store and exhibit their inventory within their designated
XXX on the vessel, during the agreed- upon segments of the voyage.

Each dealer will pay a single (not separately stated) fee to the Taxpayer as consideration for its
XXX space, fair promotional services, “drayage aboard ship ” and the use of the Taxpayer‟s
minivans to shuttle dealer staff to and from the vessel and clients‟ homes. See XXX form. The
fee is payable in advance of the segment for which the dealer has contracted. See XXX. The fee
attributable to “drayage aboard ship” is a charge for transporting the dealer‟s inventory on the
Vessel. See XXX form. The Taxpayer will also provide security to prevent unauthorized entry
onto the vessel; dealers may retain additional security personnel to protect their inventory for
periods while the inventory is in transit between ports-of-call. See XXX § 9.

The Vessel will transport dealers‟ inventory between ports-of-call within each voyage segment
for which the dealer has contracted. 1 See XXX §§9 and 17. In addition to facilitating dealers‟
access to more markets and potential customers, a key benefit to participating dealers is XXX.
XXX.

The Vessel is a XXX vessel, enabling it to dock at XXX, rather then being limited to XXX.
Although XXX is designed to be an event unto itself, the Vessel may dock in conjunction with
XXX, such as the 2006 XXX in XXX 2006. XXX will be conducted at the XXX. The Vessel
will be moored and pay appropriate fees and taxes for that privilege. In XXX, the Vessel will
dock behind the XXX and function as an extension of the Taxpayer‟s XXX (XXX) to use
portions of the XXX (a copy of the XXX was included with your letter as Exhibit “C”). The
Taxpayer will use the same facilities and amenities as XXX, and will pay sales tax on charges for
that use as reflected on XXX (XXX) from the XXX (copies of which were included with your
letter as Exhibit “D”).

Your letter states that whether docked in conjunction with a XXX such as XXX, or as a stand-
alone event at venues such as the XXX, the Vessel will be open to dealers and guests only when
moored. The Vessel will function as a fixed location, and will not cruise with guests and dealers.
The XXX will be secured while the Vessel is transporting dealers‟ inventory and security
personnel from port to port.

Your letter takes the position that the Department has determined that XXX shows are “industry
trade shows” for the purposes of Section 212.031(5), F.S. (citing as an example TAA 02A-006).
Your letter states that XXX operations will be no different - the vessel will be attached to realty
for the duration of each port visit and will be immobile during each exhibition.

The Taxpayer will become a registered Florida sales tax dealer prior to accepting delivery of the
Vessel outside of Florida. The Taxpayer will apply for and obtain Sales and Use Tax Direct Pay
Permit [Form DR-16P] (Direct Pay Permit) from the Department, and will execute and tender to
XXX an affidavit verifying that the vessel is for exclusive use in interstate commerce. The
Taxpayer may purchase fuel, parts, and other items appropriate to carry out the purposes for
which the Vessel is designed and used, and may incur charges for the repair and maintenance of
the vessel.



1
  Your letter states that “[d]ealers‟ inventory will also be transported by mobile ground units trailing the Vessel.” It
then cites United Parcel Service, Inc. v. Office of the Co mptroller, 443 So.2d 263 (Fla. 1st DCA 1983), presumab ly
for the proposition that the mobile ground units are eligible for the partial exemption in either Section 212.08(8)(a)
or (9)(b), F.S. No further details pertaining to such mobile ground units have been provided. The Department has
not been provided sufficient informat ion upon which to base an opinion regarding the taxability of the mobile
ground units.
The XXX form allows applicants to choose one or more of fourteen (14) stated segments ranging
from Florida to Boston along the Atlantic Coast of the United States, and provides further in
pertinent part:

                                              ***

       XXX SIZE
       XXX XXX
       XXX XXX
       XXX XXX

       FEE
       XXX
       Price includes space rental, XXX promotional services, drayage aboard ship and minivan
       use.

       TERMS OF SPACE REQUEST
       Applicant agrees this application is a space request only and does not obligate XXX to
       extend a contract to applicant.

                                               ***
Five of the segments from which dealers may choose solely involve ports-of-call in Florida.

The XXX provides in pertinent part:

                                                 ***

       (hereinafter the XXX) and [the Taxpayer], a Florida limited liability limited partnership
       (hereinafter the Organizer) shall govern the terms and conditions of the XXX lease of
       XXX space aboard the [Vessel] (hereinafter the Vessel) and XXX participation in
       collective shipboard XXX, hereinafter XXX, aboard the Vessel:

       XXX leases XXX square feet of XXX space aboard the Vessel for a period of           weeks
       beginning XX and ending XX.

       The rental price shall be $ XX per week, plus any applicable state and local taxes and fuel
       surcharge, payable in advance as scheduled herein.

       XXX shall pay a deposit of XXX of the rental payment upon signing this lease which
       shall be credited to the final contracted week‟s rental payment. The balance of lease
       payments shall be paid in XXX as follows: . . . All amounts due must be paid in advance
       of occupancy.

                                                 ***
       By execution of this lease, XXX acknowledges that certain rule and regulations,
       contained herein and hereby included in this XXX, concerning XXX occupancy of the
       leased space have been promulgated by the Organizer for the collective benefit of all
       tenants. The XXX agrees hereby to accept and abide by all XXX contained herein and
       all future XXX as may be promulgated by the Organizer in advance of and/or during the
       tenancy of the XXX.

       The liability of the Organizer for failure to perform its obligations under this lease shall
       be limited to remedies specifically delimited herein, but in no case shall exceed the to tal
       of XXX rental payments made to the Organizer.

       This lease is governed by the laws of the United States of America. . . .

       This lease constitutes the entire contract between the parties. . . .

       This lease is fully or partially assignable at the sole d iscretion of the Organizer.

       In the event that any individual provision of this lease shall be deemed invalid by any
       court of competent jurisdiction, the remaining provisions of this agreement shall remain
       in full force and effect.

                                                    ***

The XXX included by reference in the XXX provide in pertinent part:

       1. XXX Days and Hours: Subject to promulgation, change or modification at the
       discretion of the Organizer.

       2. Acceptance: XXX application to lease exhibit space aboard the Vessel shall not be
       deemed accepted until the [O]rganizer has executed a countersigned XXX. The
       Organizer reserves the right to accept or reject any XXX solely upon its own discretion
       and for any reason whatsoever. In the event any XXX shall submit false information or
       attempt to exhibit XXX not approved by the Organizer, the Organizer reserves the right
       to cancel the XXX at any time, and retain any monies paid as liquidated damages. The
       XXX may not assign or sublet all or any space contracted herein without written consent
       of the Organizer.

       3. Taxes: All applicable taxes are the responsibility of the XXX.

                                                    ***

       5. Exhibition Se rvices Provided: The following services are included in each XXX
       space rental: XXX.

                                                    ***
7. General Appearances: The Vessel and its leased spaces shall have an approved look.
All XXX must be approved by the Organizer as well as XXX contained in the XXX
exhibition.

8. Co-tenants: There will be no co-tenants without written approval from the Organizer.
There may be a surcharge for each approved co-tenant. Any XXX allowing another
tenant to be accommodated in the XXX rented space without prior written approval from
the Organizer acknowledges the liability of this surcharge and acknowledges that any
such unauthorized co-tenancy voids all rights of the XXX.

9. Security: A 24-hour perimeter security guard service is provided to prevent entry to
the Vessel by anyone not authorized by the Organizer or not exhibiting proper credentials
for admission. The watchman service supplied does not guarantee the XXX against loss,
neither does it imply an assumption of liability for the XXX property by the Vessel or the
Organizer.

XXX premises will be able to be reasonably secured in the absence of the XXX staff.
Vessel crew and emergency personnel may enter such secured XXX premises, however,
in an emergency situation where damage to the Vessel, Vessel contents, or any person
may occur or is at risk.

There are no warranties, representations, guarantees, obligations, or assurances
from the Organize rs or Vessel regarding shipboard security. Exhibitors may, at
their discretions, retain additional security during show hours, non-show hours,
and/or transit periods to furthe r safeguard their XXX and/or dis plays.

Merchandise security passes with an authorized signature and/or passes issued by the
Organizer must be utilized for the protection of all tenants and shall not be construed as
any guarantee or indemnification whatsoever to the XXX against loss or theft or
otherwise, nor does it imply an assumption of liability by the Vessel or the Organizer
with respect to the XXX property.

10. Release of Liability: Neither the Vessel nor the Organizer accepts any responsibility
for the well being of any XXX materials consigned to or in the ownership of any XXX
during its tenancy aboard the Vessel. The XXX waives any and all claims against the
Vessel, the Organizer, and/or the port facility for loss, theft, damage or destruction by
fire, water or otherwise of any personal possessions, XXX, crates, packing materials, etc.
aboard the Vessel or adjacent storage facilities at any time as well as for injury to
himself, his agents, servants and/or employees while in the leased premises or aboard the
Vessel, and for any damage of any nature including damage to the XXX business by
reason of the Organizer‟s failure to provide space for any XXX or for any failure to
maintain any specific schedule for XXX events.

11. Indemnify and Hold Harmless: XXX agrees to indemnify and hold harmless the
Vessel, the Organizer, and/or the port facility for any claims arising out of the negligence
of XXX, its agents, or employees. XXX agrees to obtain adequate insurance against any
such claims and to provide evidence of such insurance in writing to the Organizer prior to
embarkation.

12. Shipping: XXX must remain with all XXX and/or their freight until its designated
shipper has removed same from the Vessel.

13. Insurance and Release of Liability: XXX must carry worker‟s compensation,
commercial general liability including products and completed ope rations, independent
contractors, personal injury and blanket contractual liability insurance at limits of at lease
XXX per occurrence and XXX per aggregate. These coverages must be evidenced by a
Certificate of Insurance with a 30 day notice of cancellation provision to the holder and
naming the Vessel and the Organizer as additional insured at least 30 days before the
proposed embarkation date. It is strongly recommended the XXX also carry insurance to
cover loss, damage, or injury to any property of the Exhibitor or to any of its officers,
agents, employees or contractors, whether attributable to accident, fire, theft or any other
cause whatsoever. While the Vessel and/or the Organizer may provide perimeter security
guards, it is done solely as an accommodation to XXX tenants.

XXX expressly agrees to save and hold harmless the Vessel, the Organizer, and/or
the port facility, their respective managements, agents, and employees from any and
all claims, liabilities and claims, liabilities and losses for injury to persons (including
death) or damage to or loss of property arising in connection with XXX tenancy
aboard the Vessel.

14. Authenticity of XXX. Should the XXX be placed in issue during the course [of] the
tenancy of the XXX aboard the Vessel, the Organizer reserves the right to have said XXX
withdrawn from the XXX aboard the Vessel and promptly removed from the Vessel. All
such decisions are at the sole discretion of the Organizer.

XXX tenants are strictly accountable for XXX which are shown in rented space aboard
the Vessel. The XXX shall indemnify and hold the Vessel, the Organizer, and/or the port
facility harmless against any claims whatsoever made with regard to the XXX displayed
aboard the Vessel and to any misrepresentation made during the sale of any XXX aboard
the Vessel, as well as any expenses incurred by Vessel, the Line, or the port facility in
defense of such claim including attorney‟s fees.

                                            ***

17. Special Provisions for XXX Tenancy Aboard a Vessel: The XXX recognizes that
exhibition XXX aboard a vessel requires special precautions. Wave, wind, and weather
may create a certain instability which must be individually assessed and addressed by
each XXX tenant. In no case will any responsibility be assumed by the Vessel or
Organizer for any loss, damage, or injury to person, XXX, or XXX contents caused by
the shifting nature of the Vessel. Weather, tide, and wakes may cause instability in the
leased space. For that reason, all XXX tenants are urged to properly anchor all XXX
within their leased space. Further, all tenants must dismantle XXX during port transits
       and appropriately pack all XXX and contents within their leased space during such
       transits which could be subject to damage as a result of vessel instability due to wea ther,
       tide, waves, or wakes from other vessels.

       18. Port Cancellation/Rescheduling: . . .

       In case of show cancellation, the Organizer or Vessel shall not incur any liability
       whatsoever and all parties will be relieved of any other and all further liab ility provided
       that rental paid for canceled portion of the XXX exhibition is refunded to the XXX.

                                                   ***

                                        Requested Advice

The Taxpayer has presented the following issues for determination:

       1. Whether the Taxpayer qualifies for the interstate or foreign commerce partial
          exemption pursuant to Sections 212.08(4) and (8), F.S., as limited by the stipulation
          entered into by the Department in Atlantic Coast Line Railroad Co. v. State Revenue
          Commission, Leon County Circuit Court (March 25, 1965) (the Atlantic Coast Line
          Stipulation), for sales tax otherwise due on acquisition of the Vessel, parts, fuel, other
          items appropriate for the intended use of the Vessel, repairs, and maintenance.

       2. Whether the form of XXX will be exempt from sales and use tax as a service
          transaction pursuant to Rule 12A-1.071(15) and (9)(d), F.A.C.

       3. Whether the form of XXX creates a bailment for Florida sales and use tax purposes
          and therefore is not subject to sales and use tax.

       4. Whether the form of XXX is exempt from tax pursuant to Section 212.031(5), F.S.,
          where the Taxpayer pays sales tax on charges to moor the vessel.

       5. Whether, if a XXX is executed by the Taxpayer and a dealer outside of Florida and
          payment is made by the dealer to the Taxpayer outside Florida and prior to
          commencement of the dealer‟s voyage segment(s), the XXX will be beyond the scope
          of Florida‟s jurisdiction to impose sales and use tax.

       6. If the Department determines that the XXX is a taxable agreement, whether the tax
          must be prorated pursuant to Section 212.08(8), F.S., based upon the decisions in
          Department of Revenue v. New Sea Escape Cruises, Ltd., 894 So.2d 954 (Fla. 2005),
          and Deerbrooke Investments, Inc. v. Department of Revenue, 919 So.2d 691 (Fla. 4th
          DCA 2006).

Issues 2., 3., and 4. with regard to the taxability of the XXX have been presented in the
alternative.
                                              Taxpayer’s Position

1. The Taxpayer takes the position that it qualifies for the partial exemptions contained in
Sections 212.08(4) and (8), F.S., as limited by the Atlantic Coast Line Stipulation, as follows:

           . . . First, [the Taxpayer] is engaged in “interstate commerce,” as that term has
           been defined by the courts: “Commerce „among the several states,‟ i.e., interstate
           commerce, is „commerce which concerns more States than one.‟” [The Vessel]
                                                                                 2


           will regularly follow a predetermined route up the eastern seaboard of the United
           States, with ports-of-call in several states. At those ports, dealers‟ inventory may
           be sold, loaded and unloaded, and new dealers with entirely distinct inventor y
           may join the voyage for diverse segments.

           Second, [the Taxpayer] is transporting property in interstate commerce for hire. . .
           . The fee that [the Taxpayer] receives from its dealers compensates [the Taxpayer]
           for “drayage aboard ship,” meaning the transportation of the dealers‟ inventory
                                    3
           from port to port. . . .

           Third, [the Taxpayer] will apply to the Department for a [Direct Pay Permit], and
           extend to XXX an affidavit verifying that [the] vessel will be exclusively used to
           transport persons and property in interstate commerce, and for no other purpose. .
           ..

           [The Taxpayer] will accept delivery of the vessel outside of Florida, in
           accordance with the Atlantic Coast Line Stipulation. Pursuant to that stipulation,
           [the Taxpayer‟s] acquisition and use of the Vessel as described herein will not be
           subject to Florida sales or use tax.

           [The Taxpayer] may purchase parts and other items appropriate to carry out the
           purposes for which the Vessel is designed and used, as well as fuel, repairs and
           maintenance for the vessel. Pursuant to the Atlantic Coast Line Stipulation, these
           items will be exempt from Florida sales and use tax if delivered or performed
           outside of Florida, and will be subject to [the Taxpayer‟s] mileage apportionment
           factor if delivered or performed in Florida.

           [The Taxpayer] will estimate its mileage apportionment factor for its first fiscal
           year of operation, and “true up” that estimate to actual mileage at the end of that
           year. . . . In subsequent years, [the Taxpayer] will apply its mileage
           apportionment factor calculated at the end of its prior fiscal year to all purchases
           and leases of vessel, parts, fuel and other appropriate items, as well as repairs and
           maintenance for the vessel. . . .

2
    Citing Depart ment of Revenue v. New Sea Escape Cruises, Ltd., 894 So.2d 954, 959 (Fla. 2005).
3
  Black‟s Law Dictionary defines the term “drayage” as “[a] charge for the local transportation of property.”
Black‟s Law Dict ionary 495 (6th ed. 1991).
The Taxpayer offers the following three arguments in the alternative:

2. The Taxpayer takes the position that the substance of the XXX is a non-taxable service
transaction pursuant to Rule 12A-1.071(15), F.A.C. The Taxpayer states that Rule 12A-
1.071(15), F.A.C., “recognizes that sales tax does not apply to agreements for hiring a vessel that
transports people and property between two points, where the „charterer‟ does not direct or
control the vessel.” The Taxpayer states further that “[c]onsistent with [the Taxpayers]‟
transportation of property in interstate commerce, the substance of the XXX is transporting
dealers‟ inventory from one point to another, allowing dealers‟ to access multiple local markets
within a given voyage segment.” The Taxpayer emphasizes that, consistent with the rule, the
Taxpayer “furnishes the crew and all operating supplies, and dealers do not take possession or
have any direction or control over the physical operation of the vessel.”

3. The Taxpayer takes the position that the substance of the XXX constitutes a bailment, and
therefore the fees paid by dealers to the Taxpayer are not subject to tax pursuant to Rule 12A-
1.071(1)(a), F.A.C. Citing to Rule 12A-1.070(22)(b), F.A.C., the Taxpayer states that
“[p]ursuant to the XXX, each dealer relinquishes exclusive possession, control and dominion
over its inventory, so that [the Taxpayer] can exclude, within the limits of the agreement, all
others from access to or possession of the inventory.” The Taxpayer states that, similar to the
cold storage unit example in Rule 12A-1.070(22)(b)3., F.A.C., the “dealer‟s control and
dominion over their inventory is dependent upon [the Taxpayer‟s] cooperation and is subject to
[the Taxpayer‟s] reasonable control.” In this respect, the Taxpayer emphasizes that, under the
XXX and XXX, it controls the inventory that may be displayed by dealers, as well as access to
the Vessel and to dealers‟ inventory.

4. The Taxpayer takes the position that even if the XXX were otherwise taxable, the Taxpayer
qualifies for treatment under Section 212.031(5), F.S., “and thus will owe tax on its lease of
facilities for mooring the Vessel, but not on the XXX.” In support of its position that Section
212.031(5), F.S., applies, the Taxpayer states:

       The lease or rental of docking space for boats in boat docks or marinas is
       generally taxable. Section 212.03(6), [F.S.]; Rule 12A-1.073(1)(b), [F.A.C.]
       Such a transaction is generally exempt from the commercial rentals tax. Section
       212.031(1)(a)3.[, F.S.] However, the Attorney General has determined that rental
       amounts obtained from leasing boat slips are taxable as rentals or leases of real
       property under Rules 12A-1.070 and 12A-1.073, [F.A.C.] Atty. Gen. Op. 02-034
       (May 3, 2002) at n. 8 (citing Wells v. Department of Revenue, 10 FALR 2321
       (1996). . . .

       The term “real property” for purposes of Section 212.031 [, F.S.,] means “the
       surface land, improvements thereto, and fixtures, and is synonymous with „realty‟
       and „real estate.‟” Section 212.02(10)(h), [F.S.] The Department has recognized
       that a vessel permanently moored at a dock may be synonymous with
       improvements to realty, for transient rentals tax purposes. Rule 12A-1.061(2)(f),
       [F.A.C.] . . .
       Because the Vessel will be open for exhibition only when it is moored and
       immobile at a fixed location, it will serve as the functional equivalent of and be
       synonymous with real property. See, Section 212.02(10)(h), [F.S.]; see also, Rule
       12A-1.061(2)(f), [F.A.C.] (recognizing that a vessel with a permanent, fixed
       location may function the same as buildings for transient rentals tax purposes).
       The vessel will not move from its moorings while the XXX are open and it will
       not cruise with dealers or guests aboard. In all respects, the vessel will be an
       extension of the realty to which it is attached, such as the XXX. (See [XXX].)
       The [Vessel] will use the same amenities and facilities at these locations as XXX
       such as those described in TAA 02A-006.

The Taxpayer states that XXX is an industry trade show of XXX described in TAA 02A-006
(Jan. 30, 2002), and that the Vessel is an “exhibition hall” for the purposes of Section
212.031(5), F.S. The Taxpayer states that because “exhibition hall” is not defined by the statute,
the principles of statutory construction require that the words sho uld be construed in their plain
and ordinary sense, and that under such construction the Vessel would be included within the
meaning of “exhibition hall.”

5. The Taxpayer states that even if the XXX were an otherwise taxable agreement, Florida has no
jurisdiction to tax the fees paid by dealers where: (1) the agreement is entered into outside of
Florida; and (2) payment is made by the dealer to the Taxpayer outside of Florida prior to its
voyage segment(s). The following reasoning was provided in support of this position:

       Florida sales and use tax applies only to transactions that occur “in this state.”
       Section 212.05, Fla. Stat.; see generally Florida Department of Revenue v. New
       Sea Escape Cruises, Ltd., 894 So.2d 954, 961-62 (Fla. 2005). The phrase “in this
       state” means “within the state boundaries of Florida as defined in s. 1, Art. II of
       the State Constitution.” Section 212.02(8), Fla. Stat. The state cannot tax
       transactions that are not within its territorial jurisdiction. Department of Revenue
       v. Kelly Boat Service, Inc., 324 So.2d 651 (Fla. 1st DCA 1976); Department of
       Revenue v. Pelican Ship Corp., 257 So.2d 56 (Fla. 1st DCA 1972); Straughn v.
       Kelly Boat Service, Inc., 210 So.2d 266, 267 (Fla. 1st DCA 1968): see also, New
       Sea Escape, 894 So.2d at 962; TAA 05A-029 at p. 8 (June 16, 2005).

       The Department has determined that a lease of space on a non-carrier‟s vessel is
       deemed to have occurred in Florida where the combined event of entering into the
       agreement and payment both occurred in Florida. TAA 05A-029 at p. 10. The
       Department cited to Department of Revenue v. Pelican Ship Corp. for that
       proposition. Id. In Pelican Ship, the court held that the obligation to pay and
       admission fee arose when a customer boarded the vessel at dockside, and thus the
       transaction was taxable in Florida, regardless of whether the admission fee was
       actually collected beyond the territorial limits of the state. 257 So.2d 56; TAA
       05A-029 at p. 9.
       The necessary corollary to Pelican Ship and TAA 05A-029 is that where the
       parties enter into the lease agreement outside of Florida, thus establishing the
       lessee‟s obligation to pay, and payment is made by the lessee outside of Florida
       before the agreement commences, no taxable event occurs in this state. See, e.g.,
       Kelly Boat Service, supra.

Therefore, the Taxpayer concludes that under the instant circumstances, the transaction will not
be deemed to have occurred “in this state” for purposes of Section 212.05, F.S.

6. The Taxpayer, in its letter of February 8, 2006, references the recent decision in Deerbrooke
Investments, Inc. v. Department of Revenue, 919 So.2d 691 (Fla. 4th DCA 2006). The Taxpayer
states that upon remand from the Florida Supreme Court for reconsideration in light of
Department of Revenue v. New Sea Escape Cruises, Ltd., 894 So.2d 954 (Fla. 2005), the District
Court of Appeal held that the lease of gaming equipment for use on board the vessel and revenue
received from gift shop and photography concessionaires as rent must be prorated under Section
212.08(8), F.S. The Taxpayer takes the position that if the Department determines that the XXX
is a taxable agreement, tax must be prorated pursuant to Section 212.08(8), F.S., based upon the
decisions in New Sea Escape and Deerbrooke.

                                  Applicable Authority

Section 212.05(1), F.S., provides in pertinent part:

       It is hereby declared to be the legislative intent that every person is exercising a
       taxable privilege who engages in the business of selling tangible personal
       property at retail in this state, . . ., or who rents or furnishes any of the things or
       services taxable under this chapter, or who stores for use or consumption in this
       state any item or article of tangible personal property as defined herein and who
       leases or rents such property within the state.

       (1) For the exercise of such privilege, a tax is levied on each taxable transaction
       or incident, which tax is due and payable as follows:

       (a)1.a. At the rate of 6 percent of the sales price of each item or article of tangible
       personal property when sold at retail in this state, computed on each taxable sale
       for the purpose of remitting the amount of tax due the state, and including each
       and every retail sale.

                                               ***

       (b) At the rate of 6 percent of the cost price of each item or article of tangible
       personal property when the same is not sold but is used, consumed, distributed, or
       stored for use or consumption in this state; . . .

       (c) At the rate of 6 percent of the gross proceeds derived from the lease or rental
       of tangible personal property, as defined herein; . . .
       (d) At the rate of 6 percent of the lease or rental price paid by a lessee or rentee,
       or contracted or agreed to be paid by a lessee or rentee, to the owner of the
       tangible personal property.

                                               ***



Section 212.02, F.S., provides in pertinent part:

       (10)(g) "Lease," "let," or "rental" also means the leasing or rental of tangible
       personal property and the possession or use thereof by the lessee or rentee for a
       consideration, without transfer of the title of such property, except as expressly
       provided to the contrary herein. . . .

       (h) "Real property" means the surface land, improvements thereto, and fixtures,
       and is synonymous with "realty" and "real estate."

                                               ***

       (12) "Person" includes any individual, firm, copartnership, joint adventure,
       association, corporation, estate, trust, business trust, receiver, syndicate, or other
       group or combination acting as a unit . . . .

                                               ***

       (14)(a) "Retail sale" or a "sale at retail" means a sale to a consumer or to any
       person for any purpose other than for resale in the form of tangible personal
       property or services taxable under this chapter, . . .

                                               ***

       (15) "Sale" means and includes:

       (a) Any transfer of title or possession, or both, exchange, barter, license, lease, or
       rental, conditional or otherwise, in any manner or by any means whatsoever, of
       tangible personal property for a consideration.

                                               ***

       (19) "Tangible personal property" means and includes personal property which
       may be seen, weighed, measured, or touched or is in any manner perceptible to
       the senses, including electric power or energy, boats, motor vehicles and mobile
       homes as defined in s. 320.01(1) and (2), aircraft as defined in s. 330.27, . . .
                                               ***

Section 212.03(6), F.S., provides:

       It is the legislative intent that every person is engaging in a taxable privilege who
       leases or rents parking or storage spaces for motor vehicles in parking lots or
       garages, who leases or rents docking or storage spaces for boats in boat docks or
       marinas, or who leases or rents tie-down or storage space for aircraft at airports.
       For the exercise of this privilege, a tax is hereby levied at the rate of 6 percent on
       the total rental charged.

Section 212.031, F.S., 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, letting, or
       granting a license for the use of any real property unless such property is:

                                               ***

       3. Property subject to tax on parking, docking, or storage spaces under s.
          212.03(6).

                                               ***

       (5) When space is subleased to a convention or industry trade show in a
       convention hall, exhibition hall, or auditorium, whether publicly or privately
       owned, the sponsor who holds the prime lease is subject to tax on the prime lease
       and the sublease is exempt.

                                               ***

Section 212.08, F.S., provides in pertinent part:

                                               ***

       (4) EXEMPTIONS; ITEMS BEARING OTHER EXCISE TAXES, ETC.--

       (a) Also exempt are:

                                               ***

       2. . . . Motor fuels and diesel fuels are taxable as provided in chapter 206, with the
       exception of those motor fuels and diesel fuels used by railroad locomotives or
       vessels to transport persons or property in interstate or foreign commerce, which
       are taxable under this chapter only to the extent provided herein. The basis of the
       tax shall be the ratio of intrastate mileage to interstate or foreign mileage traveled
by the carrier's railroad locomotives or vessels that were used in interstate or
foreign commerce and that had at least some Florida mileage during the previous
fiscal year of the carrier, such ratio to be determined at the close of the fiscal year
of the carrier. However, during the fiscal year in which the carrier begins its initial
operations in this state, the carrier's mileage apportionment factor may be
determined on the basis of an estimated ratio of anticipated miles in this state to
anticipated total miles for that year, and subsequently, additional tax shall be paid
on the motor fuel and diesel fuels, or a refund may be applied for, on the basis of
the actual ratio of the carrier's railroad locomotives' or vessels' miles in this state
to its total miles for that year. This ratio shall be applied each month to the total
Florida purchases made in this state of motor and diesel fuels to establish that
portion of the total used and consumed in intrastate movement and subject to tax
under this chapter. The basis for imposition of any discretionary surtax shall be
set forth in s. 212.054. Fuels used exclusively in intrastate commerce do not
qualify for the proration of tax.

                                        ***

(8) PARTIAL EXEMPTIONS; VESSELS ENGAGED IN INTERSTATE OR
FOREIGN COMMERCE.--

(a) The sale or use of vessels and parts thereof used to transport persons or
property in interstate or foreign commerce, including commercial fishing vessels,
is subject to the taxes imposed in this chapter only to the extent provided herein.
The basis of the tax shall be the ratio of intrastate mileage to interstate or foreign
mileage traveled by the carrier's vessels which were used in interstate or foreign
commerce and which had at least some Florida mileage during the previous fiscal
year. The ratio would be determined at the close of the carrier's fiscal year.
However, during the fiscal year in which the vessel begins its initial operations in
this state, the vessel's mileage apportionment factor may be determined on the
basis of an estimated ratio of anticipated miles in this state to anticipated total
miles for that year and, subsequently, additional tax shall be paid on the vessel, or
a refund may be applied for, on the basis of the actual ratio of the vessel's miles in
this state to its total miles for that year. This ratio shall be applied each month to
the total Florida purchases of such vessels and parts thereof which are used in
Florida to establish that portion of the total used and consumed in intrastate
movement and subject to the tax at the applicable rate. The basis for imposition of
any discretionary surtax shall be as set forth in s. 212.054. Items, appropriate to
carry out the purposes for which a vessel is designed or equipped and used,
purchased by the owner, operator, or agent of a vessel for use on board such
vessel shall be deemed to be parts of the vessel upon which the same are used or
consumed. Vessels and parts thereof used to transport persons or property in
interstate and foreign commerce are hereby determined to be susceptible to a
distinct and separate classification for taxation under the provisions of this
chapter. Vessels and parts thereof used exclusively in intrastate commerce do not
qualify for the proration of tax.
       (b) The partial exemption provided for in this subsection shall not be allowed
       unless the purchaser signs an affidavit stating that the item or items to be partially
       exempted are for the exclusive use designated herein and setting forth the extent
       of such partial exemption. Any person furnishing a false affidavit to such effect
       for the purpose of evading payment of any tax imposed under this chapter is
       subject to the penalties set forth in s. 212.12 and as otherwise provided by law.

       (c) It is the intent of the Legislature that neither subsection (4) nor this subsection
       shall be construed as imposing the tax provided by this chapter on vessels used as
       common carriers, contract carriers, or private carriers, engaged in interstate or
       foreign commerce, except to the extent provided by the pro rata formula provided
       in subsection (4) and in paragraph (a).

                                               ***

Section 212.06(14), F.S., provides:

       For the purpose of determining whether a person is improving real property, the
       term:

       (a) "Real property" means the land and improvements thereto and fixtures and is
       synonymous with the terms "realty" and "real estate."

       (b) "Fixtures" means items that are an accessory to a building, other structure, or
       land and that do not lose their identity as accessories when installed but that do
       become permanently attached to realty. However, the term does not include the
       following items, whether or not such items are attac hed to real property in a
       permanent manner: property of a type that is required to be registered, licensed,
       titled, or documented by this state or by the United States Government, including,
       but not limited to, mobile homes, except mobile homes assessed as real property,
       or industrial machinery or equipment. For purposes of this paragraph, industrial
       machinery or equipment is not limited to machinery and equipment used to
       manufacture, process, compound, or produce tangible personal property. For an
       item to be considered a fixture, it is not necessary that the owner of the item also
       own the real property to which it is attached.

       (c) "Improvements to real property" includes the activities of building, erecting,
       constructing, altering, improving, repairing, or maintaining real property.

Rule 12A-1.061(2)(f), provides in pertinent part:

       "Transient accommodation" means each living quarter or sleeping or
       housekeeping accommodation in any hotel, motel, apartment house, multiple unit
       structure (e.g., duplex, triplex, quadraplex, condominium), roominghouse, 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.

Rule 12A-1.070, F.A.C., provides in pertinent part:

                                                ***

       (2) The lease or rental of docking or storage spaces for boats at boat docks or
       marinas is taxable under s. 212.03(6), F.S.

                                                ***

       (22)(a) When tangible personal property is left upon another's premises under a
       contract of bailment, the bailee is not exercising a privilege taxable under the
       provisions of s. 212.031, F.S., relating to leases, licenses, or rentals of real
       property.

       (b) A bailment is a contractual agreement, oral or written, whereby a person (the
       bailor) delivers tangible personal property to another (the bailee) and the bailor
       for the duration of the relationship relinquishes his exclusive possession, control,
       and dominion over the property, so that the bailee can exclude, within the limits
       of the agreement, the possession of the property to all others. If there is no such
       delivery and relinquishment of exclusive possession, and the owner's control and
       dominion over the property is not dependent upon the cooperation of the person
       on whose premises the property is left, and his access thereto is in no wise subject
       to the latter's control, it will generally be held that such person is a tenant, lessee,
       or licensee of the space upon the premises where the property is left.

                                                ***

       3. Example: The charge made for use of a frozen food locker in cold storage or
       locker plants is exempt under conditions which require the facility owner's
       presence and assent for the food owner to access his property.

       (c) A person who merely grants storage space without assuming, expressly or
       implied, any duty or responsibility with respect to the care and control of the
       property stored is a landlord of a person granted a right to occupy or use such real
       property and is not a bailee. Thus, the person granting the right to use such
       storage space is exercising a privilege taxable under the provisions of s. 212.031,
       F.S., as a lease or license.

       (d) A lease, license, or bailment is indicative of a contractual relationship, and the
       terms are not mutually exclusive. Whatever label is attached to a contract, in
       determining whether a transaction is a bailment or a lease or a license,
       consideration will be given to the manifested intention of the parties as to which
       relationship has been created.

                                               ***

Rule 12A-1.071, F.A.C., provides in pertinent part:

       (1)(a) For the purpose of this rule, the term "lease" includes any rental or license
       to use tangible personal property, unless a different meaning is clearly indicated
       by the context in which it is used. The term refers to all transactions that are not
       bailments in which there is a transfer of possession of tangible personal property,
       without regard to limitations upon the use, for a consideration, without a transfer
       of title to the property. . . .

                                               ***

       (9)(a) A transaction involving the use of equipment with an operator supplied by
       the owner of the equipment is a lease if control or direction over the use of the
       equipment passes to the customer.

       (b) When the operator of the equipment is on the payroll of the lessee, the contract
       constitutes a rental of tangible personal property and is subject to the tax.

       (c) A transaction is not a lease if it is for the performance of a specific job in a
       manner to be determined by the owner or his operator.

       (d) When the owner of equipment furnishes the operator and all operating
       supplies, and contracts for their use to perform certain work under his direction
       and according to his customer's specifications, and the customer does not take
       possession or have any direction or control over the physical operation, the
       contract constitutes a service transaction and not the rental of tangible personal
       property, and no tax is due on the transaction.

                                               ***

       (15) When a boat or vessel is chartered with crew furnished, for the carriage or
       transportation of persons or property from one point to another and the charterer
       does not have any direction or control over its operation, the contract constitutes a
       service transaction and not the rental of tangible personal property and is exempt.
       See paragraph (17)(c) for charter fishing vessels.
         (16) When a boat or vessel is leased or rented on a "bare boat" basis, the sales tax
         applies to the gross proceeds derived from the lease or rental. The lease or rental
         is considered to be on a "bare boat" basis when:

         (a) The lessor does not provide a crew;

         (b) The lessor does provide a crew but it is hired by the lessee under a separate
         employment contract. (Under such circumstances the employment contract cost is
         not a part of the gross proceeds derived from the lease or rental and is not
         taxable.)                                                   (emphasis supplied)

                                                         ***

Additional cited provisions of the Florida Statutes (F.S.) and Florida Administrative Code
(F.A.C.) referenced in this advisement may be found on the Department‟s website:
http://www.myflorida.com/dor, by clicking on “Research Law” at the homepage, then selecting
the link to the “Tax Law Library.” The Tax Law Library has its own search and help functions.

A.       Issue 1. - Partial Exemption for Vessels Engaged in Interstate or Foreign Comme rce

Generally, tangible personal property sold at retail in Florida is subject to Florida sales tax. See
Section 212.05(1)(a)1.a., F.S. In addition, the general rule is that tangible personal property used
in Florida upon which Florida sales tax was not paid is subject to use tax. See Section
                                                                 4
212.05(1)(b), F.S.; See also Section 212.06(1)(a) and (4), F.S.

The taxation of vessels used to transport persons and property in interstate or foreign commerce
presents special issues. Such property is used in multiple jurisdictions and enjoys constitutional
                                                  5
protection against discriminatory state taxation. Therefore, Florida law provides a partial
exemption for “vessels and parts thereof” used to transport persons or property for hire in
                                                                                             6
interstate or foreign commerce. Section 212.08(8)(a), F.S.; Rule 12A-1.0641(2)(a), F.A.C. As

4
  The use tax is reduced by a credit for any sales or use tax lawfu lly imposed and paid in another state, territory of
the United States, or the District of Co lu mbia on the property. See Section 212.06(7), F.S.; see also Section
212.06(8)(a), F.S. (creat ing a presumption that property used in another state, t erritory of the United States, or the
District of Colu mbia for six months or longer was not purchased for use in Florida).
5
   See e.g., U.S. Const. art. I., § 8, cl. 2. (the Co mmerce Clause); U.S. Const. amend. XIV, § 1 (the Due Process
Clause); U.S. Const. art. I., § 10, cl. 2 (the Import-Export Clause). The Co mmerce Clause forbids the states from
imposing any undue or unreasonable burden on interstate commerce. The Due Process Clause prohibits the states
fro m unfairly exercising the power to tax. The Import -Export Clause generally prohib its individual states from
taxing imports and exports to and from the state. Where a state law conflicts with these provisions or any other
portion of federal law, federal law controls. See U.S. Const. art. VI., cl. 2 ( the Supremacy Clause). The scope of the
Co mmerce Clause, Due Process Clause, Import-Export Clause, and other relevant constitutional provisions has been
defined through interpretation by the United States Supreme Court. See e.g., Co mp lete Auto Transit, Inc. v. Brady,
430 U.S. 274 (1977).
6
  Ru le 12A -1.0641, F.A.C., contains the Department‟s interpretation of Section 212.08(8), F.S., regarding the
proration of tax for vessels and parts thereof used to transport persons or property in interstate or fore ign co mmerce.
stated recently by the Florida Supreme Court, the purpose of Section 212.08(8), F.S., “is to
„prevent the state from exceeding its powers to tax interstate and foreign commerce‟ while
permitting the state to „tax that portion of commerce activity that occurred within the state.‟”
                                                                                             7
Department of Revenue v. New Sea Escape Cruises, Ltd., 894 So.2d 954, 963 (Fla. 2005). The
sale or use of vessels (“and parts thereof”) used to transport persons or property in interstate or
foreign commerce is only subject to the taxes imposed in Chapter 212, F.S., as provided in s.
212.08(8), F.S.

The partial exemption applies to common carriers, contract carriers, and private carriers. Section
212.08(8)(c), F.S. The basis of the tax is the ratio of intrastate mileage to interstate or foreign
mileage traveled by the vessels which were used in interstate or foreign commerce and had at
least some Florida mileage during the previous fiscal year of the carrier. Section 212.08(a), F.S.
This ratio is determined at the close of the carrier‟s prior fiscal year, except that during an
owner‟s initial fiscal year of operation in Florida, the ratio may be based upon the anticipated
mileage for that year and trued up at the end of the initial fiscal year based upon actual mileage.
Id. The terms of s. 212.08(8)(a), F.S., provide that the ratio must “be applied each month to the
total Florida purchases of . . . vessels and parts thereof which are used in Florida.” (emphasis
supplied) Vessel parts and other items appropriate to the purpose for which the vessel is
designed or equipped purchased or leased in Florida are subject to proration, as are charges for
repairs or maintenance performed in Florida. Section 212.08(8)(a), F.S.; Rule 12A-1.0641(5)(b),
F.A.C. Section 212.08(4)(a)2., F.S., provides a parallel exemption, based upon the same mileage
ratio, for purchases of motor and diesel fuels used by such vessels. See Section 212.08(8)(c),
F.S.; Rule 12A-1.0641(6), F.A.C.

In order to enjoy the partial exemption at the time of purchase, the purchaser must: (i) be a
                                                                          8
registered sales and use tax dealer; (ii) hold a valid Direct Pay Permit; and (iii) execute an
affidavit (or certificate in the case of fuel purchases) to the selling dealer attesting that the
purchase is in compliance with the statutory requirements. See Rule 12A-1.0641(4) [vessel(s)],
(5) [parts and other items], and (6) [fuel], F.A.C. Rule 12A-1.0641, F.A.C., provides suggested
affidavit formats.

Based on the facts presented, the Taxpayer is entitled to the benefits of Section 212.08(8), F.S.
The Taxpayer has indicated, consistent with the requirements of Rule 12A-1.0641(4)(b), F.A.C.,
that it will register as a Florida sales and use tax dealer and obtain a Direct Pay Permit prior to
accepting delivery of the Vessel, and that it will tender the selling dealer an affidavit stating that
the Vessel is for the exclusive use designated in Section 212.08(8), F.S. Because the Taxpayer
will take delivery of the Vessel outside Florida, the Taxpayer‟s purchase and use of the Vessel
will not be subject to Florida sales or use tax. See Section 212.08(8)(a), F.S.; New Sea Escape at
960. Likewise, the purchase of parts and other items (appropriate to carry out the purposes for
which the vessel is designed), fuel, repairs, and maintenance will not be subject to Florida sales


7
 Quoting Tropical Sh ipping & Construction v. Askew, 364 So.2d 433, 436 (Fla. 1978)(specifically upholding the
constitutionality of the statute).
8
    To facilitate the statute‟s requirement to report and pay on a monthly basis.
or use tax if delivered or performed outside Florida. Id. Vessel parts and other items purchased
or delivered in Florida that are appropriate to perform the purposes for which the Vessel is
designed or equipped will be subject to tax based upon the Taxpayer‟s mileage apportionment
factor. See Rule 12A-1.0641(5), F.A.C. The purchase of fuel in Florida and the charge for a ny
repairs or maintenance performed in Florida will likewise be subject to tax based upon the
Taxpayer‟s mileage apportionment factor. See Rule 12A-1.0641(5)(b) and (6), F.A.C.

B.         Issues 2., 3., and 4. – Applicability of Chapter 212, F.S. to the XXX
                                                                           9
The lease, license, or rental of tangible personal property in Florida is generally subject to tax
                                                          10
unless an exemption applies. See Section 212.21(2), F.S.
                                                                      11
Section 212.05(1)(c), F.S., provides that every person engaging in the business of leasing or
renting tangible personal property in Florida is exercising a taxable privilege. For the exercise of
that privilege, Section 212.05(1)(c), F.S., levies a tax at the rate of six percent (6%) of the gross
proceeds derived from the lease or rental of the tangible personal property, plus any applicable
local discretionary sales surtax. Section 212.05(1)(c), F.S.; see Section 212.054(2)(a), F.S. The
legislature has defined a “sale,” for the purposes of Chapter 212, F.S., broadly to include “[a]ny
transfer of title or possession, or both, exchange, barter, license, lease, or rental, conditional or
otherwise, in any manner or by any means whatsoever, of tangible personal property for a
consideration.” Section 212.02(15)(a), F.S. A taxable “retail sale" is defined to include any sale
“to a consumer or to any person for any purpose other than for resale . . . .” Section
212.02(14)(a), F.S. Thus, for the purposes of the imposition of tax under Chapter 212, F.S., the
lease, license or rental of tangible personal property is subject to tax in the same manner, and
under the same conditions, as a retail sale. Section 212.02(10)(g), F.S., defines “lease,” “let,” or
“rental,” with regard to tangible personal property, to mean “the leasing or rental of tangible
personal property and the possession or use thereof by the lessee or rentee for a consideration,
without transfer of the title of such property.”

Rule 12A-1.071, F.A.C., contains the Department‟s interpretation of Chapter 212, F.S., with
regard to the lease, rental, or license to use tangible personal property. Rule 12A-1.071(1)(a),
F.A.C., defines the term “lease” for the purpose of the rule includes “any rental or license to use
tangible personal property, unless a different meaning is clearly indicated b y the context in
which it is used. The rule provides further that “[t]he term refers to all transactions that are not
bailments in which there is a transfer of possession of tangible personal property, without regard
to limitations upon the use, for a consideration, without a transfer of title to the property.” Rule


9
 Section 212.02(19), F.S., defines “tangible personal property” to include “personal property which may be seen,
weighed, measured, or touched or is in any manner perceptible to the senses,” and expressly includes boats.
10
   The leg islature has declared its intention in Section 212.21(2), F.S., that “each and every sale, . . . or rental” in
Florida is taxab le, subject only to the exemptions and exclusions contained within Chapter 212, F.S., itself. The
threshold legislatively created assumption, therefore, is that every rental of tangible personal property in Florida is
subject to tax, unless it is shown by the taxpayer that an exemption or exclusion applies.
11
     Defined by Section 212.02(12), F.S., to include a partnership.
12A-1.071(1)(a), F.A.C. Whether a transaction is a “sale” or a “rental, lease, or license to use” is
determined in accordance with the provisions of the agreement. Id.

Rule 12A-1.071(15), F.A.C., states that “[w]hen a boat or vessel is chartered with crew
furnished, for the carriage or transportation of persons or property from one point to another and
the charterer does not have any direction or control over its operation, the agreement co nstitutes
a service transaction and not the rental of tangible personal property.” Rule 12A-1.071(16),
F.A.C., states that when a boat or vessel is rented on a “bare boat” basis, sales tax applies to the
gross proceeds derived from the lease or rental. A boat or vessel is considered to be rented on a
“bare boat” basis when the lessor does not provide a crew, or, when the lessor provides a crew
that is hired by the lessee under a separate employment contract. Id.

Section 212.03(6), F.S., provides that a person who leases or rents docking or storage spaces for
boats in boat docks or marinas is exercising a taxable privilege. For the exercise of that
privilege, a tax is imposed at the rate of six percent (6%) on the total rental charged, plus any
applicable local discretionary sales surtax. Id.; Section 212.054(2)(a), F.S.

Section 212.031(1)(a), F.S., provides that a person engaging in the business of renting, leasing,
letting, or granting a license for the use of any real property is exercising a ta xable privilege. For
the exercise of that privilege, a tax is imposed in an amount equal to six percent (6%) of and on
the total rent or license fee charged for such real property by the person charging or collecting
the rental or license fee, plus any applicable local discretionary sales surtax. Section
212.031(1)(c), F.S.; see Section 212.054(2)(a), F.S. Section 212.031(5), F.S., provides
that “[w]hen space is subleased to a convention or industry trade show in a convention hall,
exhibition hall, or auditorium, whether publicly or privately owned, the sponsor who holds the
prime lease is subject to tax on the prime lease and the sublease is exempt.” Section
212.031(1)(a)3., F.S., provides that property subject to tax under Section 212.03(6), F.S., is not
subject to tax under Section 212.031, F.S.

The Taxpayer‟s position is that the XXX is not subject to Florida sales or use tax for any of the
following alternative reasons:

            (1) the XXX is a nontaxable service transaction pursuant to Rule 12A-1.071(15),
            F.A.C.;
            (2) the XXX is exempt pursuant to Section 212.031(5), F.S., where the Taxpayer pays
            sales tax on the charge to moor or dock the Vessel; or
            (3) the XXX is a nontaxable bailment.

The Department disagrees, and determines that under the facts pre sented the XXX constitutes a
taxable lease of tangible personal property for the following reasons:

       1.      The parties‟ intent is to enter into a lease

A basic principle of contract law is that the intent of the parties to a contract should govern the
construction of the contract. Hughes v. Professional Ins. Corp., 140 So. 2d 340, 345 (Fla. 1st
DCA 1962). The best evidence of the intent and meaning of the contracting parties is the
language used in the contract. Jacobs v. Petrino, 351 So.2d 1036, 1039 (Fla. 4th DCA 1976).
Accordingly, in determining intent, courts initially look to the agreement between the parties and
honor that agreement, unless the provisions of an agreement or the actual practice of the parties
indicate otherwise. Keith v. News & Sun Sentinel Co., 667 So.2d 167, 171 (Fla. 1995). This
principle applies when determining whether a transaction creates a lease, bailment, charter, or
another type of contractual relationship. See 11 Fla. Jur. Contracts §143; 5 Fla. Jur. Bailments §
3. The Department similarly looks to the intent of the parties as evidenced by the provisions of a
contract to determine its tax consequences. See Rules 12A-1.070(22)(d) and 12A-1.071(1)(a),
F.A.C.

In determining the intent of the parties, the terms of a contract are considered as a whole, and not
in isolation. Jerry‟s Inc. v. City of Miami, 591 So.2d 1000, 1001 (Fla. 3d DCA 1991). When an
agreement has been made in, or by, two or more documents, then those documents must be
construed together. Hughes at 345.

It is well settled that where the terms of a contract are unambiguous, the parties‟ intent must be
determined from within the four corners of the document. Barakat v. Broward County Hous.
Auth., 771 So. 2d 1193, 1194-1195 (Fla. 4th DCA 2000). Another well settled principle is that a
contract is ambiguous only when it is of uncertain meaning and may fairly be understood in more
ways than one. 12 Atlas Sewing Center, Inc. v. Belk‟s Dep‟t Store, Inc., 162 So. 2d 274, 275 (Fla.
2d DCA 1964). In the absence of ambiguity, the plain meaning of the contractual language
controls. Misala, Inc. v. Eagles, 662 So. 2d 1389 (Fla. 4th DCA 1995).

Here, considering the terms of the XXX and accompanying XXX as a whole, it appears to the
Department incontrovertible that the parties‟ unambiguous intent, as evidenced by their
agreement, is to enter into a lease transaction regarding XXX aboard the Vessel. The terms of
the XXX and XXX are replete with language indicating that the agreement is intended to create a
XXX, 13 and devoid of language indicating that a different relationship was intended. 14
Accordingly, the terms of the XXX and XXX lead inexorably to a determination that the parties‟
unambiguous intent is to enter into a lease transaction regarding XXX aboard the Vessel.

         2.       Taxpayers are generally held to the form in which they cast a transaction

Tax authorities have long been permitted to discount the form in which a transaction is cast, and
determine tax consequences based upon the transactions‟ substance. See Parker v. The Hertz

12
  Similarly, a word or phrase in a contract is ambiguous only when it is of uncertain meaning and may be fairly
understood in more ways than one. 11 Fla. Jur. Contracts § 157.
13
   For example: (i) the subject matter of the agreement is the “lease” and “occupancy” of a specified square footage
of XXX aboard the Vessel; (ii) such occupancy is referred to as a “tenancy” and the occupants as “tenants”; and (iii)
the leased space is referred to as “leased spaces”, “rented space”, and “leased premises”.
14
  The Depart ment notes that when words or terms having a definite legal meaning and effect are knowingly used in
a written instrument, the parties are presu med to have intended such words or terms to have their proper legal
mean ing and effect, in the absence of any contrary intention appearing in the instrument. Wilco x v. Atkins, 213 So.
2d 879, 881 (Fla. 2d DCA 1968).
Corp., 544 So.2d 249, 250 (Fla. 2d DCA 1989)(citing Helvering v. F & R Lazurus & Company,
308 U.S. 252, 255 (1939)). Importantly, courts have also long recognized that while a taxpayer
is free to structure his transaction as he chooses, “once having done so, he must accept the
consequences of his choice, whether contemplated or not . . . and may not enjoy the benefit of
some other route he might have chosen to follow but did not.” Commissioner v. National Alfalfa
Dehydrating & Milling Co., 417 U.S. 134, 149 (1974); North American Company v. Green, 120
So. 2d 603, 610 (Fla. 1959)(“We are not privileged to make the taxability of a transaction
dependent upon any consideration of some alternative procedure which might not have been
taxable.”).

Because taxpayers have been accorded less freedom than tax authorities to disavow the form
they have chosen, they are generally bound to the tax consequences that follow from their
choice. See Bradley v. United States, 730 F.2d 718, 720 (11th Cir. 1984); Illinois Power Co. v.
Commissioner, 87 T.C. 1417, 1430 (1986), aff'd 896 F.2d 580 (D.C. Cir. 1990); Regal Kitchens,
Inc. v. Department of Revenue, 641 So.2d 158, 163 (Fla. 1st DCA 1994). This rule seeks to
avoid the uncertainty that would result from allowing the taxability of a transaction to depend on
whether an alternative form exists under which more favorable tax consequences would result.
National Alfalfa at 149; Department of Revenue v. McCoy Motel, Inc., 302 So.2d 440, 443 (Fla.
1st DCA 1974). 15 Thus, the form in which the parties cast a transaction generally determines its
substance for tax purposes.

         3.       The form chosen by the Taxpayer is a taxable lease of tangible personal property

Pursuant to the XXX form, XXX, and XXX, the Taxpayer will lease a specified square footage
of XXX (among the XXX aboard the Vessel) to dealers to occupy and conduct business
(exhibitions and sales) while the Vessel is docked at various ports-of-call (including
approximately sixteen (16) in Florida). Dealers will pay a single fee to the Taxpayer as
consideration for its XXX and the additional services offered by the Taxpayer. 16 The Taxpayer
will pay appropriate fees and taxes for the privilege of docking the Vessel in Florida.

Boats (here, the Vessel) have been expressly identified by the Legislature as tangible personal
         17
property. See Section 212.02(19), F.S. Pursuant to the XXX, the Taxpayer is contracting to

15
   The case law cited above recognizes that taxpayers have the freedom to structure their transactions as they see fit
and are intimately acquainted with the facts underlying the s ubstance of the chosen transactional structure. Tax
authorities, on the other hand, do not have direct access to the facts underlying a particular transaction, and must by
necessity rely upon the taxpayer‟s representations regarding the transaction when determining the resulting tax
consequences. See Plante v. Co mmissioner, 168 F.3d 1279, 1282 (11th Cir. 1999) ("If a party could alter the express
terms of his contract by arguing that the terms did not represent economic reality, the Co mmissioner would be
required to litigate the underlying factual circu mstances of 'countless' agreements.") (quoting North Am. Rayon
Corp. v. Co mmissioner, 12 F.3d 583, 587 (6th Cir. 1993).
16
   Because the space rental and other services are provided for a single price, there is no need to address the
taxab ility of additional services, or whether they must be included in the taxable “sales price” as “services that are a
part of the sale” pursuant to Section 212.02(16), F.S.
17
   Boats are, moreover, provided a degree of special attention within Chapter 212, F.S.               See e.g., Section
212.05(1)(a)1.a., F.S.
transfer possession of a specified portion of the Vessel - one or more of the onboard XXX - in
return for consideration paid by the dealer. The lease, license, or rental of an area or portion of a
boat is a taxable transfer of tangible personal property. See Sections 212.02(15)(a) and
212.05(1)(c), F.S.; see also New Sea Escape Cruises, Ltd. v. Department of Revenue, 823 So.2d
161, 164-165 (Fla. 4th DCA 2002), approved 894 So.2d 954 (Fla. 2005); Deerbrooke
Investments, Inc. v. Department of Revenue, 861 So.2d 447, 448 (Fla. 4th DCA 2003), remanded
for reconsideration 914 So.2d 949 (Fla. 2005), on remand 919 So. 2d 691, 692 (Fla. 4th DCA
2006). The Taxpayer has emphasized that there are limitations placed upon the dealers‟ use of
the onboard XXX. 18 However, with regard to the tax imposed under Chapter 212, F.S., any
conditions, limitations, or restrictions placed upon a dealer‟s use of the XXX are immaterial. See
Section 212.02(15)(a), F.S.; Rule 12A-1.071(1)(a), F.A.C. Accordingly, the XXX is subject to
tax pursuant to Section 212.05(1)(c), F.S.

        4.       Dealers do not charter or hire the Vessel

The Taxpayer takes the position that the XXX is a nontaxable charter of the Vessel pursuant to
Rule 12A-1.071(15), F.A.C. Rule 12A-1.071(15), F.A.C., provides in pertinent part:

        When a boat or vessel is chartered with crew furnished, for the carr iage or
        transportation of persons or property from one point to another and the charterer
        does not have any direction or control over its operation, the contract constitutes a
        service transaction and not the rental of tangible personal property and is exempt.
        ...

However, in order to qualify under Rule 12A-1.071(15), F.A.C., the agreement between the
parties must be for chartering or hiring a boat or vessel. There is nothing in the XXX, XXX, or
stated facts indicating that any dealer or group of XXX is hiring or chartering the Vessel. As
stated above, the unambiguous intent of the parties, as evidenced by the XXX, is to enter into a
lease transaction. The form and subject matter of the XXX is the “lease” and “occupancy” of a
specified square footage of XXX aboard the Vessel – not the charter or hire of the Vessel itself.

In addition, the Taxpayer suggests that the substance of the XXX is the transportation of dealers‟
inventory. Under the facts presented, the Taxpayer has orga nized a predetermined series of
ports-of-call for the Vessel. Dealers, by entering into a XXX, arrange to secure the use of one of
the onboard XXX while in port. The XXX, as is well evidenced by the terms of the agreement,
concerns the lease of XXX on the Vessel. Transportation of a dealer‟s inventory between ports
is included in the square feet-per week charge for a XXX. See the XXX form. Payment for
XXX includes transportation (“drayage aboard ship”), but such transportation is provided in
connection with the XXX – it is not, itself, the subject or substance of the transaction.

        5.       Section 212.031, F.S., does not apply

Section 212.031(1)(a), F.S., imposes a tax upon the privilege of engaging in the business of
renting, leasing, letting, or granting a license to use real property in Florida. The Taxpayer takes

18
   The Taxpayer has made this point particularly in its arguments that the XXX is not taxable pursuant to Rule 12A-
1.071(15), F.A.C., and that the XXX constitutes a bailment.
the position that even if the XXX is taxable, the Taxpayer qualifies for treatment under Section
212.031(5), F.S., which provides that when space is subleased to a convention or industry trade
show in a convention hall, exhibition hall, or auditorium, the sponsor is subject to tax on the
prime lease and the sublease is exempt. In support of its position, the Taxpayer essentially
argues that the Vessel should be treated as real property for the purpose of the application of
Section 212.031(5), F.S. The Department disagrees for the following reasons:

        a.       The Plain language of Section 212.031, F.S., indicates that Section
                 212.031(5), F.S. does not apply to the XXX

Section 212.031, F.S., itself forecloses the application of 212.031(5), F.S., to the Taxpayer and
the XXX. When property is subject to tax under Section 212.03(6), F.S., Section
212.031(1)(a)3., F.S., expressly excludes such property from the provisions of Section 212.031,
F.S. (i.e., Section 212.031, F.S., has no application to such property). Section 212.03(6), F.S.,
provides that the charge for docking or mooring boats is subject to tax under Section 212.03,
F.S.19 The Taxpayer has indicated that it will pay fees and applicable taxes for docking or
mooring the Vessel. Such fees are taxed pursuant to Section 212.03(6), F.S. Thus, the express
terms of Section 212.031, F.S., indicate that the exemption contained in Section 212.031(5), F.S.,
has no application to the facts presented. 20

This result is consistent with the principles of statutory construction. In this regard, the Supreme
Court of Florida has often stated that laws should be construed in harmony with other laws
relating to the same purpose: "A basic principle of statutory construction requires that 'all parts
of a statute must be read together in order to achieve a consistent whole. Where possible, courts
must give effect to all statutory provisions and construe related statutory provisions in harmony
with one another.'" M.W. v. Davis, 756 So. 2d 90, 101 (Fla. 2000) (quoting Forsythe v. Longboat
Key Beach Erosion Control Dist., 604 So. 2d 452, 455 (Fla. 1992)).

Here, Sections 212.03 and 212.031(6), F.S., are part of Florida‟s sales and use tax scheme
contained in Chapter 212, F.S. They represent two separate and distinct privileges identified by
the Legislature as being subject to tax: (i) Section 212.03(6), F.S., levies a tax upon the privilege
of leasing or renting parking or storage spaces for motor vehicles in parking lots or garages,
docking or storage spaces for boats in boat docks or marinas, or tie-down or storage space for
aircraft at airports; and (ii) Section 212.031, F.S., levies a tax upon the privilege of “renting,
leasing, letting, or granting a license for the use of any real property.” Importantly, the
Legislature itself has harmonized these two provisions by enacting Section 212.031(1)(a)3., F.S.,
which expressly excludes property subject to tax under Section 212.03(6), F.S., from taxation
under Section 212.031, F.S.

        b.       The Vessel is not real property


19
  These provisions have been in place for over two decades. See e.g., Sections 212.03(6) and 212.031(1)(a)3., F.S.
(1983).
20
  The Taxpayer‟s argument that the Vessel should be treated as real property for the purpose of the application of
Section 212.031(5), F.S., will be further addressed below.
As stated above, the Taxpayer argues that the Vessel should be treated as real property for the
purpose of the application of Section 212.031(5), F.S. The Taxpayer states in support of t his
argument that: (i) when moored, the Vessel “will serve as the functional equivalent of and be
synonymous with real property” as defined in Section 212.02(10)(h), F.S.; (ii) “[t]he Department
has recognized that a vessel permanently moored at a dock may be synonymous with
improvements affixed to realty, for transient rental purposes” (citing Rule 12A-1.061(2)(f),
F.A.C.); and (iii) the Attorney General has determined that rental amounts from leasing boat
slips are taxable as rentals or leases of real property under Rules 12A-1.070 and 12A-1.073,
F.A.C. (citing note 8. of Attorney General Opinion 02-034 (May 3, 2002)).

Real property is defined, for the purposes of Chapter 212, F.S., as “the surface land,
improvements thereto, and fixtures, and is syno nymous with „realty‟ and „real estate.‟” Section
212.02(10)(h), F.S. Put simply, the Vessel does not constitute real property, an improvement to
real property, or a fixture. Rather, the Vessel is considered tangible personal property for the
purposes of Chapter 212, F.S., and is excluded from “real property” treatment.

Whether a particular transaction is subject to tax depends upon the terms of the taxing statute.
Sales and use tax acts such as Chapter 212, F.S., generally provide precise and extensive
definitions of terms and phrases used therein. See 68 Am. Jur. 2d Sales and Use Taxes § 42.
The Florida Legislature has specifically indicated in Section 212.02(19), F.S., that tangible
personal property “means and includes . . . boats, . . .” (emphasis supplied) Thus, as a threshold
matter, the Legislature has determined that boats such as the Vessel are to be considered tangible
personal property (not real property) for the purposes of Chapter 212, F.S.

Section 212.03(1), F.S., levies a tax upon the privilege of engaging in the business of renting,
leasing, letting, or granting a license to use any living quarters or sleeping or housekeeping
accommodations in, from, or a part of, or in connection with any hotel, apartment house,
roominghouse, or tourist or trailer camp (commonly referred to as “transient accommodations).
Rule 12A-1.061(2)(f), F.A.C. (Rentals, Leases, and Licenses to Use Transient
Accommodations), defines “transient accommodation” to include a “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), . . held out to the public to be a place where living quarters or sleeping or
housekeeping accommodations are provided to transient guests for consideration.”

Any reliance by the Taxpayer upon Rule 12A-1.061(2)(f), F.A.C., is misplaced. Unlike the tax
imposed pursuant to Section 212.031(1)(a), F.S., the tax upon transient accommodations
imposed by Section 212.03(1), F.S., is not dependent upon characterization of the property in
question as “real property.” Section 212.03(1)(a), F.S., expressly requires that the property be
characterized as “real property.” Section 212.031(6), F.S., on the other hand, looks to the use of
the property, requiring that the property be used as “living quarters or sleeping or housekeeping
accommodations.” Section 212.03(1), F.S., contains no requirement that the granted
accommodations be on, within, or constitute real property. The legislature is assumed to know
the meaning of the words in the statute and to have expressed its intent by the use of those words.
Overstreet v. State, 629 So.2d 125, 126 (Fla. 1993). Moreover, the use by the legislature of
certain language in one instance and wholly different language in another indicates that different
results were intended. 48A Fla. Jur. Statutes § 133; see Frank J. Rooney, Inc. v. Leisure Resorts,
Inc., 624 So.2d 773, 777 (Fla. 4th DCA 1993)(noting that when the legislature employs a term in
one section of a statute but omits it another section of the same act, it should not be implied
where it is excluded). Accordingly, Rule 12A-1.061(2)(f), F.A.C., does not support the
Taxpayer‟s position. The Department notes, in addition, that even if Section 212.03(1), F.S., and
Rule 12A-1.061, F.A.C, were applicable, the Vessel is not permanently moored at a dock under
the facts presented, but instead is moored temporarily at each port-of-call.

The Vessel‟s lack of permanent attachment is also fatal to the Taxpayer‟s assertion that the
Vessel, when moored, will be “synonymous with improvements affixed to realty” – in other
words, a fixture to real property. 21 For the purposes of determining whether a person is
improving real property, Section 212.06(14)(b), F.S., defines “fixtures” as “items that are an
accessory to a building, other structure, or land and that do not lose their identity as accessories
when installed but that do become permanently attached to realty.” Because the Vessel, when
moored, is not attached in a permanent manner, the Vessel is simply not a “fixture” for the
purposes of Chapter 212, F.S. 22 In addition, even if the Vessel were permanently attached, it
would not be considered a “fixture.” Every vessel of a type similar to the Vessel is required to
be registered and titled in Florida. See Sections 327.02(39)(providing the definition of “vessel”),
328.03(1)(requiring vessels operated on Florida waters to be titled in this state),
328.48(2)(requiring registration for vessels used on Florida waters), F.S. Paragraph (b) of
Section 212.06(14), F.S., after the definition of “fixture” cited above, continues by providing that
“fixture” does not include “property of a type that is required to be registered, licensed, titled, or
documented in this state of by the U.S. Government, . . .” regardless of whether such property is
attached to real property in a permanent manner. 23 Thus, the Vessel is expressly excluded from
the definition of “fixture” in Section 212.06(14)(b), F.S.
In addition, the Taxpayer cites Attorney General Opinion (AGO) 02-034 for the proposition that
the Attorney General has determined that rental amounts from leasing boat slips are taxable as
rentals or leases of real property under Rules 12A-1.070 and 12A-1.073, F.A.C. 24 However, this

21
   Under the facts presented, the Vessel would not be an improvement. An “improvement” is generally defined as
“[a] valuable addition made to property (usually real estate) or an ameliorat ion in its condition, a mounting to more
than mere repairs or replacement, costing labor and capital, and intended to enhance its value, beauty or utility or to
adapt it for new or further purposes.” Black‟s Law Dict ionary 757 (6th ed. 1990). Section 212.06(14)(c), F.S.,
provides that “improvement to real property” or “real property imp rovement” includes the activities of build ing,
erecting, constructing altering, imp roving, repairing, or maintaining real property.
22
   Permanent attachment is also required by the general definition of the term. A “fixture” is generally defined as
“[a]n article in the nature of personal property which has been so annexed to the realty that it is regarded as a part of
the real property. . . . A thing is deemed to be affixed to real property when it is . . . , permanently resting upon it, or
permanently attached . . . .” Black‟s Law Dict ionary 638 (6th ed. 1990).
23
   Ru le 12A-1.051, F.A.C., contains the Departments interpretation of Chapter 212, F.S., with regard to sales to or
by contractors who repair, alter, improve, and construct real property. Rule 12A -1.051(2)(c)1., F.A.C., states that a
“fixtu re” is an accessory to a building, other structure, or land that is permanently attached to the real property. Rule
12A-1.051(2)(c)4.a., F.A.C., states that the term “fixture” does not include titled property even if it is permanently
attached to real property. Rule 12A-1.051(2)(i), F.A.C., defines “titled property” as property that must be registered,
licensed, titled, o r documented by this state or the United States, such as airplanes, boats, and motor vehicles.
24
  Attorney General Op inions, while not binding on Florida courts, are considered persuasive. See e.g., Johnson v.
Lincoln Square Properties, Inc., 571 So.2d 541, 543 (Fla. 4th DCA 1990).
is not the holding of AGO 02-034. Rather, the Attorney General in AGO 02-034 concluded that
the rental of a boat slip was subject to tax under Section 212.03(6), F.S., stating:

         . . . it is my opinion that a boat slip rental at a marina that satisfies the criteria
         established under section 212.03, Florida Statutes, would be taxable under the
         provisions of that section . . . .

The Department notes that the explanatory language to Wells v. Department of Revenue, Case
No. 96-7256, DOR 96-26-FOF, (September 6, 1996), cited by the Attorney General in footnote 8
to AGO 02-034, but presented here as the Attorney General‟s opinion, is accurate. In
Conclusion of Law 23 of Wells, adopted by the Department in its Final Order, the Hearing
Officer stated that “[r]ental amounts obtained from leasing boat slips are taxable as rentals or
leases of real property by authority of Section 212.031(1)(a), [F.S.] (1991) and Rules 12A-1.070
and 12A-1.073(1)(b), [F.A.C.]. This Conclusion of Law is patently incorrect upon the statutory
scheme and Department Rule in place in 1991. 25 See Sections 212.03(6) and 212.031(1)(a)3.,
F.S. (1991); Rule 12A-1.070(2), F.A.C. (1990).

         6.       The XXX does not create a bailment relationship

The Taxpayer takes the position that the XXX is, in substance, a bailment. For the purpose of
the Department‟s rule regarding the lease, rental, or license to use tangible personal property,
taxable transactions are described as “all transactions that are not bailments in which there is a
transfer of possession of tangible personal property, without regard to limitations upon the use,
for a consideration, without a transfer of title to the property.” (emphasis supplied) Rule 12A-
1.071(1)(a), F.A.C.

A bailment is a contractual arrangement under which personal property is delivered to another
for a particular purpose, or on deposit, after which the property is redelivered to the person who
delivered the property, kept until the person reclaims it, or otherwise dealt with according to the
deliverer‟s instruction. 5 Fla. Jur. Bailments § 1. A bailment has also been described as
“generally a contractual relationship among parties in which the subject matter of the
relationship is delivered temporarily to and accepted by one other than the owner.” S & W Air
Vac Sys. v. Department of Revenue, 697 So. 2d 1313, 1315 (Fla. 5th DCA 1997).

The law of bailments may apply in many common situations, such as; lending personal property
to another for use; delivery and acceptance of personal property for safekeeping, transportation, 26
repairs, or storage; and delivery of goods for sale on consignment. See 5 Fla. Jur. Bailments § 4;


25
   Although the Conclusion of Law incorrectly cited the controlling law, the determination that the lease of boat slips
was subject to tax was correct. See 2 Fla. Jur. Administrative Law § 409 (in the case of an erroneous interpretation
of the law by an agency, a court may only set aside agency action if a correct interpretation would co mpel a d ifferent
result).
26
     Although the charge for “drayage aboard ship” is a charge for transportation, because space rental and the
additional services are provided for a single price, there is no need to address the taxability of this service or whether
it is required to be included in the taxab le “sales price” pursuant to Section 212.02(16), F.S.
8A Am. Jur. 2d Bailments § 5.27 The "bailee" is the person who receives possession or custody
of personal property under circumstances constituting a bailment, and the "bailor" is the person
from whom the personal property is received. 5 Fla. Jur. Bailments § 1. The bailee has the
absolute duty to restore or account for the bailed property, as well as the duty to exercise the
degree of skill and care required by the particular type of bailment. See 5 Fla. Jur. Bailments §§
9-25 (regarding the rights, duties, and liabilities as between bailor and bailee and as to third
parties).

Bailments are generally classified as being for: (a) the sole benefit of the bailor; (b) the sole
benefit of the bailee; or (c) the mutual benefit of both. 8A Am. Jur. 2d Bailments § 7. The facts
presented indicate that a bailment in the instant circumstances would be for the mutual benefit of
both the Taxpayer and the dealers. A typical bailment for mutual benefit is a bailment for hire,
whereby one person, for compensation, takes another's property into his care and custody, or
where one person, for compensation, lets the use of personal property to another. 5 Fla. Jur.
Bailments § 4.

As stated above, the unambiguous intent of the parties to the XXX, as evidenced by its terms, is
to enter into a lease regarding XXX aboard the Vessel. This determination governs both the
construction of the XXX and its tax consequences. See Hughes at 345; Rules 12A-1.070(22)(d)
and 12A-1.071(1)(a), F.A.C.; 11 Fla. Jur. Contracts §143; 5 Fla. Jur. Bailments § 3. Therefore, it
is the determination of the Department that the XXX does not create a bailment relationship.

In addition, the Department notes that a bailment is a contractual relationship in which the
subject matter of the agreement - personal property of the bailor - is delivered to another. See S
& W Air Vac at 1315; 5 Fla. Jur. Bailments § 1. Thus, the form and subject matter of the XXX
should, by definition, be the delivery of dealers‟ inventory to the Taxpayer. However, as stated
above, in the instant circumstances the form and subject matter of the XXX is the “lease” and
“occupancy” of a specified square footage of XXX aboard the Vessel by dealers.

The Department notes further that under Florida law, the creation of a bailment requires
complete delivery of possession, 28 custody, and control of the subject property to the bailee.
(emphasis supplied) S & W Air Vac at 1315; Puritan Ins. Co. v. Butler Aviation-Palm Beach,
Inc., 715 F.2d 502, 504 (11th Cir. 1983)(applying Florida law); Florida Small Business Corp. v.

27
   See also LexisNexis 11-205 Southeast Transaction Guide § 205.03; LexisNexis 12-222 Southeast Transaction
Gu ide § 222.03. Many such agreements are governed by statute. See, e.g., Chapters 507, 509, 671, and 677, F.S.
Statutory provisions may change the common-law rules regard ing the liability of a bailor or narro w the
circu mstances under which a bailment is constituted. For examp le, Section 677.102(1)(a), F.S. (part of Florida‟s
Unifo rm Co mmercial Code), significantly narrows the circumstances under which a bailment relationship is created
by requiring a “bailee” to acknowledge possession of goods by a warehouse receipt, bill of lading, or other
“document of title” as defined in Section 671.201(15), F.S..
28
    “Possession,” as used in the present context, includes the ability to control. “Possession” refers to legal
possession, which is defined as “[h]aving control over a thing with the intent to have and exercise such control.”
Black‟s Law Dictionary 1163 (6th Ed. 1990). The law recognizes two types of possession - actual and constructive.
Actual possession (or possession in deed or fact) means an actual and continuous occupancy or exercise of complete
domin ion. See 42 Fla. Jur. Property §19; 63C A m. Jur. 2d Property §28. Constructive possession means being in
position to exercise domin ion and control over a thing or co mmand its use. See 63C A m. Ju r. 2d Property §§ 28 and
30.
Miami Shipyards Corp., 175 So. 2d 46 (Fla. 3d DCA 1965); Meeks v. Fla. Power & Light Co.,
816 So. 2d 1125, 1129-1130 (Fla. 5th DCA 2002); see Rule 12A-1.070(22)(b), F.A.C.; see also 5
Fla. Jur. Bailments § 2; 8A Am. Jur. 2d Bailments §§ 40, 88, and 154.

Retained control by a putative bailor has been found to defeat the creation of a bailment
relationship. See, e.g., Stegemann v. Miami Beach Boat Slips Stegemann v. Miami Beach Boat
Slips, 213 F.2d 561 (5th Cir. 1954) (applying Florida law - vessel placed at a wharf or dock for
storage and/or repairs). Thus, when control of the property is not transferred by the owner to the
putative bailee, the relationship created does not constitute a bailment. 29

Here, nothing in the XXX or XXX indicates that dealers relinquish complete or exclusive
possession, custody, and control of their inventory to the Taxpayer or that the Taxpayer exercises
(or intends to exercise) dominion or control over dealers‟ inventory. As stated above, the subject
matter of the XXX and XXX is the lease of XXX aboard the Vessel by dealers. The XXX makes
no mention of dealers‟ inventory but, rather, speaks solely to the lease of XXX. The XXX do
speak to dealers‟ inventory, but do so in exculpatory and other provisions that collective ly
provide that neither the Taxpayer nor the Vessel bears any risk of loss regarding the inventory or
occurrences within a dealer‟s leased space. See XXX §§ 9, 10, 13, and 17.

Conspicuously absent from the XXX and XXX are any provisions indicating that dealers
relinquish exclusive possession, custody, and control of their inventory to the Taxpayer.
Although the Taxpayer has the right to approve exhibited items, see Rules and Regulations §§ 2
and 14, there is no indication that dealers deliver, or that the Taxpayer receives, exclusive
possession, custody, and control of dealers‟ inventory. Rather, the parties‟ agreement indicates
the opposite - that dealers retain control over their own inventory. Dealers, not the Taxpayer, are
responsible for setting up and dismantling their displays within their XXX. See XXX § 17.
Dealers, not the Taxpayer, are likewise responsible for storing all XXX “within their leased
space” for transit. Id. The Taxpayer expressly accepts no responsibility for any XXX consigned
to or in the ownership of a dealer during its tenancy aboard the Vessel. See XXX § 10. Once a
XXX is secured, Vessel crew and emergency personnel may only enter a dealers‟ XXX in an
emergency situation. See XXX § 9. Thus, pursuant to the XXX and XXX, it is dealers who
exercise dominion and control over their inventory – not the Taxpayer.

         7.       The Taxpayer has not demonstrated that the substance of the XXX is other than a
                  taxable lease, rental, or license of tangible personal property

In the alternative positions taken by the Taxpayer, the Taxpayer suggests that the form in which
the transaction has been cast – a lease of tangible personal property, as provided above – should
be disregarded for Florida sales and use tax purposes. 30 As noted in 2., above, taxpayers are



29
   See also LexisNexis Florida Litigation Forms – Forms 263.08 and 263.10 (absence of control as defense to the
assertion of a bailment relationship).
30
  The Taxpayer does not appear to dispute that Chapter 212, F.S., would apply but for the correctness of one of its
positions.
generally held to the form in which they have cast a transaction, and have less freedom to
disavow the form they have chosen for tax purposes. See Parker at 250; Regal Kitchens at 163.

The Department has been unable to identify a standard utilized by Florida courts to determine
whether taxpayers may disavow the form in which they have cast a transaction for Florida sales
and use tax purposes. However, Federal courts have adopted heightened but differing standards
of proof for taxpayers seeking to disavow the form of their transactions for federal income tax
purposes.

In Commissioner v. Danielson, 378 F.2d. 771, 775 (3rd Cir. 1967), cert. denied, 389 U.S. 858
(1967), the court adopted the rule that “a party can challenge the tax consequences of his
agreement as construed by the Commissioner only by adducing proof which in an action between
the parties would be admissible to alter that construction or to show its unenforceability because
of mistake, undue influence, fraud, duress, etc.” The 11th Circuit, which includes Florida, has
adopted this standard. See Bradley, 730 F.2d at 720. The court in Sonnleitner v. Commissioner,
598 F.2d 464, 467 (5th Cir. 1079), determined that before a taxpayer may alter or avoid the tax
consequences of a contractual arrangement, the taxpayer must come forth with “strong proof”
that the agreement lacked economic reality. The United States Tax Court has adopted the strong
proof standard and has refused to apply Danielson outside the circuits that recognize it. See, e.g.,
Meredith Corp v. Commissioner, 102 T.C. 406, 440 (1994). The “strong proof” standard, as
applied by the Tax Court, requires a showing of “more than a preponderance of the evidence,
that the terms of the written instrument do not reflect the actual intentions of the contracting
parties.” See Little v. Commissioner, 65 T.C.M. (CCH) 3025, 3031 (1993); Miller v.
Commissioner, 57 T.C.M. (CCH) 46, 50-51 (1989)(indicating that the burden upon the taxpayer
is “far heavier when his tax reporting positions and other actions did not consistently reflect the
substance which he later argues should control the form.”).

It is unnecessary, for the purposes of this advisement, to speculate upon what standard, if any,
Florida courts would adopt. On the facts presented, the Taxpayer has simply presented no proof
that the terms of the XXX do not reflect the true intentions of the parties. See 1.-3., above.
Accordingly, the Department declines the Taxpayer‟s invitation to ignore the for m in which the
parties have cast the transaction.

C.      Issue 5. - Juris diction to Tax

As stated above, the Taxpayer takes the position that even if the XXX were an otherwise taxable
agreement, Florida has no jurisdiction to tax the fees paid by dealers where: (1) the agreement is
entered into outside of Florida; and (2) payment is made by the dealer to the Taxpayer outside of
Florida prior to its voyage segment(s). 31 The Department disagrees, and determines that Florida
has jurisdiction to tax the fees paid by dealers to Taxpayer pursuant to the XXX, as provided
below.


31
   The Taxpayer cites TAA 05A-029 (June 16, 2005); Depart ment of Revenue v. Pelican Ship Corp., 257 So.2d 56
(Fla. 1st DCA 1972; and Department of Revenue v. Kelly Boat Service, Inc., 324 So.2d 651 (Fla. 1st DCA 1976), for
this proposition.
The state may not tax property, privileges, or persons entirely beyond its jurisdiction because,
under the Fourteenth Amendment to the Federal Constitution (the Due Process Clause), 32 such a
tax amounts to depriving the taxpayer of property without due process of law (i.e., a taking). See
50 Fla. Jur. Taxation § 136; Bickell v. Lee, 5 F. Supp. 720 (N.D. Fla. 1934), aff'd as modified on
other grounds, 292 U.S. 415; Smith v. Lummus, 6 So.2d 625 (Fla. 1942). Here, the Taxpayer
argues that the XXX transaction does not occur “within this state” for the purposes of Section
212.05, F.S. The Department agrees with the Taxpayer that Florida cannot tax transactions that
are not within its territorial jurisdiction, and that the term “within this state” has the definition
ascribed to it in Section 212.02(8), F.S. However, upon the facts presented, the Department
determines that the XXX transaction is taxable by the State of Florida.

Whether a particular person, transaction, or activity is subject to a state‟s sales and use tax act
depends upon the terms of the particular statute. See 68 Am. Jur. 2d Sales and Use Taxes § 42.
Section 212.05(1)(c), F.S., imposes a tax upon the exercise of the privilege o f engaging in the
business of leasing or renting tangible personal property in Florida. As stated above, the Vessel
constitutes tangible personal property under the terms of Chapter 212, F.S., and the lease of
XXX aboard the Vessel is the lease, license, or rental of tangible personal property. See Section
212.02(19), F.S.; New Sea Escape at 164-165. Under the facts presented, the Vessel will be
physically “in this state” during the Florida segments offered to dealers (involving stops at
Florida ports-of-call).

For the purposes of Chapter 212, F.S., a taxable “sale” of tangible personal property occurs when
there is any transfer of title or possession, however accomplished, for a consideration. See
Section 212.02(15)(a), F.S. Where a lessee, licensee, or renter has or takes possession of
tangible personal property in Florida and such possession carries with it a corresponding
obligation to pay a consideration to the lessor, licensor, or rentor, Section 212.05, F.S., levies a
tax upon the gross proceeds derived by the lessor, licensor, or rentor, or upon the lease or rental
price paid or contracted to be paid by the lessee, licensee, or rentee. See Sections 212.02(15)(a),
212.05(1)(c) and (d), F.S. Although not determinative, the Department notes that under the
XXX and XXX, dealers are not entitled to possession of their XXX until the Vessel is docked or
moored. Thus, with regard to the lease of XXX during the Florida segments, transfer of
possession and use of the XXX necessarily takes place “in this state.” Contrary to the
Taxpayer‟s assertion, it is wholly immaterial where the lease was executed or entered into by the
parties (or at what point in time the agreement is made in relation to entry of the Vessel into this
State). See Kirk v. Western Contracting Corp., 216 So.2d 503, 508 (Fla. 1st DCA 1968). It is
likewise immaterial at what point in time payment is made. 33 See Florida Revenue Commission
v. Maas Brothers, Inc., 226 So.2d 849, 852-853 (Fla. 1st DCA 1969); see also Department of

32
    Section 1 of the Fourteenth Amendment provides in pertinent part: “. . . nor shall any State deprive any person of
life, liberty, or property, without due process of law; . . .” Section 9, Article I, of the Constitution of Florida
contains an essentially identical protection, stating in pertinent part: “No person shall be deprived of life, liberty or
property without due process of law, . . .”
33
   A taxpayer may not rely on a Technical Assistance Advisement issued to another taxpayer. See Ru le 12-
11.007(1), F.A.C. To the extent that TAA 05A-029 may be read, as the taxpayer suggests, to require the agreement
to be entered into and payment made in Florida, it is incorrect. However, the Depart ment notes that in TAA 05A -
029 (as well as New Sea Escape and Deerbrooke, cited by the Taxpayer), the lessee or renter‟s right to space aboard
the vessel and obligation to pay arises upon boarding the vessel in Florida.
Revenue v. Pelican Ship Corp., 257 So.2d 56, 57 (Fla. 1st DCA 1972)(holding, in the context of
the tax upon admissions, that the obligation to pay arises when a patron boards the vessel at
dockside). Therefore, it is clear under the facts presented that the Taxpayer, during the Florida
segments, will be engaging in the privilege of leasing or renting tangible personal property in
Florida, which is subject to tax pursuant to Section 212.05, F.S.

Although not directly addressed by the Taxpayer, the Taxpayer‟s pos ition suggests that the
imposition of tax by the State of Florida would violate the Due Process Clause of the Federal
Constitution. “Due process centrally concerns the fundamental fairness of governmental
activity.” Quill Corp. v. North Dakota, 504 U.S. 298, 312 (U.S. 1992). The Due Process clause
places two restrictions upon a state‟s power to tax interstate activities. See Moorman Mfg. Co. v.
Blair, 437 U.S. 267, 272-273 (1978). First, Due process requires at least some “minimal
connection” or “minimum contacts” between the taxing state and the activities giving rise to the
tax "such that the maintenance of the suit does not offend traditional notions of fair play and
substantial justice." See Quill at 307 (U.S. 1992); see also Container Corp. of America v.
Franchise Tax Board, 463 U.S. 159, 165-166 (1983). Although physical “presence” in the taxing
state is considered, the Supreme Court has shifted focus from “presence” within a State to an
inquiry into whether a person‟s contacts with the state make it reasonable to require it to defend
itself in that State. See Quill at 307 (stating, in addition, that where a taxpayer “purposefully
avails itself of the benefits of an economic market in the forum State, it may subject itself to the
State's in personam jurisdiction even if it has no physical presence in the State.). Second, the
proceeds attributed to the state for tax purposes must be rationally related to the values connected
with the taxing state. See Moorman at 273.

Upon the facts presented, four of the fourteen segments offered to dealers solely involve stops at
Florida ports-of-call (approximately sixteen in all). The Taxpayer is clearly availing itself of the
economic market in this state, and could be required to defend itself in Florida. Whether the
proceeds to be taxed are rationally related to the taxing state is also satisfied. States are granted
wide latitude in imposing general revenue taxes - the Due Process Clause does not require that
the amount of tax collected from a particular activity be reasonably related to the value of
services provided to the activity. See Commonwealth Edison Co. v. Montana, 453 U.S. 609, 622
(1981). The Due Process Clause requires only that the taxpayer be entitled to the benefits and
privileges normally afforded those doing business in the state. See Commonwealth Edison at
622-623. Here, the Taxpayer will be a registered dealer doing business in Florida, entitled to the
benefits and privileges customarily afforded to those similarly situated. Therefore, the
imposition of tax is not barred by Due Process concerns.

D.     Application of Ne w Sea Escape and Deerbrooke

The Taxpayer takes the position that if the Department determines that the XXX is a taxable
agreement, tax must be prorated pursuant to Section 212.08(8)(a), F.S., based upon the decisions
in New Sea Escape and Deerbrooke Investments, Inc. v. Department of Revenue, 919 So.2d 691
(Fla. 4th DCA 2006).
Although not constitutionally required to do so, the State of Florida apportions sales and use
taxes on purchases of vessels and parts thereof used to transport persons or property in interstate
or foreign commerce pursuant to Section 212.08(8)(a). 34

The Department notes that the Florida Supreme Court, in New Sea Escape, addressed the state‟s
jurisdiction to tax those engaged in interstate or foreign commerce as provided in Section
212.08(8)(a), F.S. New Sea Escape at 959. Recognizing that it is a “general principle of law that
a state may not tax interests which are not within its territoria l jurisdiction”, the Court, citing its
earlier decision in Tropical Shipping & Constr. Co. v. Askew, 364 So.2d 433 (Fla.
1978)(specifically upholding the constitutionality of Section 212.08(8)(a), F.S.), stated that “the
purpose of the proration provision of the taxing statute, in particular, is to „prevent the state from
exceeding its powers to tax interstate and foreign commerce‟ while permitting the state to „tax
that portion of commerce activity that occurred within the state.‟” New Sea Escape at 962-963
(citing Kelly Boat at 267 and Tropical Shipping at 435).

New Sea Escape and Deerbrooke both involved assessments by the Department against
taxpayers operating “cruises to nowhere” - where vessels depart a Florida port and cruise to a
distance three miles (or more) off the coast of Florida to conduct gambling operations. In New
Sea Escape the Florida Supreme Court, approving the earlier decision of the Fourth District
Court of Appeals, held that the partial exemption provided in Section 212.08(8)(a), F.S., applied
to the taxpayers‟ operations. See New Sea Escape at 966.

The decisions by the Supreme Court and District Courts of Appeal in New Sea Escape and
Deerbrooke indicate both that the lease, license, or rental of an area or portion of a boat
constitutes a taxable transfer of personal property, and that the tax upon payments with regard to
such transactions are entitled to the partial exemption provided in Section 212.08(8)(a), F.S. See
New Sea Escape Cruises, Ltd. v. Department of Revenue, 823 So.2d 161, 164-165 (Fla. 4th DCA
2002), approved 894 So.2d 954 (Fla. 2005); Deerbrooke Investments, Inc. v. Department of
Revenue, 861 So.2d 447, 448 (Fla. 4th DCA 2003), remanded for reconsideration 914 So.2d 949
(Fla. 2005), on remand 919 So. 2d 691, 692 (Fla. 4th DCA 2006). Although the decisions in
New Escape and Deerbrooke addressed whether the taxpayer‟s operations were purely intrastate
or involved foreign commerce, and the instant request concerns the Taxpayer‟s involvement in
interstate commerce, the Department notes that Section 212.08(8)(a), F.S., treats vessels used in
foreign commerce and those used in interstate commerce identically. Therefore, the Department
determines that the tax due with regard to the XXX is entitled to the partial exemption in Section
212.08(8)(a), F.S.



34
   In this context, the issue is ordinarily whether the tax satisfies the “fairly apportioned” prong of the test for
sustaining a tax against a Commerce Clause challenge. See Comp lete Auto Transit, Inc. v. Brady, 430 U.S. 274,
279 (1977). However, with regard to sales and use tax, a taxing scheme is considered fairly apportioned when credit
against a state‟s use tax is granted for sales tax paid to another state. See Goldberg v. Sweet, 488 U.S. 252, 264
(1989); Oklahoma Tax Co mmission v. Jefferson Lines, Inc., 514 U.S. 175, 196 (1995)(stating that Jefferson Lines
“fails to show that Oklaho ma's tax on the sale of transportation imputes economic activ ity to the State of sale in any
way substantially different fro m that imputed by the garden -variety sales tax, which we have perennially sustained,
even though levied on goods that have traveled in interstate commerce to the point of sale or that will move across
state lines thereafter”)(citations omitted).
                                            Conclusion

Issue 1. The Taxpayer is entitled to the benefits of Section 212.08(8), F.S. Consistent with the
requirements of Rule 12A-1.0641(4)(b), F.A.C., the Taxpayer will register as a Florida sales and
use tax dealer and obtain a Direct Pay Permit prior to accepting delivery of the Vessel, and will
tender the selling dealer an affidavit stating that the Vessel is for the exclusive use designated in
Section 212.08(8), F.S. Because the Taxpayer will take delivery o f the Vessel outside Florida,
the Taxpayer‟s purchase and use of the Vessel will not be subject to Florida sales or use tax. See
Section 212.08(8)(a), F.S. Vessel parts and other items purchased in Florida that are appropriate
to perform the purposes for which the Vessel is designed or equipped will be subject to tax based
upon the Taxpayer‟s mileage apportionment factor. See Rule 12A-1.0641(5), F.A.C. The
purchase of fuel in Florida and the charge for any repairs or maintenance performed in Florida
will likewise be subject to tax based upon the Taxpayer‟s mileage apportionment factor. See
Rule 12A-1.0641(5)(b) and (6), F.A.C.

Issues 2., 3., and 4. The XXX is subject to tax under Chapter 212, F.S., and is not a nontaxable
service transaction pursuant to Rule 12A-1.071(15), F.A.C., a nontaxable bailment, or exempt
pursuant to Section 212.031(5), F.S.

The intent of the parties to a contract governs its construction. The parties‟ unambiguous intent,
as evidenced by their agreement, is to enter into a lease transaction regarding XXX aboard the
Vessel. The form in which the parties cast a transaction generally determines its tax
consequences, and here the form of the XXX, as evidenced by the parties‟ agreement and
unambiguous intent, is a taxable lease, license, or rental of tangible personal property.

The form and subject matter of the XXX is the “lease” and “occupancy” of a specified square
footage of XXX aboard the Vessel - dealers are not chartering or hiring the Vessel, bailing their
inventory with the Taxpayer, or subleasing Florida real property. With regard to the Taxpayer‟s
“substance over form” argument, the Taxpayer has not in the instant circumstances presented
proof that the terms of the XXX do not reflect the intentions of the parties.

Issue 5. Payments by dealers to the Taxpayer pursuant to the XXX are within Florida‟s
jurisdiction for tax purposes. With regard to the lease of XXX during the Florida segments, the
Taxpayer is engaging in the taxable privilege of leasing or renting tangible personal property in
Florida. It is immaterial where the XXX was entered into or at what point in time payment is
made. The imposition of tax is not barred by the Due Process Clause.

Issue 6. Based upon the decisions in New Sea Escape and Deerbrooke, the Department
determines that the tax due with regard to the XXX is entitled to the partial exemption in Section
212.08(8)(a), F.S.

This response constitutes a Technical Assistance Advisement under s. 213.22, F.S., which is
binding on the Department only under the facts and circumstances described in the request for
this advice, as specified in s. 213.22, F.S. Our response is predicated on those facts and the
specific situation summarized above.         You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the statutes or rules upon which this
advice is based may subject similar future transactions to a different treatment than expressed in
this response.

You are further advised that this response, your request and related backup documents are public
records under Chapter 119, F.S., and are subject to disclosure to the public under the conditions
of s. 213.22, F.S. Confidential information must be deleted before public disclosure. In an effort
to protect confidentiality, we request you provide the undersigned with an edited copy of your
request for Technical Assistance Advisement, the backup material and this response, deleting
names, addresses and any other details which might lead to identification of the taxpayer. Your
response should be received by the Department within 15 days of the date of this letter.

If you have any further questions with regard to this matter and wish to discuss them, you may
contact me directly at (850) 922-4710.

Sincerely,



Thomas K. Butscher
Senior Attorney
Technical Assistance & Dispute Resolution

TKB\
Record ID: 16939

				
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