From Jennifer Sloane, Sloane Law Office
As I work on closing another purchase agreement for a client, where it was discovered in due diligence that the seller failed to pay applicable sales taxes during its ownership of the assets, I am compelled to write this article in an effort to spread the word to all operators/developers that there are laws pertaining to sales tax which are applicable to the out-of-home industry. Often operators tend to build, pay rent, sell advertising, and not even think twice about sales tax. However, in some states a sales tax is applicable. And if you want to sell your assets one day and you failed to pay the applicable sales tax, it will hold up the closing until you can clear up the issue of all past due taxes.
Florida is the perfect example. In the state of Florida, pursuant to Florida Administrative Code Rule 12A-1.072(8), sales tax is due on the production costs that are collected from advertisers. The rule states that the advertising materials and services used in the creation of billboard concepts and mock-ups by an advertising agency are exempt under these provisions. However, the charge to produce displays is taxable. So if your Florida ad contract states that you are charging the advertiser $500 for production, then you must pay a 6% state sales tax plus a discretionary sales tax, if applicable, based on the county rate for the county in which the sale takes place. Additionally, Florida Statute 212.031 and Florida Administrative Rule 12A-1.070 state that sales tax is due on lease payments made to landowners. To make matters worse, the case law in Florida has established that if your lease is silent on who is responsible for the tax, the tenant is responsible to the State of Florida for the payment of the sales tax. Did you see that highlighted language?? What that means is don’t leave your lease silent on this issue! Put in your lease that the rent you are paying includes base rent and sales tax and that the lessor is responsible for the payment of all sales tax to any governmental entity.
The laws of every state are different and as a developer/operator it is important that you know your state laws regarding sales tax; not just to avoid problems with delinquent tax penalties, but also so that the sale of your assets to a third party are not held up while you scramble to fix a big problem on your hands.
The information provided in this article does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available in this article is for general informational purposes only. Readers of this article should contact their attorney to obtain advice with respect to any particular legal matter. No reader of this article should act or refrain from acting on the basis of information in this article without first seeking legal advice from counsel. Only your individual attorney can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation.
You can reach Jennifer at JSloane@Sloanelawoffice.com, 407-599-7400.
[wpforms id=”9787″]
Paid Advertisement
