Florida Administrative Code › 12 - DEPARTMENT OF REVENUE › 12A - Sales and Use Tax › Chapter 12A-1 - SALES AND USE TAX › Section 12A-1.071 - Rentals, Leases, or License to Use Tangible Personal Property

Current through Reg. 50, No. 138; July 16, 2024
(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. It is not essential
				for a transfer of possession of tangible personal property to include the right
				to move the tangible personal property. It includes a transaction under which a
				person secures for a consideration the temporary use of tangible personal
				property which, although not on his premises, is operated by or under the
				direction or control of the person or his employees. All leases of tangible
				personal property other than conditional-sale type leases as described in
				paragraph (1)(d) of this rule, are operating leases. Whether a transaction is a
				"sale" or a "rental, lease, or license to use" shall be determined in
				accordance with the provisions of the agreement.
(b) Transfer of possession with respect to an
				operating lease means that one of the following attributes of tangible personal
				property ownership has been transferred:
1.
				Custody or possession of the property, actual or constructive;
2. The right to custody or possession of the
				property; or
3. The right to use
				and control or direct the use of the property.
(c) For an operating lease, tax applies to
				the gross proceeds derived from the lease of tangible personal property for the
				entire term of the lease when the lessor of such property is an established
				business, part of an established business, or leasing tangible personal
				property is incidental or germane to the lessor's business.
1. The "gross proceeds derived" means the
				total consideration agreed by the parties for the lease of the tangible
				personal property. Sales tax is due and payable by the lessee to the lessor
				when the lessee's obligation arises to pay to the lessor each agreed payment,
				irrespective of whether the lessee has complied with the obligation to pay the
				agreed payment(s) to the lessor.
2.
				Gross proceeds for purposes of this rule include, in addition to the amount
				attributable to the rental of tangible personal property:
a. Any interest charges whether or not
				separately stated, unless the interest charges are clearly imposed for late
				payment or other defaults under the lease.
b. Ad valorem taxes due by the lessee or
				other person actually using, or entitled to use the tangible personal property
				to the lessor or any other person on behalf of the lessor, including
				transactions between affiliated entities.
c. Any portion of an insurance premium due by
				the lessee or other person actually using, or entitled to use the tangible
				personal property to the lessor or any other person on behalf of the lessor
				which names the lessor or his assigns as the beneficiary thereof and which is
				separately stated or itemized. However, when a lessee or other person pays
				insurance for his own protection, the premium is not regarded as gross proceeds
				subject to tax, even though the lessor or other person granting the right to
				use the tangible personal property is also protected by the coverage.
d. Freight charges incurred as part of the
				lease transaction. See Rule
				12A-1.045,
				F.A.C.
(d)
				Where a contract designated as a lease transfers substantially all the
				benefits, including depreciation, and risks inherent in the ownership of
				tangible personal property to the lessee, and ownership of the property
				transfers to the lessee at the end of the lease term, or the contract contains
				a purchase option for a nominal amount, the contract shall be regarded as a
				sale of tangible personal property under a security agreement commonly referred
				to as a conditional-sale type lease, from its inception. The purchase option
				shall be regarded as a nominal amount if it does not exceed $100 or 1 percent
				of the total contract price, whichever is the lesser amount.
(e) Whether a lease is a conditional-sale
				type lease or an operating lease shall be determined in accordance with the
				provisions of the agreement, read in light of the facts and circumstances
				existing at the time the agreement was executed. Taxpayers who calculated and
				paid taxes on leases, entered into after January 2, 1989, pursuant to any
				amendments to paragraph (1)(d) of this rule adopted after January 2, 1989,
				shall be deemed to be in compliance with the requirements of this
				rule.
(f) In the case of a
				conditional-sale type lease executed on or after the effective date of this
				rule, the Executive Director or the Executive Director's designee in the
				responsible program will consider these to be sales and purchases from their
				inception with tax due and payable at the moment the contractual agreement is
				entered into or when the property comes to rest in this state if at a later
				date. Charges for interest or financing are taxable unless the rate of interest
				or the actual amount of interest charged is separately stated on the customer's
				contract.