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The Florida department of revenue (the Department) lately issued guidance on revenue and use taxes since it relates to particular rental arrangements. Issuing specialized assistance Advisement 10A-026 on 06/07/2010, the department addressed questions from related entities involved inside of a rental arrangement. during the scenario, a set of managers owns equally an LLC, which holds the real property, along with a Subchapter S institution (the Taxpayer) which occupies the same property.

The managers claimed that, since equally entities are held by the same persons, and no formal lease exists, the LLC is not engaged in commercial rental activities. Further, since the framework only exists to secure financing, this romantic relationship is not one of landlord/tenant and therefore not subject to commercial rental revenue tax.

The department do not find this rationale satisfactory, and rather discovered how the rental income recorded through the LLC was subject to Florida revenue tax. while no formal definition for “landlord and tenant relationship” exists in applicable Florida taxes code, Black’s Law Dictionary areas the romantic relationship among the LLC and Taxpayer squarely as an implied landlord/tenant relationship. regarding hire payments, while the amount only covers mortgage payments as well as depreciation, they are nonetheless regarded as total concern and taxed accordingly.