We are in the commercial real estate management business and are working on our CAM reconciliations. We charge real estate taxes to our tenants via monthly operating expense charges. At reconciliation time we charge sales tax to the give back or charge that is owed/charged to the tenant. Are we double charging taxes on the property taxes portion?

ANSWER

The BIDaWIZ Team's Answer:

Based on the information you've provided, the sales tax charges are correct. According to the Florida State Department of Revenue and Administrative code, property taxes paid by a tenant qualify as rent and are taxable. It doesn't matter if the property taxes are paid by a tenant, either directly to the landlord as part of CAM, as a reimbursement to the landlord, or directly to the relevant tax collector. You need to look at the substance over form in this scenario in that the payment of property taxes is technically consideration for a tenant occupying the premises (Reference: Fla. Admin. Code R. 12A-1.070(4)(c); Florida, Department of Revenue, Technical Assistance Advisement 94(A)-052)