19-001881 Bayfront Hma Medical Center, Llc vs. Department Of Revenue
 Status: Closed
Recommended Order on Friday, February 7, 2020.


View Dockets  
Summary: Bayfront Baby Place is not exempt from tax as a lease for re-lease or a space used exclusively as a dwelling unit. Recommend sustaining assessment and denying refund applications.

1S TATEMENT OF T HE I SSUE S

9These consolidated case s involve three issues: (1) whether the Department

20of Revenue's ("the Department") assessment against Bayfront HMA M edical

32Center, LLC ( "Bayfront"), for sales tax on commercial rent payments is

45erroneous; (2) whether Bayfront is entitled to a refund for overpayment of

57sales tax on commercial rent payments from August 1, 2014, to July 31, 2017;

71and (3) whether Bayfront is entitled to a refu nd for overpayment of sales tax

86on commercial rent payments from August 1, 2017 , to May 31, 2018.

98P RELIMINARY S TATEMENT

102In August 2017, the Department initiated a sales and use tax audit of

115Bayfront. While the audit was underway, Bayfront filed a refund a pplication

127with the Department seeking a refund of $546,068. In June 2018, the

140Department issued to Bayfront a sales and use tax assessment in the sum of $148,452 and denied the refund application. In July 2018, Bayfront filed a

167second refund application, which was denied by the Department in

177September 2018. Bayfront timely filed informal protests to the assessment

187and the two refund application denials. On October 4, 2018, the Department

199issued decisions denying each of Bayfront's protests.

206On November 3 0, 2018, Bayfront filed three petitions challenging each of

218the Department's October 4, 2018, decisions. On April 11, 2019, the Department referred all three petitions to the Division of Administrative Hearings ("DOAH") for assignment to an administrative law judge. On

251April 26, 2019, an Order was entered consolidating the cases and setting a

264final hearing for June 10, 2019. On May 22, 2019, the hearing was continued

278to August 8, 2019. Thereafter, on June 24, 2019, the Departme nt filed an

292unopposed motion t o transfer venue. The motion was granted and on

304June 27, 2019, the final hearing was set for August 13, 2019.

316The final hearing was conducted as scheduled on August 13, 2019, and

328September 30, 2019. Bayfront presented the testimony of five witnesses:

338Charl es Tyson, Bayfront's Chief Financial Officer; Jane DeMauro, Director of

349Bayfront Baby Place; James Malone, a tax consultant from FM Cost

360Containment; David Stevens, preparer o f the Capstan report; and

370Chuck Wallace, senior attorney for the Department's Tec hnical Assistance

380and Dispute Resolution ("TADR") office in Tallahassee. Bayfront's Exhibits 1

392through 24 were admitted.

396The Department presented three witnesses: Chris Anderson, tax auditor

405from the Department's refund office in Tallahassee; Tom Koah, se nior tax

417specialist at the Department's Largo Service Center; and Chuck Wallace,

427senior attorney for the Department's TADR office. The Department's

436Exhibits 1 through 32 and 34 through 37 were admitted.

446The two - volume final hearing Transcript was filed on November 1, 2019.

459The parties agreed to 30 days in which to file proposed recommended orders.

472The parties timely filed proposed recommended orders . The Department then

483requested, and was granted the opportunity to file a supplemental proposed r ecommended o rder on the issue of an unadopted rule challenge raised by

508Bayf ront for the first time in its Proposed Recommended O rder. The parties'

522proposed recommended orders were taken into consideration in the preparation of this Recommended Order. All references t o the Florida

542Statutes are to the 2019 version unless otherwise stated.

551F INDINGS OF F ACT

5561. The Department is the state agency responsible for administering

566Florida's sales and use tax laws pursuant to chapter 212, Florida Statutes.

5782. Bayfront, a for - pr ofit LLC, is a 480 - bed faci lity that is housed in a large

599six - floor building with adjacent smaller buildings comprising the hospital

610campus in downtown St. Petersburg. The Department issued Bayfront's sales

620tax registration in August 2013.

6253. The petitions in DOAH Case Nos. 19 - 1881 and 19 - 1882 contest the

641Department's tax assessment and refund application denial for the period of

652August 1, 2014 , to July 31, 2017. The petition in DOAH Case No. 19 - 1880

668contests the Department's refund application denial for t he period of

679August 1, 2017 , to May 31, 2018.

6864. While the Department audited all of Bayfront's Florida sales and use

698tax liabilities, in this proceeding , Bayfront only challenges the Department's

708determination that Bayfront owes sales and use tax on its base rent and

721additional rent payments for space it leases at Johns Hopkins All Children's

733Hospital ("All Children's Hospital").

739Bayfront Baby Place

7425. On November 30, 200 7, All Children's Hospital (as the landlord) , and

755Bayfront (as the tenant) entered into a l ease agreement for a term of 23 years

771wherein Bayfront leas es 91,195 square feet, or 12.57 percent , of All

784Children's Hospital to provide obstetric services. Bayfront refers to this space

795as Bayfront Baby Place (although for purposes of this Recomm ended Order, it

808may also be referred to as "Bayfront").

8166. Together with All Children's Hospital, Bayfront Baby Place is a

827regional perinatal intensive care center licensed under sections 383.15

836through 383 .19, Florida Statutes. A regional p erinatal inten sive care center

849is a specialized unit within a hospital specifically designed to provide a full

862range of health services to women with high - risk pregnancies and intensive

875care services for newborns. Bayfront Baby Place provides these services to

886low and h igh - risk mothers and normal newborns. Both outpatients and

899inpatients are treated at this facility. Approximately 50 to 60 percent of

911Bayfront Baby Place's monthly patient visits are for outpatient treatment.

9217. Bayfront Baby Place is a secure facility, r equiring identification for

933patients and others entering the facility. The 94,195 square feet of leased

946space is allocated as follows:

951(a) The first floor has 3,532 square feet of leased space and consists of the

967entrance with a security station, gift sho p, lobby area, and conference room.

980Patients and family members enter at the first - floor entrance. The conference

993room is used by Bayfront Baby Place's staff and to hold classes for the public.

1008Other than the entrance, inpatients do not usually use the fir st floor.

1021(b) The second floor has 264 square feet and is not accessible to Bayfront's

1035inpatients or outpatients.

1038(c) The third floor has 86,824 square feet and is used to provid e obstetric

1054medical services to inpatients and outpatients. On this floor th ere are

1066eight triage rooms used solely for outpatient care; 14 antepartum rooms for

1078both outpatient and in patient treatment; four operating rooms; eight

1088post - anesthesia recovery bays; 13 labor and delivery rooms; a nursery for

1101newborns; and 40 mother - baby inpatient rooms.

1109(d) The fourth floor has 575 square feet and is not accessible to Bayfront's

1123inpatients or outpatients.

11268. Under its lease, Bayfront is responsible for paying sales tax on base

1139rent and additional rent payments. The lease specifies that u tility services

1151(electricity, water, sewer, heating, air conditioning, plumbing, medical gas,

1160etc.) are charged to the tenant as additional rent. All Children's Hospital

1172provides Bayfront with an itemized invoice each month detailing base rent,

1183Florida sal es tax, environmental services, routine maintenance, dietary

1192services, utilities, medical gases , and central energy plant.

12009. Bayfront Baby Place's inpatient room charge exceeds $2,000 per day. 1

1213The room fee includes nursing care, medical supplies, dietary services , and

1224general overhead charges.

12271 Bayfront characterizes the room charge as "rent." However, Bayfront's invoices label the

1240charge as "Private Room OB."

124510. Patients receiving outpatient treatment are not considered inpatients

1254and are not charged an inpatient room charge.

126211. Bayfront's witnesses, Charles Tyson, Jane DeMauro, and David

1271Stephens, all acknowledge the leased space is used exclusively to provide

1282medical services. It is not a hotel, a nursing home, a psychiatric facility, or a

1297substance abuse facility.

1300The Audit

130212. On August 30, 2017, the Department initiated a sales and use tax

1315audit of Bayfront for the period of August 1, 2014, to July 31, 2017. The audit

1331was conducted by Glenn Morrison, an auditor at the Department's Largo Service Center, and the scope of the audit was all of Bayfront's sales and use

1357tax liabilities imposed under Florida law. Bayfront' s representative for the

1368audit was Camille Henry, Director of Finance.

137513. The Department's initial assessment was issued on April 16, 2018 , and

1387assessed an amount due of $1,002,761.97 of tax and accrued interest. The

1401assessment contained seven audit exhib its. Bayfront is only contesting audit

1412assessment exhibit B03 - Commercial Rent fo r All Children's Hospital, in

1424which the Department determined Bayfront failed to pay sales and use tax

1436owed on utilities, maintenance , and other services that are component s of its

1449rent payments.

145114. On May 8, 2018, tax consultant James Malone informed the

1462Department of FM Cost Containment's representation of Bayfront for the

1472audit. From May 17, 2018, to about May 31, 2018, FM Cost Containment

1485supplied additional taxpayer record s to the Department. After review of the

1497newly - supplied records, the auditor , Mr. Morrison , determined th e additional

1509records supported substantial reduction s to most of the audit assessment

1520exhibits. However, the Department rejected Bayfront's challenge to audit

1529exhibit B03 and made no change to B03 in the assessment revisions.

154115. The Department's Largo Service Center held a telephone conference

1551with James Malone on June 7, 2018, and reviewed all issues. On June 8,

15652018, the Largo Service Center issued i ts revised Notice of Intent to Make

1579Audit Changes. Mr. Malone did not request a second audit conference, and

1591instead asked the Largo Service Center to close his file and forward it to

1605Tallahassee for further processing.

160916. On June 21, 2018, the Department 's Compliance Standards Process

1620office in Tallahassee issued to Bayfront a Notice of Proposed Assessment having a balance due of $124,395.34 tax and $24,412.02 accrued interest.

164417. On June 29, 2018, Bayfront, through FM Cost Containment, filed a

1656timely i nformal protest with the Department, challenging audit exhibit B03.

1667In its protest, Mr. Malone cites sections 212.08(7) and 21 2.031(1)(a)2., Florida

1679Statutes; Florida Administrative Code Rule 12A - 1.001; and Beverl y

1690En terprises - Florida, Inc. v. Department of Revenue , No. 94 - 2259 - CA - 16 - L

1709(Fla. 18th Cir. Ct. Apr. 30, 1996) to support the claim that "the lease, rental,

1724and license to use rooms exclusively as dwelling units by patients in hospitals

1737and other qualify ing healthcare facilities are … exempt from ta x."

174918. On October 4, 2018, the Department issued a Notice of Decisi on

1762sustaining the assessment and , due to accruing interest , Bayfront's tax

1772liability increased to $151,588.36. This decision was prepared by TADR tax

1784conferee Clay Brower, who retired fro m the Department in the fall of 2018. In

1799its Notice of Decision, the Department rejected Bayfront's argument that its

1810leased space is used exclusively as dwelling units and explained that only

1822patients and inmates are exempt from paying sales tax under sec tion

183421 2.08(7)(i), a sales tax exemption that is not available to Bayfront , which is

1848a Florida for - profit business entity and not a patient or inmate.

186119. On November 30, 2018, Bayfront filed a petition challenging the

1872Department's Notice of Decision.

1876Re fund I ( Case No. 19 - 1881)

188520. On May 29, 2018, Bayfront filed an application with the Department

1897seeking a refund of $546,068.49 for the period of November 1 , 2014 , to

1911July 31, 2017 ("Refund I"). Because the Department's service center was still

1925involved w ith the audit, this refund application was se nt to auditor

1938Glenn Morrison in Largo for processing.

194421. As Bayfront's landlord, All Children's Hospital is the taxpayer

1954responsible for remitting commercial rent tax to the s tate. § 212.031(3) , Fla.

1967Stat. In order to have standing for a refund claim, Bayfront needed to obtain

1981an assignment of rights from its landlord. § 215.26(1), Fla. Stat. Along with

1994its refund application, Bayfront provided the Department with All Children's

2004Hospital's executed assignment d ated May 24, 2018 , for the refund period.

201622. Bayfront's reason set fo rth in its refund application was: "NT Rental

2029Tax - Patients Rooms - Sec. 212.08(7), F.S.; Sec. 212.031(1)(a)2., F.S.; Rule 12A -

20431.001 indicate that the lease, rental and license to use room s exclusively as

2057dwelling units by patients in hospitals and other qualifying healthcare

2067facilities are also exempt from tax."

207323. On June 25, 2018, the Department issued its Notice of Intent to Make

2087Tax Refund Claim Changes , denying Bayfront's applicatio n.

209524. On June 29, 2018, Bayfront timely filed a n informal protest with the

2109Department challenging the denial of its refund application. In its protest ,

2120Bayfront repeated the same argument from its protest of the assessment.

2131See ¶17 .

213425. On October 4, 20 18, the Department issued a Notice of Decision of

2148Refund Denial sustaining the denial of the refund application on the same basis as its Notice of Decision.

216626. On November 30, 2018, Bayfront filed a petition challenging the

2177Department's Notice of Decision of Refund Denial.

2184Refund II (C ase No. 19 - 1880)

219227. On July 10, 2018, Bayfront filed a second refund application with the

2205Department. This refund claim sought $117,586.85 for the period of August 1,

22182017 , to May 31, 2018 ("Refund II"). Bayfront 's reason in this application

2233was: "Tax paid on NT Rental Tax - Patients Rooms pursuant to Sec.

2246212.08(7), F.S.; Sec 212.031(1)(a)2."

225028. Refund II was sent to Tallahassee for processing and was assigned to

2263refund tax auditor Chris Anderson.

226829. By Notice of Propo sed Refund Denial issued on September 4, 2018, the

2282Department denied Bayfront's application determining that the lease was

2291taxable and the leased space was not transient rental accommodations under

2302r ule 12A - 1.061. When Mr. Anderson issued the denial of the refund claim he

2318did not know of the earlier audit or the first refund application denial. His

2332analysis and conclusion were based solely on issues raised by Bayfront in Refund II.

234630. On September 7, 2018, Bayfront timely filed a n informal protest with

2359the Department challenging the denial of Refund II. In this protest , Bayfront

2371repeated the same argument it made in its protest of the initial assessment and Refund I. See ¶17 .

239031. On October 4, 2018, the Department issued a Notice of Decision of

2403Refund Deni al sustaining the denial of Refund II on the same bas is as its

2419Notice of Decision sustaining the assessment and the Notice of Decision of

2431Refund Denial in Refund I.

243632. On November 30, 2018, Bayfront filed a petition challenging the

2447Department's Notice of Decision of Refund Denial of Refund II.

2457Bayfront's Position

245933. Bayfront's three petitions are essentially the same, with the only

2470difference being the specific facts relevant to the audit assessment and each refund application.

248434. In the Joint Pre - hear ing Stipulation, Bayfront claims it is exempt and

2499excluded from sales and use tax on its commer cial rent payments because:

2512(1) patient rooms and space used principally by patients are dwelling units

2524excluded from tax under section 212.031(1)(a)2.; and (2) Bayfront's re - lease of

2537space to its patients is excluded from tax as a sale for resale pursuant to

2552rule 12A - 1.039(1)(b). In its Proposed Recommended Order, Bayfront also

2563argues that the Department's cr iteria for distinguishing a space used

2574exclusively as a dwelling unit fro m a space used for medical care constitutes

2588an unadopted rule.

2591The Capstan Report

259435. In support of its arguments that patient - accessible areas of Bayfront

2607are used exclusively as dwelling units, or should be considered a lease for

2620re - le ase, and thus excluded from tax, Bayfront retained the services of

2634Capstan, a separate consulting firm, to prepare a space - use report.

264636. The report, prepared by David Stephens, provides a facility use

2657analysis of Bayfront Baby Place based on the square f ootage of the public

2671space and private space. To prepare the report, Mr. Stephens, conducted an

2683on - site inspection on September 21, 2018, and subse quently prepared the

2696September 24, 2018, Capstan report after viewing each floor of the leased

2708space with Bay front staff. Mr. Stephens, who is not an engineer, testified as a

2723lay witness, rather than an expert.

272937. For purposes of the Capstan report, spaces determined to be accessible

2741to patients and, therefore, "public," included patient rooms, patient suites, o perating rooms, the nursery, hallways, bathrooms, lobbies, conference

2760rooms, and the front portion of nurses' stations. Spaces determined to be

2772administrative and, therefore, "private," included employee rooms, employee

2780break rooms, areas behind the nursin g stations, offices, labs, laundry rooms,

2792storage spaces, hazardous waste rooms, and janitorial closets.

280038. Based on the floor plans and information from the visit, Mr. Stephens

2813used satellite imagery to determine the square footage accessible to patients

2824and the square footage accessible to only Bayfront staff.

283339. The parties dispute what portion of the third floor is public versus

2846private. At final hearing, Mr. Stephens tes tified that the public (patient -

2859accessible) portion o f the entire lea sed space i s 85 percent (77,483 divided by

287691,195) , if the first and third floors are considered. If only the public square

2891feet from the third floor are considered, the total public square feet for the

2905entir e leased space equals 81 percent (73,951 divided by 91,195) . Mr.

2920Stephens also did a separate calculation for only the patient rooms, patient

2932suites, and hallways, and determined the total public squ are feet for those

2945areas to be 52 percent of the leased space .

295540. The Capstan report is of limited value. Other tha n visiting Bayfront

2968Baby Place on one occasion, Mr. Stephens testified that he was unfamiliar

2980with the taxpayer, he engaged in no independent research, and the

2991classification of leased space as "public" vers us "private" was supplied by

3003FM Cost Containment, the entity hired by Bayfront to respond to the audit.

3016The report fails to distinguish between the portions of the facility used

3028exclusively by inpatients, from that used for outpatient medical treatment.

3038C ONCLUSIONS OF L AW

304341. The Division of Administrat ive Hearings has jurisdiction over the

3054subject matter and the parties hereto pursuant to sections 120.569, 120.57(1)

3065and 120.80(14).

3067Applicable Burdens

306942. The Department bears the initial burden to demonstrate that the

3080assessment has been made against the taxpayer and the factual and legal

3092grounds upon which the Department made the assessment. § 120.80(14)(b)2., Fla. Stat. The Department met its burden of proof. It established that it made

3116an assessment against Bayfront for sales and use tax for the audit period,

3129and the Department also demonstrated the factual and legal grounds upon

3140which it based the assessment.

314543. Once the Department meets this burden, the burden shifts to th e

3158taxpayer who must prove by a preponderance of the evidence that the tax

3171asses sment is incorrect to prevail. § 120.57(1)(j) , Fla. Stat. This evidentiary

3183burden is described as "the greater weight of the evidence" and "evidence that

3196more likely than not tends to prove a certain proposition." §120.57(1)(j), Fla.

3208Stat.; IPC Sports, Inc . v. Dep't of Rev . , 829 So. 2d 330, 333 (Fla. 3d DCA

32262002) ; S. Fla. Water Mgmt. v RLI Live Oak , 139 So. 3d 869, 872 (Fla. 2014).

324244. In addition to the assessment, Bayfront protests the Department's

3252denial of two refund applications. In an admi nistrative p roceeding regarding

3264a refund claim, a party's burden of proof is not provided by statute. Hence,

3278Bayfront has the initial burden of proof provided by general law. See

3290§ 120.80(14)(b)2 . , Fla. Stat. "The general rule is, that as in court proceedings,

3304the bur den of proof, apart from statute, is on the party asserting the

3318affirmative of an issue before an administrative tribunal." Balino v. Dep ' t. of

3332HRS . , 348 So. 2d 349, 350 (Fla. 1st DCA 1977); see also Green v. Pederson , 99

3349So. 2d 292, 296 (Fla. 1957)("It is well settled that he who would shelter

3364himself under an exemption clause in a tax statute must show clearly that he

3378is entitled under the law to exemption.") . Bayfront has the burden of proving

3393by a preponderance of the evidence that it is entitled to a r efund.

"3407Used Exclusively As Dwelling Units"

341245. B oth the contested assessment and the refund applications stem from

3424Bayfr ont's commercial lease of 12.57 percent of All Children's Hospital.

3435Section 212.031 provides in pertinent part:

3441Tax on rental or licens e fee for use of real property.

3453(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

3489property unless such property is:

3494* * *

34972. Used exclusively as dwelling units.

3503* * *

3506(b) When a lease involves multiple use of real

3515property wherein a part of the real property is

3524subject to the tax herein, and a part of the property

3535would be excluded from the ta x under …

3544subparagraph (a)2 … the department shall

3550determine, from the lease … and such other

3558information as may be available, that portion of the

3567total rental charge which is exempt from the tax imposed by this section. The portion of the premi ses leased or rented by a for - profit entity

3595providing a residential facility for the aged will be

3604exempt on the basis of a pro rata portion calculated

3614by combining the square footage of the areas used for residential units by the aged and for the care of s uch residents and dividing the resultant sum by

3643the total square footage of the rented premises. For purposes of this section, the term "residential facility for the aged" means a facility that is

3668licensed or certified in whole or in part under chapter 400 , chapter 429, or chapter 651 or that

3686provides residences to the elderly.

369146. Bayfront entered into a written landlord - tenant lease agreement

3702requiring it to pay monthly base rent and additional rent, in exchange for the

3716exclusive right to use a portion of its landlord's real property. The

3728Department determined Bayfront failed to pay sales and use tax owed on

3740utilities, maintenance , and other services that are component s of its rent

3752payments.

375347. Bayfront argues it is exempt and excluded from sales and u se tax on

3768its commercial rent payments because patient rooms and space used

3778principally by patients are dwelling units excluded from tax under

3788section 212.031(1)(a)2. Bayfront relies on Beverl y En terprises - Florida, Inc. v.

3801Department of Revenue , No. 94 - 225 9 - CA - 16 - L (Fla. 18th Cir. Ct. Apr. 30,

38211996) for the proposition that nursing homes, which provide medical related

3832services, are considered "exclusively used as a dwelling unit." 2

384248. The terms "dwelling unit" and "used e xclusively" are not defined in

3855c hap ter 212 or by administrative rule. When construing a statute, the court

3869must first look to the plain language used by the Legislature. Verizon Bus.

3882Purchasing, LLC v. Dep't of Rev . , 164 So. 3d 806, 809 (Fla. 1st DCA 2015). If

3899a statute is clear, "the statu te must be given its plain and obvious meaning."

3914Id. "When considering the meaning of terms used in a statute, this c ourt

3928looks first to the term's ordinary definitions [which] may be derived from

3940dictionaries." Trinidad v. Fla. Peninsula Ins. Co. , 121 So. 3d 433, 439 (Fla.

39532013), citing Metro. Cas. Ins. Co. v. Tepper , 2 So. 3d 209, 214 (Fla. 2009).

396849. Among the definitions for the term "use" is "to put into service or

3982employ for a purpose." The American Heritage Dictionary of the English

3993Language, 5th Edition, see "use," www.ahdictionary.com/word/

3999search.html?q=use (last visited February 5, 2020) . The term "exclusively" is

4011defined as " not allowing something else ; not di vided or shared with

4023others … ; not accompanied by others; single or sole." Id. at "exclusively,"

4035www.ahdictionary.com /word/search.html?q=exclusively (last visited

4040February 5, 2020) . "Dwelling" is defined as "a place to live in; an abode."

4055Id . at "dwelling," www.ahdictionary.com/word/ search.html?q =dwelling (last

4064visited February 5, 20 20) . Hence, a common understanding of the phrase

"4077used exclusively as dwelling units" is a facility intended to be used solely as

4091a place to live.

409550. However, the term "used exclusively," in the property context, refers to

4107the "dominant use of property" a nd does not necessarily mean a use which

4121excludes all others. Exclusive Use, USLEGAL, www.definitions.uslegal.com/

4128e/exclusive - use - property/ (last visited February 5, 2020) . In fact, t he

4143Department admits s ection 212.031(1)(a)2. applies to assisted living facilities

41532 Beverl y was decided before nur sing homes were give n the pro rata exclusion under

4170section 212.031(1)(b).

4172("ALFs"), inpatient substance abuse facilities, and inpatient psychiatric units.

4183Each of these facilities unquestionably provide s medical care in addition to

4195sleeping accommodations.

419751. Bayfront's provision of sleeping accommodations for inpat ient care is

4208distinguishable from ALFs, inpatient substance abuse facilities, and

4216psychiatric units.

421852. While the Department acknowledge s that certain taxpayers that offer

4229nursing services at their facility receive the section 212.031(1)(a)2. tax

4239exempti on, the leased space for the qualifying taxpayers are factually and

4251legall y distinguishable from Bayfront. Bayfront's reliance on the

4260Department's advisory letters are misplaced because not only are those

4270taxpayers materially different from Bayfront, by st atu t e and rule, the

4283advisory letters are not legal precedents nor legal authority for other

4294taxpayers. § 213.22(1), Fla. S tat., Fla. Admin. Code R. 12 - 11.007(1) - (2) .

431053. Nursing homes and ALFs are specifically designated as residential

4320facilities under cha pters 400 and 429 , Florida Statutes . Individuals who

4332reside in nursing homes and ALFs are considered "residents" under Florida

4343law. Whereas "residents" reside in nursing homes and ALFs, Bayfront's

4353customers are patients. A patient at a regional perinatal f acility is defined as

4367a woman experiencing a high - risk pregnancy or a medic ally eligible newborn

4381infant. § 383.16(3), Fla. Stat. Bayfront has a patient - medical provider

4393relationship with its customers, not a residential relationship.

440154. Bayfront leases th e space as a place of business to provide obstetric

4415medical care. No common person refers to a hospital as a dwelling unit,

4428home, or abode solely or even primarily to live and reside. Patients who use

4442the Bayfront space are not leasing a bed or a room with the intention of

"4457dwelling" or staying. Additionally, living and residing is a key to the care

4470offered at ALFs, inpatient substance abuse, and inpatient mental health

4480facilities. In contrast the care provided by Bayfront includes 50 - 60 percent

4493outpatient services.

449555. Unlike residents of an ALF, inpa tient substance abuse facility , and

4507inpatient psychiatric unit , who either chose to be, or are placed, at these

4520facilities to reside short or long - term while receiving assistance with personal

4533care and medical needs, obstetric patients are placed in a fully - equipped

4546medical room and their overnight stays are incidental to the child - birth

4559process. Bayfront is not used as a home or a residence. The fact that sleeping

4574may occur at Bayfront does not alter its sole use or dominant purpose. In

4588fact, Bayfront's own witnesses admit that the facility is used exclusively for

4600medical services. Bayfront cannot be use d "exclusively" or predominantly

4610both as a labor and delivery medical facility and as a residential facility .

462456. The fact that section 212.031(1)(a)2. is applied to exclude certain

4635residential care facilities does not make the provision ambiguous. The space

4646leased by Bayfront is not used "exclusively as dwelling units" and is,

4658therefor e , taxable. 3

4662Lease for Re - Lease

466757. In the prehearing stipulation , Bayfront argues its "re - lease of the

4680space to its patients is excluded from tax as a sale for resale" and cites to

4696rule 12A - 1.039(1)(b). In essence , Bayfront claims it subleases Bayfront Baby

4708Place to its patients and is somehow exempt from tax on that basis. However,

4722since Bayfront maintains sole control and full use of its leased space and there is no applicable tax exemption under Florida law, Bayfront's claim has

4747no factual or legal basis.

475258. Sections 212.031(1 )(a) and (c) impose sales and use tax on the total

4766rent fee charged for the renting or leasing of real property. Section 212.031 (3)

47803 Both parties wrote extensively in their proposed recommended orders on the issue of

4794whether section 212.031(1)(a)2 . , provides a tax exemption or a tax exclusion. If the phrase

"4809use d exclusively as dwelling units" is considered a tax exclusion, any ambiguity is reso lved

4825in favor of the taxpayer. Drum Service Co. v. Kirk , 23 4 So. 2d 358, 359 (Fla. 1970).

4843Conversely, if the phrase is meant to create an exemption from tax, it is constru ed against

4860the taxpayer. Alachua Cty. v. Dep't of Rev . , 466 So. 2d 1186, 1187 (Fla. 1st DCA 1985).

4878Because the language is not ambiguous, it is unnecessary for the undersigned to address

4892whether this provision is an exclusion or exemption.

4900holds landlords responsible for charging tenants, collecting , and remitting

4909commercial rent tax to the Department. Rule 12A - 1.070(4)(b) requires the tax

4922due to be paid by the tenant to its landlord. Rule 12A - 1.070(7)(a) provides

4937that when a tenant sublets a portion of its taxable leased property, the tenant

4951is required to register as a dealer and collect and remit the tax on al l sublet

4968rentals. Rule 12A - 1.070(9) requires the tenant that assigns its interest, or

4981retains only an incidental portion of the leased premises, to collect sales tax

4994on the sub rentals and pay tax to the landlord on the portion retained. The

5009rule also provi des that when a tenant sublets all, or substantially all, of its

5024interest in the leased premises, the tenant may register with the Department

5036as a dealer and provide a resale certificate to its landlord in lieu of paying the

5052tax to the landlord, hence reli eving the landlord of the duty to remit the tax

5068to the s tate on its prime lease.

507659. However, when a tenant retains its interest in the leased space, an

5089assignment of the leased space (for the avoidance of tax obligations) does not

5102occur, and the tenant co ntinues to be responsible for the tax owed on all

5117consideration paid on the prime lease. Bayfront's control of the leased

5128premises is superior to that of its patients and it does not sublet or assign its

5144interest in the leased premises to its patients. Bec ause Bayfront does not

5157assign its interest in the facility to its patients, Bayfront is responsible for the

5171sales and use tax pursuant to section 212.031(1)(a). 4 See Fla. Admin.

5183Code R. 12A - 1.070(7) , (8) , and (9).

5191Unadopted Rule

519360. Agency action that deter mines the substantial interests of a party

5205cannot be based on an unadopted rule. § 120.57(1)(e)1., Fla. Stat. An

5217unadopted rule is any agency statement of general applicability t hat is a

52304 In its inform al protests Bayfront also relie d on section 212.08(7)(i) as support for its claim

5248that the c ommercial lease is tax exempt. Section 212.08(7)(i) provides that hospital room and

5263meal charges to patients are exempt from tax. This exemption does not apply to B ayfront's

5279commercial lease because the taxpayer, Bayfront, is not a patient.

"5289rule," as defined in s ection 120.52(16), without going through the

5300r ul emaking process required under s ection 120.54 . § 120.52(20), Fla. Stat.

531461. The Department is required to promulgate rules on "those statements

5325which are intended by their own effect to create rights, or to require

5338compliance, or otherwise to have the di rect and consistent effect of law."

5351Coven try First v. Office of Ins. Reg . , 38 So. 3d 200, 203 (Fla. 1st DCA 2010). If

5370the effect of the Department's statement is to "create certain rights or

5382adversely affect other rights, it is a rule." Id . at 203.

539462. No t all agency statements are required to be promulgated as rules.

5407Agency statements that only apply under specific circumstances are not

5417statements of general applicability when the statements are merely

5426guidelines and the application of the statement is su bject to the discretion of

5440an agency employee. Id. at 204.

544663. Bayfront argues:

5449The Department testified that hospitals do not

5456qualify under Section 212.031(1)(a)2, because medical treatment is provided. The Department

5467has previously issued a ruling with a similar

5475position that hospitals do not qualify because of medical treatment [PE 16, Letter of Technical Advice ("LTA") 96A - 011].

5497See Petitioner's Proposed Recommended Order ¶¶ 115 - 116.

550664. However, this is a mischaracterization of the testimony. The testimony

5517offered by Charles Wallace on behalf of the Department was that if the sole

5531purpose of a medical facility is to provide medical care, that is a factor taken

5546into consideration in determining whether the structure is a " dwelling unit"

5557under sectio n 212.013.

556165. It is clear from Mr. Wallace's testimony that the Department's

5572determination of whether taxpayers qualify for an exemption under

5581section 212.031(1)(a)2. is based upon the application of the plain language of

5593the statute to the facts of each individual case and is not based upon a

5608general statement by the Department. There is no evidence to establish that

5620the Department instructs its auditors that hospitals do not qualify for the

5632sought - after exemption. In fact, as stated by Bayfront in its P roposed

5646Recommended O rder, "the Department determines what real property

5655qualifies for the exclusion on an ad hoc basis." See Petitioner 's Proposed

5668Recommended Order ¶ 51; and Tr . Vol. II, p . 218; lines 1 - 15.

568466. Bayfront's reliance on the 1996 Letter of Te chnical Advice ("LTA") is

5699similarly misplaced. 5 Nowhere in the LTA does the Department suggest that

5711hospitals do n ot qualify under s ection 212.031 (1)(a)2. because medical

5723treatment is provided. Rather, this LTA states:

5730With respect to the applicability of the "dwelling

5738unit" exclusion to hospitals, it must be ascertained

5746whether or not a hospital room can be considered as

5756being used exclusively for dwelling. Unlike the case

5764of a hotel, motel, boarding house, or other similar

5773structure, whose sole purpose is to provide sleeping

5781and, perhaps, housekeeping, facilities to its customers, a hospital provides its customers with a place to sleep only as a method of accomplishing its sole purpose of providing treatment, cure, mitigation or amelioration of illness or disease

5818The hospital does not make exclusive use of hospital

5827rooms to simply provide sleeping accommodations to the public. In fact, a primary goal of the hospital

5844is to discharge patients as soon as possible, unlike a

5854motel or hotel, where the objective is to retain the

5864guests for as long as possible.

58705 / An LTA is a Department advisory position on the taxa bility of a given transaction. An LTA

5889is informal and non - binding on the Department. See Fla. Admin. Code. R. 12 - 11.003(1)(b ).

5907See also Chapter 9, § 9.3 , Florida Administrative Practice (2019) .

591867. An agency statement that merely reiterates a law or declares what is

"5931readily apparent" from the text of a law, is not considered a rule. Grabba -

5946Leaf v. D ep't of Bus. & Prof'l Reg. , 257 So. 3d 1205, 1 208 (Fla. 1st DCA 2018).

5965It is readily apparent from the statute , that the L egislature intends that

5978every person who rents real property is exercising a taxable privilege, unless

5990the "property" qualifies for an exemption. § 212.031(1)(a), Fla. Stat. Here, the

6002claimed exemption applies to property "used exclusively as dwelling units"

6012under section 2 12.031(1)(a)2 .

601768. Because Bayfront is not used exclusively or predominately to provide

6028dwelling units for patients , the Department concluded it did not have the

6040legislative authority to provide Bayfront with the claimed exemption. The

6050effect of the Department's decision is not a rule because it is an application of

6065the statute to the facts of the se case s . In making this decision , the

6081Department did not apply a gen eral statement which , in and of itself, creates

6095certain rights or adversely affects other rights.

6102R ECOMMENDATION

6104Based on the foregoing Findings of Fact and Conclusions of Law, it is

6117R ECOMMENDED that the Department of Revenue enter final order s in these

6130c onsolidated cases sustaining the assessment and denying Bayfront HMA

6140Medical Center, LLC's , refund applications.

6145D ONE A ND E NTERED this 7th day of February, 2020 , in Tallahassee, Leon

6160County, Florida.

6162M ARY L I C REASY

6168Administrative Law Judge

6171Division o f Administrative Hearings

6176The DeSoto Building

61791230 Apalachee Parkway

6182Tallahassee, Florida 32399 - 3060

6187(850) 488 - 9675

6191Fax Filing (850) 921 - 6847

6197www.doah.state.fl.us

6198Filed with the Clerk of the

6204Division of Administrative Hearings

6208this 7 th day of February , 20 20 .

6217C OPIES F URNISHED :

6222Mark S. Hamilton, General Counsel

6227Department of Revenue

6230Post Office Box 6668

6234Tallahassee, Florida 32314 - 6668

6239(eServed)

6240Joseph C. Moffa, Esquire

6244Moffa, Sutton & Donnini, P.A.

6249Trade Center South, Suite 930

6254100 West Cypress Creek Ro ad

6260Fort Lauderdale, Florida 33309

6264(eServed)

6265Randi Ellen Dincher, Esquire

6269Office of the Attorney General

6274Revenue Litigation Bureau

6277The Capitol, Plaza Level 01

6282Tallahassee, Florida 32399

6285(eServed)

6286Rex D. Ware, Esquire

6290Moffa, Sutton & Donnini, P.A.

62953500 Financial Plaza , Suite 330

6300Tallahassee, Florida 32312

6303(eServed)

6304Jonathan W. Taylor, Esquire

6308Moffa, Sutton & Donnini, P.A.

6313Trade Center South, Suite 930

6318100 West Cypress Creek Road

6323Fort Lauderdale, Florida 33309

6327(eServed)

6328James A. Zingale, Executive Dir ector

6334Department of Revenue

6337Post Office Box 6668

6341Tallahassee, Florida 32314 - 6668

6346(eServed)

6347N OTICE OF R IGHT T O S UBMIT E XCEPTIONS

6358All parties have the right to submit written exceptions within 15 days from

6371the date of this Recommended Order. Any exceptions to this Recommended

6382Order should be filed with the agency that will issue the Final Order in this

6397case.

Select the PDF icon to view the document.
PDF
Date
Proceedings
PDF:
Date: 09/07/2021
Proceedings: Department's Unopposed Motion for Order Taxing Costs (filed in Case No. 19-001882). (DOAH CASE NO. 21-2717F ESTABLISHED)
PDF:
Date: 09/07/2021
Proceedings: Department's Unopposed Motion for Order Taxing Costs (filed in Case No. 19-001881). (DOAH CASE NO. 21-2716F ESTABLISHED)
PDF:
Date: 09/07/2021
Proceedings: Department's Unopposed Motion for Order Taxing Costs filed. (DOAH CASE NO. 21-2715F ESTABLISHED)
PDF:
Date: 08/27/2021
Proceedings: Notice of Appearance (Franklin Sandrea-Rivero; filed in Case No. 19-001882).
PDF:
Date: 08/27/2021
Proceedings: Notice of Appearance (filed in Case No. 19-001881).
PDF:
Date: 08/27/2021
Proceedings: Notice of Appearance (Franklin Sandrea-Rivero) filed.
PDF:
Date: 04/08/2020
Proceedings: Agency Final Order
PDF:
Date: 04/08/2020
Proceedings: Department of Revenue's Response to Bayfront's Exceptions to the Recommended Order filed.
PDF:
Date: 04/08/2020
Proceedings: Petitioner's Exceptions to the Recommended Order filed.
PDF:
Date: 04/08/2020
Proceedings: Agency Final Order filed.
PDF:
Date: 02/07/2020
Proceedings: Recommended Order
PDF:
Date: 02/07/2020
Proceedings: Recommended Order (hearing held August 13 and September 30, 2019). CASE CLOSED.
PDF:
Date: 02/07/2020
Proceedings: Recommended Order cover letter identifying the hearing record referred to the Agency.
PDF:
Date: 01/08/2020
Proceedings: Department of Revenue's Supplemental Proposed Recommended Order filed.
PDF:
Date: 12/27/2019
Proceedings: Order Granting Respondent's Motion to Supplement the Department's Proposed Recommended Order.
PDF:
Date: 12/23/2019
Proceedings: Respondent's Motion to Supplement the Department's Proposed Recommended Order filed.
PDF:
Date: 12/20/2019
Proceedings: Order on Respondent's Motion to Strike.
PDF:
Date: 12/11/2019
Proceedings: Bayfront HMA Medical Center, LLC's Response to the Department's Motion to Strike filed.
PDF:
Date: 12/06/2019
Proceedings: Petitioner's Notice of Objection to the Department's Motion to Strike and Intent to Timely File a Response filed.
PDF:
Date: 12/06/2019
Proceedings: Department's Motion to Strike filed.
PDF:
Date: 12/02/2019
Proceedings: Appendix to Petitioner's Proposed Recommended Order filed.
PDF:
Date: 12/02/2019
Proceedings: Petitioner's Proposed Recommended Order filed.
PDF:
Date: 12/02/2019
Proceedings: Department of Revenue's Proposed Recommended Order filed.
Date: 11/01/2019
Proceedings: Transcript of Proceedings (not available for viewing) filed.
PDF:
Date: 11/01/2019
Proceedings: Notice of Filing Transcript.
Date: 11/01/2019
Proceedings: Transcript of Proceedings (not available for viewing) filed.
Date: 09/30/2019
Proceedings: CASE STATUS: Hearing Held.
PDF:
Date: 08/14/2019
Proceedings: Notice of Hearing by Video Teleconference (hearing set for September 30, 2019; 9:00 a.m.; Tampa and Tallahassee, FL).
Date: 08/13/2019
Proceedings: CASE STATUS: Hearing Partially Held; continued to September 30, 2019; Tampa, FL.
Date: 08/12/2019
Proceedings: Petitioner's Proposed Exhibits filed (exhibits not available for viewing).
PDF:
Date: 08/09/2019
Proceedings: Department of Revenue Supplemental to Exhibits filed (exhibit not available for viewing).
PDF:
Date: 08/09/2019
Proceedings: Department of Revenue Supplement to Exhibits filed.
PDF:
Date: 08/09/2019
Proceedings: Petitioner's Notice of Filing Proposed Supplemental Exhibit filed.
Date: 08/08/2019
Proceedings: Petitioner's Proposed Exhibits filed (exhibits not available for viewing).
Date: 08/08/2019
Proceedings: Respondent's Proposed Exhibits filed (exhibits not available for viewing).
PDF:
Date: 08/07/2019
Proceedings: Department of Revenue's List of Exhibits filed.
PDF:
Date: 08/06/2019
Proceedings: Petitioner's Notice of Filing Proposed Exhibits filed.
PDF:
Date: 08/02/2019
Proceedings: Joint Pre-Hearing Stipulation filed.
PDF:
Date: 08/02/2019
Proceedings: Department's Supplemental Response to Petitioner's First Request for Admission filed.
PDF:
Date: 08/01/2019
Proceedings: Department's Notice of Proof of Service of Subpoena Ad Testificandum on Jane DeMauro filed.
PDF:
Date: 07/15/2019
Proceedings: Petitioner's Response to Respondent's First Request for Production of Documents filed.
PDF:
Date: 07/12/2019
Proceedings: Petitioner, Bayfront HMA Medical Center, LLC's Responses to Respondent's First Request for Admissions filed.
PDF:
Date: 07/12/2019
Proceedings: Petitioner's Notice of Serving Answers and Objections to First Set of Interrogatories filed.
PDF:
Date: 07/01/2019
Proceedings: Petitioner's Amended Notice of Taking Deposition of Thomas Koah (amended as to deponent's name) filed.
PDF:
Date: 06/28/2019
Proceedings: Petitioner's Notice of Taking Deposition of Tim Koah filed.
PDF:
Date: 06/28/2019
Proceedings: Petitioner's Notice of Taking Deposition of Minerva Krueger filed.
PDF:
Date: 06/27/2019
Proceedings: Order Rescheduling Hearing by Video Teleconference (hearing set for August 13, 2019; 9:00 a.m.; Tampa and Tallahassee, FL).
PDF:
Date: 06/27/2019
Proceedings: Department of Revenue's Notice of Taking Depositions of Petitioner's Designated Witness filed.
PDF:
Date: 06/27/2019
Proceedings: Department's Notice of Date for Inspection of Land and Real Estate filed.
PDF:
Date: 06/26/2019
Proceedings: Order Denying Department's Motion for Protective Order and Motion in Limine.
PDF:
Date: 06/26/2019
Proceedings: Bayfront HMA Medical Center, LLC's, Response to the Department's Motion for Protective Order and Motion in Limine filed.
PDF:
Date: 06/24/2019
Proceedings: Department's Motion for Change of Venue filed.
PDF:
Date: 06/21/2019
Proceedings: Department's Motion for Protective Order and Motion in Limine filed.
PDF:
Date: 06/21/2019
Proceedings: Department's Response to Petitioner's First Request for Admission filed.
PDF:
Date: 06/21/2019
Proceedings: Department's Unverified Answers to Petitioner's First Set of Interrogatories filed.
PDF:
Date: 06/21/2019
Proceedings: Department's Response to Petitioner's First Request for Production of Documents filed.
PDF:
Date: 06/14/2019
Proceedings: Department's First Request for Admissions with Interlocking Discovery filed.
PDF:
Date: 06/14/2019
Proceedings: Department's First Request for Production filed.
PDF:
Date: 06/14/2019
Proceedings: Department's First Set of Interrogatories withe Interlocking Requests for Production of Document filed.
PDF:
Date: 06/14/2019
Proceedings: Notice of Service of Respondent's First Set of Discovery Upon Petitioner filed.
PDF:
Date: 06/13/2019
Proceedings: Petitioner's Notice of Taking Deposition of Chuck Wallace filed.
PDF:
Date: 06/12/2019
Proceedings: Department's Request for Entry Upon Land for Inspection and Other Purposes filed.
PDF:
Date: 05/22/2019
Proceedings: Order Granting Continuance and Rescheduling Hearing by Video Teleconference (hearing set for August 8, 2019; 9:00 a.m.; Lauderdale Lakes and Tallahassee, FL).
PDF:
Date: 05/21/2019
Proceedings: Joint Motion to Continue Final Hearing filed.
PDF:
Date: 05/21/2019
Proceedings: Department's Notice of Agreed upon Extension filed.
PDF:
Date: 04/26/2019
Proceedings: Petitioner's First Requests for Admission to Respondent filed.
PDF:
Date: 04/26/2019
Proceedings: Petitioner's First Request for Production of Documents to Respondent filed.
PDF:
Date: 04/26/2019
Proceedings: Petitioner's Notice of Serving First Set of Interrogatories to Respondent filed.
PDF:
Date: 04/26/2019
Proceedings: Notice of Hearing by Video Teleconference (hearing set for June 10, 2019; 9:00 a.m.; Lauderdale Lakes and Tallahassee, FL).
PDF:
Date: 04/26/2019
Proceedings: Order of Pre-hearing Instructions.
PDF:
Date: 04/26/2019
Proceedings: Order of Consolidation (DOAH Case Nos. 19-1880, 19-1881, 19-1882).
PDF:
Date: 04/19/2019
Proceedings: Notice of Transfer.
PDF:
Date: 04/18/2019
Proceedings: Joint Response to Initial Order filed.
PDF:
Date: 04/18/2019
Proceedings: Notice of Appearance (Jonathan Taylor) filed.
PDF:
Date: 04/16/2019
Proceedings: Notice of Appearance (Rex Ware) filed.
PDF:
Date: 04/16/2019
Proceedings: Notice of Substitution of Counsel (Randi Dincher) filed.
PDF:
Date: 04/15/2019
Proceedings: Notice of Appearance (John Leadbeater) filed.
PDF:
Date: 04/12/2019
Proceedings: Initial Order.
PDF:
Date: 04/11/2019
Proceedings: Notice of Decision of Refund Denial filed.
PDF:
Date: 04/11/2019
Proceedings: Petition for Chapter 120 Hearing filed.
PDF:
Date: 04/11/2019
Proceedings: Agency referral filed.

Case Information

Judge:
MARY LI CREASY
Date Filed:
04/11/2019
Date Assignment:
04/19/2019
Last Docket Entry:
09/07/2021
Location:
Tampa, Florida
District:
Middle
Agency:
ADOPTED IN TOTO
 

Counsels

Related Florida Statute(s) (12):