Payment of Tolls on Privately Owned Toll Road

SUMMARY

QUESTION: Will the payment of tolls by the motoring public for use of the toll road be subject to Florida sales tax?

ANSWER – Based on Facts Below: Tolls paid solely for transportation purposes on the Toll Road discussed herein will not be subject to Florida sales tax.

July 23, 2007

Re: Technical Assistance Advisement 07A-024 Sale Tax – Payment of Tolls on privately owned toll road XXX (“Taxpayer”) FEI #: XX XXX (“Operating Entity”) FEI #: XX Section 212.031, Florida Statutes (“F.S.”) Rule 12A-1.070, Florida Administrative Code (“F.A.C.”)

Dear XX:

This response is in reply to your letter dated XX, requesting the Department’s issuance of a Technical Assistance Advisement (“TAA”) pursuant to Section 213.22, F.S., and Rule Chapter 12-11, F.A.C., regarding the Department’s position on the payment of tolls on a privately owned toll road. An examination of your letter has established that you have complied with the statutory and regulatory requirements for issuance of a TAA. Therefore, the Department is hereby granting your request for issuance of a TAA.

Stated Facts

Your letter of XX, provides in pertinent part:

… The Taxpayer will build a private toll road in XX County, Florida that will be known as the … XX (the “Toll Road”). The Toll Road will connect XX separate segments of publicly owned roads in [Counties XX] Florida, which would not be contiguous (but for the Toll Road). Upon substantial completion of the Toll Road, the Toll Road will be conveyed to

[Operating Entity] a XXX[,] which has been qualified to conduct business in Florida. The Operating Entity will be 100% owned by the Taxpayer…. At some point in the future, the Taxpayer might either: ([1]) convey its interest in the Operating Entity to a third party, or (2) cause the Operating Entity to convey title to the Toll Road to a third party (the “Successor Entity”). Alternatively, it is also possible that the Taxpayer might continue to own the Operating Entity, without transferring the Toll Road. Any member of the motoring public will be entitled to travel on the Toll Road for the payment of a toll.

On June 12, 2007, the Department received supporting documentation with regard to the toll road, including copies of the regulatory agreements executed between Taxpayer and Counties XXX.

The regulatory agreement between Taxpayer and County XXX provides in pertinent part:

RECITALS:

B. [Toll Road], as depicted on Appendix A attached hereto, consists of the Project Area, the … Toll Road, and the … Project Area and has been adopted as part of the … County Comprehensive Plan, … County Comprehensive Plan, … Metropolitan Planning Organization Long Range Transportation Plan and Transportation Improvement Element and the … Urbanized Area Metropolitan Planning Organization 2010 Long Range Transportation Study Cost Feasible Element.

C. … County lacks present or available capital improvement funding to construct the … Project Area and the … Toll Road and/or acquire the necessary right-of-way absent some level of initial private investment or funding.

D. The development and operation of the [Toll Road] will serve the public interest because, among other things:

(1) it will create an additional hurricane evacuation route and increase access for public safety and emergency vehicles and enhance the overall development potential of property located not only along the [Toll Road] corridor, but

throughout [Counties XXX], thus increasing the ad valorem tax base and benefiting the citizens of [Counties XXX].

(2) it will ease the flow of vehicular traffic… provide more direct access ... and will provide a more convenient and quicker access to … thereby providing the citizens of [Counties XXX] … tourists and other temporary visitors … a direct connection

(3) it will provide employment opportunities, promote development and have a significant positive effect on the general economy of [Counties XXX] and will serve a valid public purpose of [Counties XXX]

The regulatory agreement between Taxpayer and County XXX provides in part:

RECITALS:

B. [Toll Road], as depicted on Appendix A attached hereto, consists of the … Project Area, the … Toll Road, and the … Project Area and has been adopted as part of the … County Comprehensive Plan, … County Comprehensive Plan, … Metropolitan Planning Organization Long Range Transportation Plan and Transportation Improvement Element and the … Urbanized Area Metropolitan Planning Organization 2010 Long Range Transportation Study Cost Feasible Element.

C. [Toll Road], formerly named the … was identified by the … County Transportation Planning Organization (TPO) in its 2025 Long Range Transportation Plan as a proposed new two-lane arterial public road project which would be built by means of a public/private partnership and with private funding.

D. … County lacks present or available capital improvement funding to construct [Toll Road] and/or acquire the necessary right-of-way absent private investment or funding.

E. The development and operation of the [Toll Road] will serve the public interest because, among other things:

(1) it will create an additional hurricane evacuation route and increase access for public safety and emergency vehicles … thus benefiting the citizens

(2) it will ease the flow of vehicular traffic… provide more direct access ... and will provide a more direct route from … a more convenient access to … and a direct connection to … for residents of … counties and for visitors to the area. ***

Requested Advisement

You ask if the payment of tolls by the motoring public for use of the toll road will be subject to Florida sales tax.

Applicable Authority

Section 212.031, F.S., provides in part:

(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 property unless such property is:

6. A public street or road which is used for transportation purposes.

Rule 12A-1.070(1)(a)5.a., F.A.C., also provides:

(1)(a) Every person who rents or leases any real property or who grants a license to use, occupy, or enter upon any real property is exercising a taxable privilege unless such real property is: …

5. A public street or road which is used for transportation purposes.

a. Tolls imposed exclusively for the right to travel on turnpikes, expressways, bridges, and other public roadway are payments for the use of the public roadway and are thus exempt. Example: The toll charged by a city to the general public for the right to cross a bridge is a payment for transportation purposes; therefore, it is exempt.

Discussion

The road under advisement, which will be constructed and owned by a private entity, will be open to the public for transportation purposes through payment of tolls. This type of construction is a “growing trend in highway investment” according to The Return of Private Toll

Roads, by Robert Poole and Peter Samuel,1 which further provides that “the public and private sectors are looking toward partnerships to build, operate, and maintain highway infrastructure in the United States….”

As provided in the aforementioned statutory and regulatory provisions, the rental, lease, or license to use real property is subject to Florida sales tax. However, the rental, lease or license to use specifically enumerated real property is exempt from Florida sales tax. An exemption from

1 www.tfhrc.gov/pubrds/06mar/06.htm sales tax is granted for real property that is a public street or road used for transportation purposes. For instance, tolls paid solely for the right to travel on a public road are exempt from sales tax.

The term “public road” is not defined in Chapter 212, F.S., or Rule 12A-1.070, F.A.C. Thus, we must look to the principles of statutory construction. Words of common usage, when used in a statute should be construed in their plain and ordinary meaning. See Pederson v. Green, 105 So.2d 1 (Fla. 1958)

Black’s Law Dictionary 1193 (5th ed. 1979) defines “road” as:

A highway; an open way or public passage; a line of travel or communication extending from one town or place to another; a strip of land appropriated and used for purposes of travel and communication between different places.

Meriam-Webster’s Collegiate Dictionary, Tenth Edition, 1999, defines “public” in part as:

1 a: exposed to general view: OPEN … 2 c: of, relating to, or being in the service of the community or nation 3 a: of or relating to people in general … 5: devoted to the general or national welfare 6 a: accessible to or shared by all members of the community ….

Due to lack of funding by Counties A and B, the road under advisement will be constructed by a private entity in order to meet public transportations needs. The toll road will serve as a means of travel from one place to another. Furthermore, it will be accessible to and available for use by the general public through payment of tolls. The Toll Road to be constructed, albeit owned by a private entity, will be a public road.

Conclusion

Tolls paid solely for transportation purposes on the Toll Road discussed herein will not be subject to Florida sales tax.

Closing Statement

This response constitutes a Technical Assistance Advisement under Section 213.22, F.S., which is binding on the Department only under the facts and circumstances described in the request for this advice as specified in Section 213.22, F.S. Our response is predicated on those facts and the specific situation summarized above. You are advised that subsequent statutory or administrative rule changes, or judicial interpretations of the statutes or rules, upon which this advice is based, may subject similar future transactions to a different treatment than expressed in this response.

You are further advised that this response, your request and related backup documents are public records under Chapter 119, F.S., and are subject to disclosure to the public under the conditions of s. 213.22, F.S. Confidential information must be deleted before public disclosure. In an effort to protect confidentiality, we request you provide the undersigned with an edited copy of your request for Technical Assistance Advisement, the backup material and this response, deleting names, addresses and any other details which might lead to identification of the taxpayer. Your response should be received by the Department within 15 days of the date of this letter.

Sincerely,

Heather S. Miller Tax Law Specialist Technical Assistance and Dispute Resolution (850) 922-4835

Record ID: 31482