When did an equipment finance lease become subject to documentary stamp tax if payment duties began 16 days after shipment?

Subject

Leases

Plain-English summary

The equipment lease became subject to documentary stamp tax on the sixteenth day after shipment. The master lease expressly incorporated the equipment schedule, so Florida read the documents together. They established an unconditional obligation and the amount and number of payments.

The payment obligation was not yet effective when the documents were signed because the equipment had not been procured and the parties' rights and duties began on the acceptance date, defined as day 16 after shipment.

What this means for you

An incorporated document can supply the amount and payment terms needed for a taxable written obligation, while a stated condition or future acceptance date controls when that obligation becomes taxable.

Common questions

Q: Was the lease taxable at signing? No.

Q: When did tax attach? Sixteen days after shipment.

Q: Why were the two documents read together? The master lease expressly incorporated the equipment schedule.

Citations and references

• Fla. Stat. § 201.08(1) and (6) — written obligations and incorporated documents
• Fla. Admin. Code r. 12B-4.053(2)(b) — leases containing unconditional payment obligations
• Gulf American Land Corp. v. Green, 149 So. 2d 396 (Fla. 1st DCA 1962)
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01B4-004

Original ruling text

SUMMARY
QUESTION: Is a lease, which incorporates the Equipment
Schedule, and indicates that the rights and obligations of
the parties commence on the Acceptance day, which is
sixteen days after the shipment of the equipment, subject
to tax?

ANSWER - BASED ON FACTS BELOW: The lease, which
incorporates the Equipment Schedule, is subject to tax on
the sixteenth day after the shipment of the equipment.

Feb 21, 2001

Re: Technical Assistance Advisement No. 01B4-004
Documentary Stamp Tax - Leases
Section 201.08, F.S., and Rule 12B-4.053(2), F.A.C.
XXX (hereinafter "Taxpayer")

Dear :

Your letter requesting a Technical Assistance Advisement
has been referred to this office for response. The specific
scenario for which advice has been requested is summarized
below.

Facts as Presented by Petitioner

The Taxpayer is located outside the state of Florida and
enters into commercial finance leases of tangible personal
property, with lessees inside and outside the State of Florida.

The lease transaction consists of two documents: a Master
Lease and the Equipment Schedule(s). The Master Lease and the
Equipment Schedule will sometimes be referred to collectively as
the "Lease Documents."

The introductory paragraph of the Master Lease expressly
incorporates the Equipment Schedule. Paragraph 2 of the Master

Lease, which addresses the Term, Renewal and Extensions,
provides that the initial term and the rights and obligations of
the parties shall commence on the Acceptance Date, and shall
continue from the Commencement Date for the number of months set
forth in the lease. The Acceptance Date is the sixteenth (16th)
day after the date of shipment to the lessee and the
Commencement Date is the first day of the month after the
Acceptance Date. The lease is non-cancelable for the full term
of the lease and automatically renews in one year non-cancelable
increments unless the lessor receives written notice that the
lessee intends to purchase the equipment or terminate the lease.

The Equipment Schedule describes the equipment to be
leased. The schedule also sets forth the term of the lease, the
monthly lease payment, and the number of lease payments. The
schedule also provides that, at the end of the lease term, the
lessee may purchase the leased equipment for a XXX buyout
amount. The terms of the Master Lease are also incorporated
into the Equipment Schedule. At the time the Master Lease and
the Equipment Schedule are executed, the equipment has not been
procured by the lessor.

Request for Advisement

The Taxpayer requests a Technical Assistance Advisement on
the issue of whether the lease documents are subject to tax
under s. 201.08, F.S., as a written obligation to pay money.

Provisions of Law

Section 201.08(1), F.S., imposes tax on promissory notes,
nonnegotiable notes, or written obligations to pay money. The
tax rate is $.35 per $100 or faction thereof.

Rule 12B-4.053(2)(b), F.A.C., provides that a lease of
tangible personal property containing a written unconditional
obligation to pay money is subject to tax.

In Gulf American Land Corporation v. Green, 149 So.2d 396
(Fla. 1st DCA 1962), cert. den., 157 So.2d 70 (Fla. 1963), the
conditions of the contract were not fulfilled at the time the

contract was executed, but became an unconditional obligation to
pay money only after the contract had existed six months without
being rescinded. The court held that the contract was taxable
after the six months.

Position of the Department

The Master Lease expressly incorporates the Equipment
Schedule, so the documents are read together for purposes of
applying s. 201.08(1), F.S. Section 201.08(6), F.S. The Master
Lease states specifically that the lessee's obligation to make
lease payments is unconditional. The Equipment Schedule states
the amount and number of payments. The rights and obligations
of the parties commence on the Acceptance Date, which is sixteen
(16) days after the equipment has been shipped to the lessee.
Applying the Gulf American Land Corporation case, supra, the
lease is taxable as a written obligation to pay money sixteen
(16) days after shipment of the equipment.

This response constitutes a Technical Assistance Advisement
under s. 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 s. 213.22, F.S. Our response is
based on those facts and 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,

Celestine Grantham
Senior Tax Specialist
Technical Assistance and Dispute Resolution
Office of General Counsel

CG/mh