Were a bank's disbursement request, credit-line agreement, guaranty, and unrecorded security agreement subject to documentary stamp tax?

Subject

Business Credit Line Documents

Plain-English summary

The four submitted open-end credit-line forms were not subject to documentary stamp tax by themselves. A taxable written obligation required a signed, unconditional promise to pay a sum certain. Each form lacked at least one required element, and none expressly incorporated the others.

The answer was limited. The bank did not submit the credit-line checks, which could be taxable depending on their language. The commercial security agreement would also become taxable if filed or recorded in Florida, based on the indebtedness it secured at recordation.

What this means for you

Florida examined each document's face and only documents expressly incorporated into it. Mere references among related credit documents did not combine their terms for the tax test.

Common questions

Q: Were the four reviewed forms taxable by themselves? No.

Q: Were the credit-line checks cleared? No; they were not submitted.

Q: Could the security agreement become taxable? Yes, if filed or recorded in Florida.

Citations and references

• Fla. Stat. § 201.08(1) and (6) — written obligations, recorded security instruments, and incorporated documents
• Fla. Admin. Code rr. 12B-4.052(6)(b) and 12B-4.054(4) — face-of-document test and unfixed promises
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 01B4-005

Original ruling text

SUMMARY

QUESTION: Are any of the submitted documents subject to the
imposition of documentary stamp tax under s. 201.08, F.S.?

ANSWER - BASED ON FACTS BELOW: Since none of the documents
submitted with the request contain all three elements
required for the imposition of documentary stamp tax and
none of the documents are specifically incorporated within
any other of the documents, documentary stamp tax is not
required.

Apr 02, 2001

Re: Technical Assistance Advisement No. 01B4-005
Documentary Stamp Tax-Business Credit Line Documents
Section 201.08(1), (6), F.S.
Rules 12B-4.052(6)(b) and 12B-4.054(4), F.A.C.
XXX (hereinafter, Bank)

Dear :

This is in response to your February 12, 2001 request for a
Technical Assistance Advisement, asking for an opinion on
whether various documents issued by your bank in connection with
the open-end credit line program would be subject to documentary
stamp tax under s. 201.08(1), F.S.

FACTS AS PRESENTED BY PETITIONER

The documents presented for review are:

1. Disbursement Request and Authorization
2. Business Credit Line Agreement
3. Commercial Guaranty
4. Commercial Security Agreement

These documents are used in Bank's open-end credit line

program. These documents may be made, executed and/or delivered
in Florida. Bank is the lender in the credit line program.
None of the documents submitted exhibited a form number which
could be used to identify a specific form. Our answer
encompasses only the forms submitted for review with this
request.

REQUESTED RULING

The requested ruling is whether execution of these
documents in Florida would be subject to the imposition of
documentary stamp tax under s. 201.08(1), F.S.

DISCUSSION AND LAW

Section 201.08(1), F.S., imposes documentary stamp tax on
promissory or nonnegotiable notes or written obligations to pay
money that are made, executed, and/or delivered in this state.
To constitute a taxable written obligation to pay money, the
document must contain an unconditional written obligation to pay
a sum certain in money and be signed by the obligor.

Rule 12B-4.054(4), F.A.C., provides that "[a] written
promise to pay money which is not fixed and absolute at the time
of execution is not subject to tax."

Section 201.08(1), F.S., further imposes documentary stamp
tax on "mortgages, trust deeds, security agreements, or other
evidences of indebtedness filed or recorded in this state...."

Section 201.08(6), F.S., provides that taxability of a
document pursuant to this section shall be determined solely
from the face of the document and any separate document
expressly incorporated into the document. Taxability of a
document pursuant to this section is not determined by reference
to any separate document referenced or forming part of the same
contract or obligation unless the separate document is expressly
incorporated into the document. When multiple documents
evidence, secure, or form part of the same primary debt, tax
pursuant to the section is not imposed more than once, on the
total indebtedness evidenced, notwithstanding the existence of

multiple documents.

Rule 12B-4.052, F.A.C., states in pertinent part:

(6)(b) Taxability of a written obligation to pay money is
determined from the form and face of the document.

1. Whether a document is taxable is determined by
   reference to that document and any other document or
   documents expressly incorporated therein.

2. A document does not expressly incorporate another
   document by implication or by mere reference and
   description of the other document.

3. Express incorporation occurs when words in a document
   under examination provide that another document or
   documents are incorporated into the document under
   examination....

The Disbursement Request and Authorization provides certain
disclosures and itemizes the costs associated with the Business
Credit Line. It contains the signature of the borrower, but it
does not contain the promise to pay a sum certain.

The Business Credit Line Agreement contains a promise to
pay for all advances, but it does not contain a sum certain in
money. It contains the borrower's signature. It provides in
part that the agreement may be secured by real estate and/other
property which may be required for collateral. The first copy
of the Business Credit Line Agreement described, in part, a
prior note. The final copy of the Business Credit Line
Agreement omitted mention of the prior note, which was located
just above the Default section on page 2.

The Commercial Guaranty, although unconditionally promising
to pay, does not contain a sum certain. It is signed by the
guarantor, but not by the borrower.

The Commercial Security Agreement does not contain a
promise to pay a sum certain in money. It contains the

signature of the grantor. The Commercial Security Agreement is
taxable if recorded, based on the indebtedness secured thereby
at the time of recordation.

The checks used in connection with the open-end credit line
program were not submitted and might be subject to the tax.

None of the documents is expressly incorporated by
reference into any of the other documents submitted for review.
References are made to promissory notes in the Disbursement
Request and Authorization, the Commercial Guaranty, and in the
Commercial Security Agreement. Promissory notes are subject to
documentary stamp tax under s. 201.08(1), F.S.

DEPARTMENT'S POSITION

The Disbursement Request and Authorization does not contain
the promise to pay a sum certain. The Business Credit Line
Agreement does contain a promise to pay, but not a sum certain
in money. The Commercial Guaranty, although unconditionally
promising to pay, does not contain a sum certain. The
Commercial Security Agreement does not contain a promise to pay
a sum certain in money. Based on the foregoing and the facts
presented, it is the position of the Department that the named
documents are not taxable in and of themselves. None of the
documents contains a written obligation to pay a sum certain in
money signed by the borrower. None of the documents are
expressly incorporated into any of the other documents
presented. The Business Credit Line Checks were not submitted.
The checks would be taxable if they contain language that
expressly incorporates any of the documents reviewed which would
contain a signed promise to pay. If the Commercial Security
Agreement is filed or recorded in Florida, it is subject to the
tax under s. 201.08(1), F.S.

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
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 this letter.

Sincerely,

M.E. Clemens, C.P.A.
Senior Tax Specialist
Technical Assistance and Dispute Resolution
Office of General Counsel

MEC/mh