Was a Florida equipment lease a taxable written obligation to pay money for documentary stamp tax purposes?

Plain-English summary

The Florida Department of Revenue concluded that the reviewed equipment agreement was a true lease and was not subject to documentary stamp tax under section 201.08(1)(a).

A taxable written obligation under the Department's analysis requires an unconditional written promise to pay, a sum certain, and the borrower's signature. Here, the lessor had to provide the equipment and permit the customer's quiet enjoyment throughout the lease term, making the customer's payment obligation conditional.

The agreement also required the customer to return the equipment at the end of the term or buy it at a purchase-option price that could not be below fair market value. The Department found those provisions similar to the true lease in Florida Department of Revenue v. Winn-Dixie Stores, Inc.

What this means for you

Equipment lessors

A lease is not automatically treated as a taxable financing obligation merely because it requires periodic payments. The substance of the payment promise and the lessor's continuing obligations matter.

Businesses leasing equipment

Return requirements, a fair-market-value purchase option, and the lessor's duty to provide quiet enjoyment supported true-lease treatment for this specific agreement.

Accountants and tax professionals

Check whether the document contains an unconditional promise to pay a sum certain. The ruling applies section 201.08(1)(a) and the Winn-Dixie decision to the agreement actually submitted to the Department.

Common questions

Q: Why was the payment obligation conditional?
A: The lessor had to provide the equipment and allow the lessee's quiet enjoyment throughout the term.

Q: What happened at the end of the lease?
A: The customer could return the equipment or purchase it at an option price no lower than fair market value.

Q: Does this mean every equipment lease avoids documentary stamp tax?
A: No. The result was based on the provisions of the reviewed agreement and its similarity to the true lease in Winn-Dixie.

Citations and references

• Fla. Stat. §§ 201.08(1)(a) and 213.22
• Florida Department of Revenue v. Winn-Dixie Stores, Inc., 884 So. 2d 1100 (Fla. 5th DCA 2004)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 16B4-003

Original ruling text

Executive Director

Leon M. Biegalski

QUESTION: IS A LEASE AGREEMENT FOR XXXX SUBJECT TO DOCUMENTARY
STAMP TAX PURSUANT TO SECTION 201.08(1)(A), F.S.?
ANSWER: SINCE THE LEASE AGREEMENT MEETS THE STANDARDS ESTABLISHED
BY THE COURT IN FLORIDA DEPARTMENT OF REVENUE V. WINN-DIXIE STORES,
INC., 884 SO.2D 1100, (FLA. APP. 5TH DCA 2004), WHERE THE COURT DETERMINED
THAT LEASE PAYMENTS ARE CONDITIONAL UPON THE LESSOR’S QUIET
ENJOYMENT OF THE EQUIPMENT, THE SUBJECT LEASE AGREEMENT IS NOT
SUBJECT TO DOCUMENTARY STAMP TAX.
September 20, 2016
Re: Technical Assistance Advisement No. 16B4-003
Documentary Stamp Tax – Equipment Lease
Section 201.08(1)(a), Florida Statutes (F.S.)
XXXX (collectively, “Taxpayers”)
Dear XXXX:
This is in response to your letter dated May 13 2016, requesting a Technical Assistance
Advisement regarding application of Florida’s documentary stamp tax as imposed under s.
201.08(1)(a), F.S., on a Lease Agreement governing an equipment lease program operated by
Taxpayers.
Facts as Presented by Petitioner
Taxpayers are XXXX, and Taxpayers sell and lease XXXX. Customers who choose to lease
these XXXX may enter into a Lease Agreement with Taxpayers.
The Lease Agreement provides for “the quiet enjoyment of the Equipment during the lease
term.” At the end of the lease term, the lessee may return the equipment to Taxpayers, or
purchase the equipment at “the purchase option price” as set forth in the Lease Agreement.
A copy of the Lease Agreement was provided to the Florida Department of Revenue for review.

Child Support – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Dr. Maurice Gogarty, Director  Information Services – Damu Kuttikrishnan, Director

http://dor.myflorida.com/dor/
Florida Department of Revenue
Tallahassee, Florida 32399-0100

Page 2

Request for Advisement
You request a determination by the Department as to whether the Lease Agreement used by
Taxpayers is subject to the documentary stamp tax imposed under s. 201.08(1)(a), F.S.
Law and Discussion
Section 201.08(1)(a), F.S., provides that on a written obligation to pay money which is made,
executed, delivered, sold, transferred, or assigned in the State, and for each renewal of the same,
the documentary stamp tax shall be $0.35 cents on each $100.00 or fraction thereof of the
indebtedness or obligation evidenced thereby.
In order to be taxable under s. 201.08(1)(a), F.S., a written obligation to pay money must have
the following three elements within the four corners of the document or must expressly
incorporate other documents such that, when the documents are read together, they contain these
elements:

1. An unconditional written promise to pay;
2. A sum certain in money; and
3. The signature of the borrower.
   In Florida Department of Revenue v. Winn-Dixie Stores, Inc., 884 So.2d 1100, (Fla. App. 5th
   DCA 2004), the Court determined that the lessor was obligated to provide the leased equipment
   to the lessee at the outset of the lease, and the lessor must permit the lessee’s quiet enjoyment of
   the equipment throughout the lease term. The Court held that because of these conditions, the
   lessee’s obligation to pay was conditional making it a true lease, which is not subject to
   documentary stamp tax.
   Position of the Department
   The Lease Agreement contains provisions similar to those found in Winn-Dixie Stores. In addition,
   under the Lease Agreement, the customer returns the equipment to Taxpayers at the end of the lease,
   or the customer may purchase the equipment at “the purchase option price.” It bears noting that
   “the purchase option price” cannot be less than the fair market value of the equipment at the end
   of the lease.
   As in the case of Winn-Dixie, the Lease Agreement is a true lease, and it is not subject to
   documentary stamp tax as applied under s. 201.08(1)(a), 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.

Page 3

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,

Roger L. Beasley
Tax Law Specialist
Technical Assistance and Dispute Resolution
Record ID: 210744