Is an equipment lease with an end-of-term purchase option at fair market value subject to Florida documentary stamp tax?

Plain-English summary

The Florida Department of Revenue ruled that an equipment agreement with an end-of-lease fair-market-value purchase option was a true lease and was not subject to documentary stamp tax.

At the end of the term, the customer could return the equipment or purchase it at a price that could not be less than its then-current fair market value. That price was unknown when the agreement began, unlike the separate 10% or $1 buyout options the taxpayer expressly excluded from its request.

The agreement resembled the true lease in Florida Department of Revenue v. Winn-Dixie Stores: the lessor had to provide the equipment and permit quiet enjoyment, making the lessee's payment obligation conditional.

What this means for you

Equipment lessors

An authentic fair-market-value option preserves a meaningful return-or-buy choice. Fixed nominal buyouts may be analyzed as conditional sales instead.

Lessees and finance teams

Review whether the end price is genuinely determined at lease end and whether the agreement permits return of the equipment.

Accountants and tax professionals

This TAA did not decide the taxpayer's 10% or $1 buyout agreements. Do not extend its no-tax conclusion to those forms.

Common questions

Q: Was the FMV lease subject to documentary stamp tax?
A: No.

Q: What made it a true lease?
A: The customer could return the equipment or purchase it only at no less than end-of-term fair market value.

Q: Did the ruling cover a $1 buyout?
A: No. The taxpayer excluded dollar-buyout and other conditional-sale leases from the request.

Citations and references

• Fla. Stat. §§ 201.08(1)(a) and (b), and 213.22
• Fla. Admin. Code rr. 12B-4.052(6)(b) and 12B-4.053(1)
• 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 18B4-001

Original ruling text

TAX: Documentary Stamp Tax
TAA NUMBER : 18B4- 001
ISSUE : Fair Market Value (FMV) Leases
STATUTE CITES: Section 201.08(l)(a), (b), Florida Statutes
RULE CITES: Rules 12B-4.052(6)(b), 12B-4.053(1), Florida Administrative Code
QUESTION: Whether documentary stamp tax is due on a lease of equipment where the lessee may
purchase the equipment at the end of the lease for the Fair Market Value of the equipment.
ANSWER: The Taxpayer provided a copy of the lease agreement that is used for the Fair Market
Value end of purchase option. When the purchase price for the equipment at the end of the lease is the
fair market value, it is a true lease and not subject to documentary stamp tax.

May 17, 2018

XXXXXXXX
XXXXXXXX
XXXXXXXX

Re:
Technical Assistance Advisement 18B4-001
Tax: Documentary Stamp Tax
Issue: Fair Market Value (FMV) Leases
Section 201.08(l)(a), (b), Florida Statutes (F.S.)
Rules 12B-4.052(6)(b), 12B-4.053(1), Florida Administrative Code (F.A.C.)
Dear XXX:
This is in response to your XXX, request for a Technical Assistance Advisement (TAA) pursuant
to section 213.22, F.S., and Rule Chapter 12-11, F.A.C., regarding Documentary Stamp Tax on
FMV Leases. 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 a TAA.

XXX
May 17, 2018
Florida Department of Revenue
Page 2

FACTS AS PRESENTED BY PRACTITIONER
XXX is in the business of leasing tangible personal property to its customers. The Lease
Agreement (Agreement) provides different end of lease purchase options: FMV, 10%, or $1.00.
The actual purchase price for the FMV purchase option is not known at the time of the Agreement.
A copy of the Agreement was provided to the Florida Department of Revenue for review.
REQUESTED RULING
You requested the Department determine if documentary stamp tax is due on the Agreement
provided for review when the end of lease purchase option is for FMV. You stated that
Agreements that have a dollar buyout are considered conditional sale leases, not FMV leases, and
are not intended to be included in this TAA.
LAW AND DISCUSSION
Section 201.08(l)(a), F.S., imposes documentary stamp tax on written obligations to pay money,
and each renewal thereof, made, executed, delivered, sold, transferred, or assigned in Florida.
The tax rate is $.35 for each $100 or fraction thereof of the indebtedness or obligation evidenced
thereby.
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.
DEPARTMENT'S POSITION
The Lease Agreement contains provisions similar to those found in Winn-Dixie Stores. Under the
Agreement, the customer returns the equipment to XXX at the end of the lease, or the customer
may purchase the equipment at the “end of lease purchase option” price. It bears noting that the
“end of lease 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 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

XXX
May 17, 2018
Florida Department of Revenue
Page 3

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 documents are public records
under Chapter 119, F.S., which are subject to disclosure to the public under the conditions of
Section 213.22, F.S. Your name, address, and any other details, which might lead to identification
of the taxpayer, must be deleted before disclosure. In an effort to protect the confidentiality of
such information, we request you provide the undersigned with an edited copy of your request
Technical Assistance Advisement, backup material and response within fifteen days of the date of
this advisement.
Sincerely,

Juanita Slagle
Juanita Slagle
Tax Law Specialist
Technical Assistance & Dispute Resolution
Phone: (850) 717-6388
Fax: (850) 922-9252
[email protected]

ID # 69305