Was a vehicle lessor's transfer of about 15,000 leased vehicles to a new wholly owned subsidiary subject to Florida sales tax?

Subject

Resale and Exemption Certificates

Plain-English summary

The vehicle transfers were not taxable retail sales if the new subsidiary was a registered dealer, acquired the vehicles exclusively for continued leasing, and gave the parent a blanket resale certificate at the time of transfer.

Florida still treated both the capital-contribution portion and the transfer-for-value portion as sales. But because the subsidiary would continue leasing the vehicles to the existing individual and fleet lessees, the transfers were for resale or leasing rather than consumption.

The ruling said the blanket certificate did not expire on its own. It remained usable until the subsidiary revoked it in writing or the Department canceled the subsidiary's sales-tax registration.

What this means for you

Common ownership did not eliminate the sale. The exemption depended on the subsidiary's registered-dealer status, exclusive leasing purpose, and timely resale documentation.

Common questions

Q: Was a capital contribution still a sale? Yes, under the ruling.

Q: Why was the sale not taxable? The subsidiary acquired the vehicles exclusively to continue leasing them.

Q: Was a resale certificate required? Yes, at the time of transfer.

Citations and references

• Fla. Stat. § 212.02(15)(a), (16)(a) — retail-sale and sale definitions
• Fla. Stat. § 212.06 — dealer registration
• Fla. Admin. Code rr. 12A-1.038 and 12A-1.039 — resale and exemption certificates
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93A-036

Original ruling text

Jun 15, 1993

RE: TAA 93A-036
Sales Tax; Resale and Exemption Certificates
ss. 212.02(16), 212.06, F.S.
Rules 12A-1.038 and 12A-1.039, F.A.C.

Dear :

This acknowledges receipt of your letter of March 30, 1993,
to the Department, requesting a Technical Assistance Advisement
(TAA), regarding the transaction described below.

FACTS

As ascertained from your letter the following conclusions
of fact have been reached by the Department. XXX (hereinafter,
Taxpayer) is a wholly owned subsidiary of XXX (hereinafter,
Parent). Taxpayer leases motor vehicles to individual and fleet
lessees in a number of states, and intends to transfer
approximately 15,000 vehicles and associated leases to a newly
formed, special-purpose subsidiary (hereinafter, New-Sub).
Approximately 11,000 of the vehicles and associated leases will
be transferred to New-Sub upon closing of a financing
transaction. The remaining 4,000 vehicles and leases are
expected to be transferred within three months following the
initial closing.

New-Sub will be wholly owned by Taxpayer. The vehicles
involved in this transaction are or will be registered in
Florida with the Department of Highway Safety and Motor
Vehicles. At the time of the transfer, New-Sub will be
registered with the Department of Revenue as a "dealer" within
the meaning of s. 212.06, F.S. After the transfers, New-Sub
will continue to lease the vehicles to the individual and fleet
lessees who leased the vehicles from Taxpayer prior to the
transfer. The transfers of the vehicles to New-Sub will be
accomplished partially through a capital contribution by
Taxpayer to New-Sub and partially as a transfer for value.

Taxpayer will continue to exist as a corporate entity after the
transfers.

ISSUE

"Whether the transfer of motor vehicles to a wholly-owned
subsidiary as described [herein] is subject to sales and use tax
under Chapter 212, Florida Statues."

DEPARTMENT'S DETERMINATION

Section 212.02(15)(a), F.S., defines the term "retail sale"
or "sale at retail" as follows:

"... sale to a consumer or to any person for any purpose
other than for resale in the form of tangible personal
property or services taxable under this part, and includes
all such transactions that may be made in lieu of retail
sales or sales at retail."

Section 212.02(16)(a), F.S., defines the term "sale" as:

"Any transfer of title or possession, or both, exchange,
barter, license, lease, or rental, conditional or
otherwise, in any manner or by any means whatsoever of
tangible personal property for a consideration."

Therefore, the transfer of motor vehicles from Taxpayer to
New-Sub, either as a contribution to capital or as a transfer
for other consideration, is a "sale" within the meaning of s.
212.02(16), F.S., supra.

However, although this transaction is considered a sale, it
is not a retail sale, as defined in s. 212.02(15)(a), F.S.,
because it is a sale by Taxpayer to New-Sub exclusively for
resale or leasing purposes. Since Florida sales tax is levied
only on retail sales, it does not apply to the sale of items,
like the motor vehicles herein, that are purchased exclusively
for subsequent resale or leasing.

With respect to sales for resale, Rule 12A-1.038, F.A.C.,

provides, in pertinent part, as follows:

"(1) It is the specific legislative intent that every
sale,... is taxable under Chapter 212, F.S., unless such
sale,... is specifically exempt. The exempt status of the
transaction must be established by the dealer. Unless the
dealer shall have taken from the purchaser a certificate to
the effect that the property or service was purchased for
resale and bearing the name and address of the purchaser,
the effective date of the certificate and the number of his
dealer's certificate of registration, or a certificate
bearing the number of his consumer's exemption certificate,
and the effective date of the certificate, the sale shall
be deemed to be a taxable sale at retail,...."

"(3) A resale certificate is required from every purchaser
who purchases tangible personal property or service for
resale,... Otherwise, the dealer will be required to
collect and remit the tax to the Department of Revenue...."

Therefore, under Rule 12A-1.038(3), F.A.C., a completed
resale certificate is required from every purchaser who
purchases tangible personal property for resale (subject to the
provisions of subsection 12A-1.038(1), F.A.C.), otherwise, the
selling dealer, namely Taxpayer, will be required to collect and
remit the tax to the Department. Therefore, Taxpayer is
required to obtain from New-Sub its blanket exemption
certificate at the time of sale, in order to make the sales of
the motor vehicles to New-Sub tax exempt (provided New-Sub is a
"dealer" at the time the transaction occurs).

The Florida Department of Revenue does not supply dealers
with preprinted forms which meet the standards of Rule
12A-1.038, F.A.C., and has therefore promulgated Rule 12A-1.039,
F.A.C., providing only a suggested form for a blanket resale and
exemption certificate, that meets the minimum requirements of
Rule 12A-1.038, F.A.C. (A copy of Rules 12A-1.038 and 12A-1.039
is enclosed for your review.)

Please be advised that a blanket resale certificate does
not expire, as this is not a document issued by the Department.

It may continue to be used until the issuer, in this case
New-Sub, revokes it by written notice to the supplier, or until
such time as the Florida Department of Revenue cancels New-Sub's
sales tax registration, should such an event occur.

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 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 and your request
are public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of s. 213.22, F.S.
Your name, address, and any other details which might lead to
identification of the taxpayer must be deleted by the Department
before disclosure. In an effort to protect the confidentiality
of such information, we request you notify the undersigned in
writing within 15 days of any deletions you wish made to the
request or the response.

Sincerely,

Nydia Men‚ndez
Technical Assistant

NM/pb
Enclosures
Con. #8005