Was an individual's transfer of a lien-free recreational vehicle to the individual's revocable trust subject to Florida sales tax?

Subject

Transfer of Recreational Vehicle to Trust

Plain-English summary

The transfer of the lien-free recreational vehicle to the revocable trust was not subject to Florida sales or use tax. Florida sales-tax law treated the trust as a distinct person and therefore recognized a transfer of title, even though the individual was both grantor and sole trustee.

But a taxable sale also required consideration. The trust would pay no cash or other value and would assume no lien, so the transfer qualified as a gift rather than a sale.

The ruling instructed the taxpayer to submit Form DR-40 at the county tag office, describing the vehicle and parties, identifying the estate-planning trust transfer as a gift, and expressly stating that the trust assumed no outstanding lien.

What this means for you

Grantor-trust status did not erase the title transfer for Florida sales-tax purposes. The exemption depended on the absence of consideration and debt assumption, plus the required sworn documentation.

Common questions

Q: Did Florida treat the revocable trust as a separate person? Yes.

Q: Why was the transfer still exempt? Because no consideration passed and the trust assumed no lien.

Q: What if the trust assumed an outstanding lien? The ruling said the lien amount would be the tax base when that was the only consideration.

Q: Was documentation required? Yes. The title application needed the sworn gift-transfer statement described in the ruling.

Citations and references

• Fla. Stat. § 212.02(13) — definition of person, including a trust
• Fla. Stat. § 212.02(16)(a) — definition of sale
• Fla. Admin. Code r. 12A-1.007(26)(a)2. — gift transfer of a titled vehicle
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93A-047

Original ruling text

Jul 21, 1993

Re: Technical Assistance Advisement 93A-047
Sales Tax - Transfer of Recreational Vehicle to Trust
Sections 212.02(13) and 212.02(16)(a), F.S.
Rule 12A-1.007(26)(a)2., F.A.C.
XXX (Herein the "Taxpayer")
Address: XXX
SSN: XXX

Dear

This response is in reply to your May 4, 1993, petition for the
Department's issuance of a Technical Assistance Advisement
("TAA") pursuant to s. 213.22, F.S., concerning the captioned
matter and party. Your petition has been carefully examined and
the Department finds it to be in compliance with the requisite
criteria set forth in Chapter 12-11, F.A.C. Therefore, the
Department is herewith granting your request for the issuance of
a TAA and the ensuing discourse shall embody said ruling.

DISCUSSION OF FACTS

Your petition imparts the following significant information
regarding the issues under advisement herein:

"The [T]axpayer owns a recreational vehicle in his sole
name. As a part of his estate planning, the [T]axpayer will
transfer the vehicle to a revocable trust. At the time of
the transfer the vehicle will not be subject to any liens
or encumbrances and the [T]axpayer will sign an affidavit
to that effect. The [T]axpayer is the grantor and is the
sole trustee of the trust. The [T]axpayer is treated as a
grantor trust for federal income tax purposes as the
[T]axpayer has the power to alter, amend or revoke the
trust at any time during his life. Because the trust is a
grantor trust, it has no separate federal or state taxpayer
identification number. In addition, the trust does not
file any federal or state income tax returns, and all items

of income, gain, loss or deduction are reported directly on
the [T]axpayer's individual income tax return."

REQUESTED ADVISEMENT

You endeavor to elicit the following advice from the Department:

"The [T]axpayer requests a ruling that the transfer of the
recreational vehicle to a revocable trust in which the
[T]axpayer is the grantor and trustee is not subject to
Florida sales tax."

DISCUSSION, ANALYSIS, AND CONCLUSIONS OF LAW

In order for there to be a transfer their must be a transferee.
Thus, the question arises as to whether a living trust does in
fact constitute a person under the law, and, hence a transferee
when it receives property into its custody as trust property.
Notwithstanding the Internal Revenue Service's administrative
policy of not distinguishing between grantor/trustee and a
living trust for federal income tax purposes, Florida sales tax
law does make a distinction in s. 212.02(13), F.S., which
states:

"`Person' includes any individual, firm, copartnership,
joint adventure, association, corporation, estate, trust,
business trust, receiver, syndicate, or other group or
combination acting as a unit and also includes any
political subdivision, municipality, state agency, bureau,
or department and includes the plural as well as the
singular number." (Emphasis Supplied)

Consequently, Florida sales tax law does contemplate and embrace
"trusts" as distinctive persons without any exclusion or
separate treatment for "living trusts". It therefore follows
that since a trust is a distinctive person under Florida sales
tax law that it must be recognized as a transferee when
receiving property into trust from the grantor.

Now that we have established trusts as distinctive persons and,
hence, recognizable tranferees for sales tax purposes, the next

step is to ascertain whether the transfer of property by grantor
to trust constitutes a "sale" for sales tax purposes. The
elements which must be present in order for a transaction to
constitute a sale are specified in s. 212.02(16)(a), F.S., which
defines the term "sale" for sales tax purposes to mean and
include:

"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." (Emphasis
Supplied)

Therefore, the requisite elements of a sale make up a two prong
test both prongs of which must be satisfied in order for a
transaction to constitute a sale. These prongs are, namely: (i)
the transfer of title or possession, or both, of personalty; and
(ii) the flow of consideration in exchange for the transfer of
title or possession, or both, of the personalty.

In terms of the first prong of the test, we have already
established in the foregoing discussion that a transfer occurs
when a grantor passes title of personal property to his/her
trust due to the classification of a trust as a distinctive
person under the sales tax law. Therefore, the facts of the
instant case do satisfy the first prong of the test.

Considering the second prong of the test, there is no doubt in
the Department's view, where such transfers occur wherein the
grantor/ settlor transfers a motor vehicle subject to a lien
which the trust assumes and agrees to pay, that a consideration
flows from the trust to the grantor/settlor. This is consistent
with the well established doctrine set out by Florida courts
that the shifting of economic burden for payment of one's debt
by another constitutes consideration. See

Win-San Bldg. Corp. v. State Dept. of Revenue, 358 So.2d
112 (Fla. 3rd DCA 1978);
Andean Inv. Co. v. State Dept. of Revenue, 370 So.2d 377
(Fla. 4th DCA 1978);
Abramson v. Straughn, 348 So.2d 1172 (Fla. 4th DCA 1977);

State Dept. of Revenue v. Zuckerman-Vernon Corp., 354 So.2d
353 (Fla. 1977), reh. den. January 31, 1978;
Florida Dept. of Revenue v. De Maria, 338 So.2d 838 (Fla.
1976);
Kendall House Apartments, Inc. v. Florida Dept. of Revenue,
245 So.2d 221 (Fla. 1971), reh. den. March 10, 1971.

Relying on your statement that "at the time of transfer the
vehicle [the `Recreational Vehicle'] will not be subject to any
liens or encumbrances" and presuming that the Taxpayer as
trustee does not pay himself as grantor any cash or its
equivalent or exchange any other thing of value as a condition
of the trust receiving the Recreational Vehicle, the instant
facts do not prove to satisfy the second prong of the test, as
the transfer will not be supported by any true consideration.
Whereas, the transfer under advisement as represented in your
disclosure of the facts is not supported by any consideration,
it cannot be deemed to constitute a sale for sales tax purposes
and, accordingly, will not give rise to an incidence of sales or
use tax. Such a transfer comes within the purview of Rule
12A-1.007(26)(a)2., F.A.C., which provides:

"(26)(a) The following transfers of ownership of any
aircraft, boat, mobile home, motor vehicles, or other
vehicles of a class or type required to be registered,
licensed, titled, or documented in this state or by the
United States Government are exempt from tax, provided that
a certificate setting forth the facts and signed under
penalty of perjury accompanies the application for title
transfer or if no title certificate is required by law the
application for transfer of license or registration:....
"2. A transfer of title as a gift. The application for
title or, if no title certificate is required, the transfer
of license or registration, must be accompanied by a sworn
statement which contains a description of the aircraft,
boat, mobile home, motor vehicle, or other vehicle, the
name and address of the donor and a statement that the
title of the vehicle passed without any consideration
valued in money, whether paid in money or otherwise, and
that no outstanding lien on the described aircraft, boat,
mobile home, motor vehicle, or other vehicle is being

assumed by applicant, to be tax exempt. In lieu thereof,
the Executive Director or... designee in the responsible
division shall estimate the value of the aircraft, boat,
mobile home, motor vehicle, or other vehicle and assess tax
thereon accordingly. If applicant assumes outstanding lien
only, the amount of such outstanding lien is the basis for
the tax."

At the time of the title transfer, the County Tag Office should
be presented with a completed Sales Tax Exemption Affidavit,
Form DR-40, setting forth the facts of the transfer under the
legend "Other." Such affidavit should include a statement to
the effect that the transfer is pursuant to the creation of a
Revocable Trust for estate planning purposes. A description of
the Recreational Vehicle should also be provided together with
the names and addresses of the parties to the transfer, that the
transfer was one by gift pursuant to Rule 12A-1.007(26)(a)2.,
F.A.C., and a statement which expressly specifies that no
outstanding lien was assumed by the trust.

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 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 confidential
information, we request you notify the undersigned in writing
within 15 days of any deletions you wish made to the request or
this response.

Sincerely,

Daniel M. Wagner, Jr.
Tax Law Specialist

DW/
Con. #8691