Which of ten open-end loan forms did Florida treat as subject to documentary stamp tax?

Subject

Open-End Loan Forms

Plain-English summary

Two submitted forms were taxable written obligations: the guarantor's agreement and the termination-of-joint-borrower agreement. The guarantor form stated the loan amount and obligated the signer to pay it with interest and other charges. The termination form stated the present balance and kept the member responsible for it.

A separate security agreement was not among those two face-taxable forms, but the Department said it would become taxable if filed or recorded because recorded mortgages and security agreements could be taxed even when they secured contingent obligations. The remaining seven forms did not contain the required combination of a written promise, a sum certain, and the relevant signature.

What this means for you

The ruling evaluated each document separately. A credit application, loan agreement, advance application, draft, check stub, change agreement, or change-in-terms form could fall outside the tax when a required element was missing, while a filed security instrument faced a separate rule.

Common questions

Q: Which forms were taxable without relying on filing or recording? The Xpress Guarantor's Agreement and Xpress Termination of Joint Borrower.

Q: What happened to the security agreement? It was taxable if filed or recorded, even though it secured a contingent obligation.

Q: Were all signed loan documents taxable? No. Several signed forms lacked either a promise to pay or a sum certain.

Citations and references

• Fla. Stat. § 201.08(1) — written obligations and recorded security agreements
• Fla. Admin. Code r. 12B-4.052(6) — taxable-document requirements
• Lee v. Kenan, 78 F.2d 425 (5th Cir. 1935)
• Maas Brothers, Inc. v. Dickinson, 195 So. 2d 193 (Fla. 1967)
• Department of Revenue v. Lincoln Pointe Associates, 544 So. 2d 291 (Fla. 1st DCA 1989)
• Barnett Bank v. State Department of Revenue, 571 So. 2d 527 (Fla. 3d DCA 1990)
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93B4-008

Original ruling text

Apr 01, 1993

Re: Technical Assistance Advisement No. 93(B)4-008
Documentary Stamp Tax; Open-End Loan Forms
XXX (hereinafter Lender)

Dear :

You have petitioned for a Technical Assistance Advisement
pursuant to s. 213.22, F.S., and Florida Administrative Code
Rule 12-11.003.

Issue

Whether the following open-end loan forms used by Lender in
making loans to its members are subject to tax under s.
201.08(1), F.S.:

(1) Xpress Credit Application No. F11-2500; and
(2) Xpress Permanent Loan Agreement No. F6 2500; and
(3) Xpress Loan Advance Application No. MS13 1000; and
(4) Xpress Pre-Approved Loan Envelope, form No. 224; and
(5) Check 015371; and
(6) Xpress Security Agreement No. F7 2500; and
(7) Xpress Loan Change Agreement No. F2 2500; and
(8) Xpress Guarantor's Agreement No. F1 500; and
(9) Xpress Termination of Joint Borrower No. F4 500; and
(10) Xpress Change-in-Terms No. F3 500.

Background

(1) The Credit Application, signed by the member, provides
information to determine the member's credit
worthiness and ability to pay, but does not contain a
promise to pay.
(2) The Permanent Loan Agreement, signed by the member,
contains a promise to pay, but not any sum certain.
(3) The Loan Advance Application, which is not signed by
the member, states the amount advanced, but does not

contain a promise to pay.
(4) The Pre-Approved Loan Envelope is a "sight draft"
signed by the member, but does not contain a promise
to pay.
(5) The Check, signed and issued by Lender to the member,
has an attached stub to be signed and retained by the
member outlining the transaction, but does not contain
a promise to pay.
(6) The Security Agreement, signed by the member, details
and pledges the type security for a loan, but does not
contain a promise to pay.
(7) The Loan Change Agreement, signed by the member,
contains 2 blank blocks to be checked to change the
rate of payment of the outstanding balance and/or to
request certain security to be released.
(8) The Guarantor's Agreement, signed by a guarantor or
co-maker, states the amount of loan the member has
applied for and obligates the guarantor or co-maker to
pay that amount in total, plus interest, late charges
and other costs according to the member's Permanent
Loan Agreement.
(9) The Termination of Joint Borrower, signed by the
member/joint borrower and Lender provides 2 blocks to
be checked. Where the first block is checked Lender
agrees not to make future loans obligating the joint
borrower. Where the second block is checked the joint
borrower is to be removed from any future loans under
the Permanent Loan Agreement. The member agrees to
remain responsible for the present stated balance as
shown on this agreement.
(10) The Change in Terms, signed by the member, provides
for changes in minimum payment per $100 borrowed,
annual percentage rate and daily periodic rate, but no
promise to pay.

Discussion and Law

Relevant to your petition, s. 201.08(1), F.S., provides
that:

On promissory notes, nonnegotiable notes, written

obligations to pay money... made executed, delivered, sold,
transferred, or assigned in the state, and for each renewal
of same, the tax shall be 35 cents on each $100 or fraction
thereof of the indebtedness or obligation evidenced
thereby. On mortgages, trust, deeds, security agreements,
or other evidences of indebtedness filed or recorded in
this state, and for each renewal of the same, the tax shall
be 35 cents or each $100 or fraction thereof of the
indebtedness or obligation evidenced thereby. [emphasis
added]

Certain requirements are necessary in order for a note or
other written obligation to be taxable, which are:

1. A written promise to pay; and
2. A sum certain in money; and
3. The signature of the borrower.

See Lee v. Kenan, 78 F. 2d 425 (5th Cir. 1935) (liability
of instrument to stamp duty, as well as amount of such duty, is
determined by form and face of instrument and cannot be affected
by proof of extrinsic facts). Maas Brothers Inc. v. Dickinson,
195 So.2d 193 (Fla. 1967) (neither a revolving charge account
credit agreement nor individual sales receipts were taxable,
since the credit agreement did not contain a stated sum and the
sales receipts, which contained a stated sum and a borrower's
signature, did not contain a promise to pay). Also see Fla.
Admin. Code Rule 12B-4.052(6).

Department's Position

Only the forms (8) Xpress Guarantor's Agreement No. F1 500
and (9) Xpress Termination of Joint Borrower No. F4 500, meet
the requirements for requiring tax under s. 201.08(1), F.S.
However, if (6) the Xpress Security Agreement No. F7 2500, is
recorded or filed it would be subject to tax since mortgages are
taxable, even when securing contingent obligations. See
Department of Revenue v. Lincoln Pointe Associates, 544 So.2d
291 (Fla. 1 DCA 1989); Barnett Bank v. State Dept. of Revenue
571 So.2d 527 (Fla. App. 3 Dist. 1990); In Re: The Matter of NuMed Lake, Inc., and Nu-Med Pembroke, Inc., v. Department of

Revenue, 12 Fla. Admin. L. Rev. 1095 (January 4, 1990) Affirmed
580 So.2d 282 (Fla. 1 DCA 1991).

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 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,

W.E. Webb
Technical Assistant
Technical Assistance

WEW/mh