Were equipment master leases and separate schedules or acceptance certificates subject to Florida documentary stamp tax as written obligations?

Subject

Lease Documents

Plain-English summary

The submitted equipment-lease documents were not subject to Florida documentary stamp tax. The master agreements described the lessee's rent obligation, but that obligation did not arise until the lessee later accepted the equipment and the applicable commencement conditions occurred.

The schedules, orders, equipment-acceptance certificates, and commencement certificates identified transactions or confirmed delivery and acceptance, but did not themselves contain an express written promise to pay rent. Because tax was determined from the face of each single document without using outside facts, none contained the taxable obligation required by section 201.08(1).

The Department treated the arrangements as qualifying for the rule covering agreements whose payment obligation depended on a later contingency.

What this means for you

The ruling did not say equipment leases are generally exempt. It depended on the exact separation of terms among documents and on rent remaining contingent when each document was executed.

Common questions

Q: Did the master agreement alone create a taxable rent obligation? No. Its obligation was expressly contingent on later equipment acceptance.

Q: Did the acceptance certificate contain the promise to pay? No, on the submitted forms.

Q: Could outside facts be combined with a document to create the tax? No. The ruling applied the face-of-the-document test.

Citations and references

• Fla. Stat. § 201.08(1) — tax on written obligations to pay money
• Fla. Admin. Code r. 12B-4.052(6) — document-face test for written obligations
• Fla. Admin. Code r. 12B-4.054(12) — contingent revolving-charge agreements
• Maas Brothers, Inc. v. Dickinson, 195 So. 2d 193 (Fla. 1967)
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93B4-016

Original ruling text

Jun 16, 1993

Re: Technical Assistance Advisement No. 93(B)4-016
Documentary Stamp Tax; Lease Documents
XXX (hereinafter Parent); and
XXX (hereinafter Taxpayers)

Dear :

Pursuant to s. 213.22, F.S., and Ch. 12-11, Florida
Administrative Code, you have petitioned for a Technical
Assistance Advisement concerning tax under Ch. 201, F.S., as it
applies to substantially the following question:

Whether Fla. Admin. Code Rule 12B-4.054(12), would exempt
tax levied by s. 201.08(1), F.S., on lease documents
executed by lessees in favor of Taxpayers, as lessors, for
the purpose of leasing tangible personal property located
in Florida?

You have submitted the following single lease documents for
our determination:

1. Master Equipment Lease Agreement XXX (MELA); and
2. Master Equipment Lease Agreement Schedule XXX (the
   MELA Schedule); and
3. Master Equipment Lease Agreement Commencement
   Certificate XXX (the MELA Commencement Certificate);
   and
4. General Lease Agreement XXX which includes the Order
   and the Acceptance documents (the GLA-1); and
5. General Lease Agreement XXX (the GLA-2); and
6. Advance Payment Invoice-General Lease Agreement
   Commencement Certificate XXX (the GLA-2 Commencement
   Certificate).

Background

Taxpayers are related companies who are collectively and

individually engaged in the leasing of various types of tangible
personal property, both within and without the state of Florida.
Each of Taxpayers has its principal place of business outside
Florida but they are authorized to do business in the state of
Florida, pursuant to the following arrangements as stated in
your request.

MELA ARRANGEMENT

"This lease arrangement is used principally for equipment
leases exceeding XXX in value. It consists of three
separate documents entitled (1) the Master Equipment Lease
Agreement (MELA), (2) the MELA Schedule and (3) the MELA
Commencement Certificate. Each document is separately
executed at separate times in accordance with the
particular transaction. The Taxpayer-lessor and lessee
enter into the MELA prior to the identification of the
leased equipment described in the MELA Schedule (MELA,
Section XX). The MELA contains the terms and conditions of
the lease and is the only document which specifies the
lessee's obligation to pay rent (MELA Section XX).
However, the lessee's obligation to pay rent is contingent
upon the lessee's subsequent acceptance of the equipment
and execution of the MELA Commencement Certificate.

"Section XX of the MELA provides that the lessee shall
cause the described equipment to be delivered to a
specified location, but the lessee shall not irrevocably
accept the equipment until lessee executes the separate
MELA Commencement Certificate attesting to the satisfactory
delivery and installation of the equipment. Neither the
term of the lease (MELA, Section XX) nor the lessee's
obligation to pay rent (MELA, Section XX) commence until
the date that the MELA Commencement Certificate is signed.
The lessor also has no obligation to purchase the equipment
from a supplier until this date (MELA, Section XX).

"Hence, while the MELA sets forth the lessee's obligation
to pay, such obligation does not exist at the time of the
MELA's execution and is expressly contingent upon the
lessee's subsequent acceptance of the equipment and

execution of the MELA Commencement Certificate. The other
two MELA documents do not contain an express obligation to
pay rent by the lessee.

"The MELA Schedule identifies the parties, the equipment
being leased, the amount of all rental payments, the latest
Commencement Date for the lease term, the length of the
lease term, and certain other pertinent information. The
Schedule also identities three possible purchase options
which can be elected by lessee: a fair market value
purchase option; a fixed price purchase option or a nominal
purchase option. The Schedule is governed generally by the
terms and conditions of the MELA, except that the terms and
conditions of the Schedule shall prevail over any
conflicting or inconsistent terms and conditions in the
MELA.

"The MELA Commencement Certificate is certification by
lessee that (a) the equipment described in the Schedule has
been delivered and installed, (b) lessee has inspected and
tested the equipment, (c) lessee accepts the equipment and
(d) the equipment has become for the first time operational
and available for service. The MELA Commencement
Certificate is in accordance with the terms and conditions
of the MELA and the Schedule."

GENERAL LEASE AGREEMENT (GLA-1)

"This lease arrangement is similar to the MELA arrangement
except that it is used exclusively in connection with lease
transactions between the Taxpayers and [Parent] or one of
its affiliates as lessee. This arrangement also consists
of multiple documents, of which three are pertinent to this
Request: (1) the General Lease Agreement (the `GLA-1'), (2)
the Order (Exhibit XX to the GLA-1) and (3) the Equipment
Acceptance (Exhibit XX to the GLA-1). Each document is
separately executed at separate times in accordance with
the particular transaction.

"The Taxpayer-lessor and lessee enter into the GLA-1 prior
to the identification of the leased equipment described in

the Order. The GLA-1 provides (at page XX, LEASE) that
lessor "anticipates" the issuance of Orders by the lessee,
each of which shall constitute a lease of the equipment
specified in the Order. The GLA-1 generally contains the
terms and conditions of the lease and specifies the
lessee's obligation to pay rent (at page XX, RENT).
However, identical to the MELA, the lessee's obligation to
pay rent is contingent upon the lessee's subsequent
acceptance of the equipment and execution of the Equipment
Acceptance Certificate.

"The GLA-1 provides that lessee shall notify lessor of its
acceptance of the equipment by delivering to lessor an
executed Equipment Acceptance Certificate (at page XX,
EQUIPMENT ACCEPTANCE CERTIFICATE). Neither the terms of
the lease (at page XX, TERMS OF LEASE) nor lessee's
obligation to pay rent (at page XX, RENT) commence until
the Certificate is subsequently executed by lessee. The
GLA-1 also specifically requires that for each lease, the
lessee shall complete, execute and deliver to lessor both
the Order to initiate the transaction and the Equipment
Acceptance Certificate to connote acceptance (at page XX,
REQUIRED DOCUMENTS).

"Accordingly, as with the MELA, no obligation by the lessee
to pay rent exists at the time the GLA-1 is executed and
such obligation is expressly contingent upon both the
lessee's initiation of the equipment Order and lessee's
subsequent acceptance and execution of the Equipment
Acceptance Certificate. These other two documents do not
contain an express obligation to pay rent by the lessee.

"The GLA-1 Order (at page XX, Exhibit XX) identifies and
describes the equipment subject to the lease, the rental
charges, delivery and installation dates, the term of the
lease and certain other pertinent information. The terms
and conditions of the GLA are incorporated therein, except
to the extent they conflict or are inconsistent with the
terms and conditions of the Order, which latter shall
prevail.

"The GLA-1 Equipment Acceptance Certificate (at page XX,
EXHIBIT XX) is certification by Lessee that (a) the
equipment was delivered and has been accepted by lessee in
accordance with the lease terms, (b) lessee has selected
the equipment and (c) lessee is satisfied that the
equipment is suitable for its intended use. The
Certificate identifies the commencement and expiration
dates of the lease. It also states that payment of monthly
rental charges will not be due until lessor pays the
purchase price of the equipment."

GENERAL LEASE AGREEMENT ARRANGEMENT

"This lease arrangement is used principally for equipment
leases of less than XXX in value. It consists of two
documents entitled (1) the General Lease Agreement (the
`GLA-2') and (2) the GLA-2 Commencement Certificate. In
this lease arrangement, the equipment is identified in the
GLA-2 or in a separate schedule (GLA-2, Section XX).
Otherwise, the GLA-2 contains the terms and conditions of
the lease and specifies the lessee's obligation to pay rent
(GLA-2, Section XX). However, the lessee's obligation to
pay rent, as in the other lease arrangements, is expressly
contingent upon the lessee's subsequent acceptance of the
equipment.

"Section XX of the GLA-2 provides that upon delivery of the
equipment, lessee's acceptance of the equipment becomes
irrevocable if within 10 days of such delivery lessee has
not delivered a rejection notice to lessor. The GLA-2
further provides that neither the term of the lease (GLA-2,
Section XX) nor lessee's obligation to pay rent (GLA-2,
Section XX) commences until lessor selects a commencement
date within 30 days after lessee's acceptance. As with
respect to the other described lease arrangements, no
obligation by lessee to pay rent exists at the time the
GLA-2 is executed and such obligation is contingent upon
the subsequent acceptance by lessee of the equipment and
the lessor's selection thereafter of the lease term's
commencement date.

"The lessee can also notify lessor of its acceptance by
executing the GLA-2 Commencement Certificate. This
Certificate does not contain an express obligation to pay
rent by the lessee, but merely certifies that (a) the
equipment described in the Schedule has been delivered and
installed, (b) lessee has inspected and tested the
equipment, (c) lessee accepts the equipment and (d) the
equipment has become for the first time operational and
available for service."

Discussion and Law

Section 201.08(1), Florida Statutes, imposes a tax on notes
and other written obligation to pay money. The tax is on the
promise to pay, and is measured by the amount promised. The
liability to pay the tax and its amount are determined by the
form and face of the document. Metropolitan Pub. Co. v. Lee,
(1936) 126 Fla. 170 So. 442; Bankers Trust Co. v. Florida E.C.R.
Co., (1934 DC Fla.) 8 F Supp 874, affd (CA 5 Fla.) 78 F 2d 425,
cert den 296 US 637, 80 L Ed 453, 56 LS Ct 170; Fla. Admin. Code
Rule 12B-4.052(6). Extrinsic facts are not to be considered.
Metropolis Pub. Co. v. Lee, supra; Choctawhatchee Electric
Cooperative, Inc. v. Green, 132 So.2d 556 (Fla. 1961); Fla.
Admin. Code Rules 12B-4.002(1)(b) and 12B-4.052(6).

Florida Admin. Code Rule 12B-4.054(12), provides an
exemption from tax on revolving charge account agreements in
which the obligation is dependent upon the happening of a
contingency, that is the purchase of goods and the signing of a
sales slip that does not contain a promise to pay but is only an
acknowledgment of delivery of the goods. Maas Brother, Inc. v.
Dickinson, 195 So.2d 193 (Fla. 1967).

Department's Position

The single documents submitted for our determination do not
contain a written obligation to pay money which would subject
them to tax under s. 201.08(1), F.S. Taxpayer's documents and
leasing arrangements qualify for exemption from tax pursuant to
Fla. Admin. Code Rule 12B-4.054(12), since the master lease,
which provides the lessee's obligation to pay rent, is expressly

conditioned upon lessee's subsequent acceptance of the leased
tangible personal property. The question is, therefore,
answered in the affirmative.

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