Were a purchase-money security agreement and a Florida UCC-1 financing statement subject to documentary stamp tax?

Subject

Security Agreement

Plain-English summary

The purchase-money security agreement was not taxable while unfiled and unrecorded, but filing or recording it would trigger documentary stamp tax based on the maximum indebtedness under the referenced purchase order. As an unrecorded written obligation, it did not contain all three elements the Department required: a written promise to pay, a sum certain, and the borrower's signature.

The Florida UCC-1 financing statement was not itself taxable when filed alone. It still needed a notation stating either that required stamps had been placed on the secured promissory instruments or that tax was not required.

What this means for you

The same security agreement received different treatment depending on whether it was merely executed or actually filed or recorded in Florida.

Common questions

Q: Was the unrecorded security agreement taxable? No.

Q: What happened if it was recorded? Tax applied to the maximum indebtedness created under the referenced purchase order.

Q: Was the UCC-1 itself taxable? No, but it required the specified tax notation.

Citations and references

• Fla. Stat. § 201.08(1) — notes, written obligations, and recorded security agreements
• Fla. Admin. Code r. 12B-4.053(33) — UCC financing statements
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93B4-020

Original ruling text

Aug 06, 1993

Re: Technical Assistance Advisement No. 93(B)4-020
Documentary Stamp Tax; Security Agreement
XXX hereinafter Debtor
XXX hereinafter Secured Party
XXX hereinafter Vendee

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 a Purchase Money Security Agreement and a UCC
Financing Statement executed by Debtor in favor of Secured Party
are subject to the tax levied by s. 201.08(1), F.S.

Background

Debtor is purchasing, pursuant to a purchase order,
electrical equipment and supplies from Secured Party for re-sale
to Vendee.

Under Part I, entitled "Creation of Security Interest", the
Purchase Money Security Agreement states that:

"A. For the purpose of securing the performance of all
obligations and the payment of all existing and subsequent
indebtedness of Debtor to Secured Party created by the sale
of electrical and other materials to Debtor in response to
the P.O. No [Numbered], Debtor hereby grants to Secured
Party a present security interest in the Collateral
described in Paragraph II and in its expectancy to acquire
such Collateral in the ordinary course of its business, and
does hereby sell, assign and transfer to Secured Party its
account with its customer, [Vendee], which will purchase

these goods or products of goods that are sold by Secured
Party to Debtor."

Under Part II, entitled "Collateral" the Purchase Money
Security Agreement provides that:

"All inventory of electrical supplies including, but not
limited to, meters and controls, pursuant to Purchase Order
[Numbered] and any change orders, and all of the Debtor's
rights and interest in these goods, and all contract
rights, accounts receivable, products, and proceeds and
evidence thereof of the Debtor arising out of its re-sale
to [Vendee] of the materials described in this paragraph
and the products thereof."

Under Part III, entitled "Obligations of Debtor, the
Purchase Money Security Agreement reads:

"A. Obligation to Pay

1. Debtor shall pay, when due, its indebtedness to Secured
   Party..."

The UCC-1 Financing Statement is the standard type Uniform
Commercial Code Financing Statement filed in Florida with the
Secretary of State. Debtor is shown as the debtor and Secured
Party is shown as the secured party. The collateral described
in the financing statement reads identically to the collateral
described under Part II in the Purchase Money Security
Agreement.

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 on 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.

A Department regulation provides that a UCC Financing
Statement that is filed or recorded in Florida is not subject to
tax unless the note, security agreement or other obligatory
document is also filed or recorded. Fla. Admin. Code Rule 12B4.053(33).

Department's Position

Unless filed or recorded, the Purchase Money Security
Agreement does not contain the three essential elements required
for the imposition of tax. If it is filed or recorded, tax
would be due based upon the maximum indebtedness created under
the purchase order referred to in the Purchase Money Security
Agreement. Tax is not required on the UCC Financing Statement.
However, a notation must be made on the financing statement that
any stamps required have been placed on the promissory
instruments secured by the financing statement, or that the tax
is not required.

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