Did a Florida corporation owe documentary stamp tax on unsecured debentures issued entirely outside Florida?

Subject

Corporate Debentures Issued Outside Florida

Plain-English summary

The unsecured corporate debentures were not subject to Florida documentary stamp tax because their issuance occurred outside Florida and no Florida-recorded mortgage secured them. The corporation was a Florida corporation and its directors signed consent resolutions in Florida, but all other issuance and sale steps occurred outside the state.

The officers manually signed blank sheets outside Florida so a bank-note company could reproduce their facsimile signatures. The debentures were printed and delivered to purchasers outside Florida. On those facts, the Department found they were not debentures issued in Florida under section 201.07.

What this means for you

The issuer's Florida incorporation and in-state board authorization did not control the result. The Department focused on where the actual issuance steps occurred and whether a Florida-recorded mortgage secured the debt.

Common questions

Q: Did the Florida board resolutions make the debentures taxable? No, not when the remaining issuance and sale steps occurred outside Florida.

Q: Were the debentures secured? No. They were unsecured, and no mortgage was to be recorded in Florida.

Q: What could change the result? Issuance steps in Florida or a Florida-recorded mortgage securing the debt could require a different analysis.

Citations and references

• Fla. Stat. § 201.07 — tax on corporate bonds, debentures, and certificates of indebtedness issued in Florida
• Fla. Admin. Code r. 12B-4.041 — corporate obligations
• Fla. Admin. Code r. 12B-4.043(5) — bonds issued outside Florida
• State v. Gay, 90 So. 2d 132 (Fla. 1956)
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93B4-023

Original ruling text

Dec 08, 1993

Re: Technical Assistance Advisement No. 93(B)4-023
Documentary Stamp Tax; Corporate Debentures Issued Outside
Florida
XXX hereinafter Corporation)
XXX (hereinafter Trustee)

Dear :

You have petitioned for a Technical Assistance Advisement
under the provisions of s. 213.22, F.S., and Ch. 12-11, F.A.C.

Issue

Whether documentary stamp tax is due where Corporation
issues its unsecured corporate debentures outside Florida.

Background

Corporation, a Florida corporation, proposes to issue up to
$XX Million in debentures on or about XXX. The debentures will
be unsecured and the terms and conditions thereof will be
governed by a Debenture Indenture which will not be recorded in
any office of the Clerk of Circuit Court in any county. Trustee
under the Debenture Indenture is headquartered in Atlanta,
Georgia and does not do any business in the state of Florida.

The execution of the debentures consists of the president
and secretary of Corporation placing their manual signatures on
a blank sheet of paper which is then sent to the bank note
company for the printing of the debenture certificates which
bear the facsimile signature of the president and secretary.
The blank sheets of paper bearing the manual signatures are used
by the bank note company to prepare the facsimile signatures
which are impressed upon the debenture certificates. The manual
signing of the blank sheets of paper will take place outside of
the state of Florida.

The only matters incident to the issuance of the debentures
which take place in the state of Florida is the execution by
each director of the Board of Directors of Company of a Consent
Resolution authorizing the issuance of the debentures and the
execution of the Indenture and other miscellaneous documents
attesting to the financial and legal status of Company. Other
than the foregoing, all matters incident to the issuance and
sale of the debentures will take place outside of the state of
Florida.

The debentures will be printed in XXX and delivered to the
purchasers in XXX.

Discussion And Law

Section 201.07, F.S., imposes documentary stamp tax on
bonds, debentures and certificates of indebtedness which are
issued by anyone in Florida, including documents, however
described, with interest coupons or in registered form, issued
by any corporation. The rate of tax is 35 cents on each $100 of
the face value or fraction thereof, except that where the
indebtedness is secured by property in and out of Florida, the
tax is based upon the ratio which the value of the Florida
property, as evidenced by the recorded document, bears to the
total value of all the collateral pledged. If the indebtedness
is secured only by a Florida mortgage, tax is due on the
mortgage based upon the total indebtedness. (Also see Fla.
Admin. Code Rule 12B-4.041).

A Department regulation states that where all steps in the
issuance of bonds by a Florida corporation take place outside
Florida, the transaction is not taxable, except in the case
where a mortgage is recorded in Florida as security for the
indebtedness (Fla. Admin. Code Rule 12B-4.043(5). Also see
State v. Gay, 90 So.2d 132 (Fla. 1956)).

Department's Position

Corporation's debentures are not subject to tax under s.
201.07, F.S., since the issuance of the corporation debentures
takes place outside Florida and they are not secured by a

mortgage recorded in Florida.

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
Tax Law Specialist
Technical Assistance
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