Did an out-of-state municipal-securities fund have Florida corporate-tax nexus when it used independent brokers but had no Florida office, people, property, or management?

Subject

Nexus

Plain-English summary

Neither the fund nor the trust had Florida corporate-income-tax nexus on the stated facts. They and the related series had no Florida office, employees, salespeople, property, or management, and all assets were held and managed outside Florida. Independent investment broker-dealers sold the shares.

The result would change if the trust or any fund acquired Florida nexus. The ruling listed ownership or leasing of Florida property, Florida employees or salespeople, Florida management, and loans secured by liens on Florida real or tangible personal property as nexus-creating examples, while warning that the list was not exhaustive.

What this means for you

The fund's Florida investment focus and use of independent brokers did not create nexus by themselves under the represented facts. Activity anywhere in the trust's fund structure could affect the analysis.

Common questions

Q: Did independent broker-dealers create nexus here? No, on the stated facts.

Q: Did investing in Florida municipal securities create nexus? The ruling found no nexus while all assets were held and managed outside Florida and the other stated absences remained true.

Q: What activities could create nexus? Florida property, people, management, or loans secured by Florida real or tangible property, among other possibilities.

Citations and references

• Fla. Stat. ch. 220 — corporate income and emergency excise taxes
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 93C1-001

Original ruling text

Sep 07, 1993

Re: Technical Assistance Advisement No. 93C1-001
Corporate Income Tax; Nexus
Chapter 220, F.S.
XXX (hereinafter referred to as the "Trust")
XXX Exempt Fund
XXX (hereinafter referred to as the "Fund")

Your request for a Technical Assistance Advisement has been
referred to this office for response. The specific request is
for technical advice on the application of corporate income tax
to a trust organized as a XXX business trust.

You have asked whether or not the Fund will be subject to
Florida corporate income and emergency excise taxes.

The Trust is a business trust established under the laws of
the XXX by a declaration of Trust. The Florida Fund is an
investment portfolio offered by the Trust. The Fund's objective
is to provide shareholders a high level of tax-exempt income
through investment in a portfolio of investment obligations the
interest of which is exempt from federal income taxation, other
than the alternative minimum tax. The Fund intends to achieve
its objective by investing in a portfolio of Florida tax-exempt
municipal securities as well as obligations of territories and
possessions of the United States.

None of the Fund, the Trust nor any series fund which
comprises the Trust will have an office or other place of
business in Florida. None of the Fund, the Trust nor any series
fund which comprises the Trust will have employees or
salespersons in Florida, and none of these entities will own or
maintain any property of any kind in Florida. All assets owned
by the Fund, the Trust or any series fund which comprises the
Trust will be held and managed outside of Florida. Shares of
the Fund will be sold primarily by independent, investment
broker-dealers who purchase such shares pursuant to sales

contracts with XXX the Fund's principal underwriter.

If any of the funds under the Trust or the Trust itself
have nexus in Florida, the Fund will have nexus and be subject
to Florida corporate income tax and emergency excise tax. Nexus
will be created by any of the following activities: owning or
leasing any property within Florida; employees or a salesperson
in Florida; management within Florida; loans secured by
mortgages, deeds of trust or other liens upon real or tangible
personal property located within this state. Note that the
above list is not exhaustive as the activities that could create
nexus with Florida.

Based upon the facts presented neither the Fund nor the
Trust will be subject to corporate income tax or emergency
excise tax.

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
predicted 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 the 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 section 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,

Charles E. Pate

Technical Assistant
Bureau of Technical Assistance

CEP/tb