Were a retailer's revolving-credit application, credit agreement, and signed purchase invoice subject to documentary stamp tax?

Subject

Revolving Charge Credit Application, Credit Agreement and Invoice

Plain-English summary

The retailer's revolving-charge credit application, credit agreement, and signed invoice were not subject to Florida documentary stamp tax. A taxable written obligation required a written promise to pay, a sum certain in money, and the borrower's signature.

The application and credit agreement were contingent on future purchases and did not state a sum certain. The invoice showed a purchase amount and customer signature but merely acknowledged receipt of the merchandise; it did not contain a written promise to pay. Because none of the submitted documents contained all three elements, none was taxable.

What this means for you

Revolving-credit documents were tested from their own wording and any properly incorporated terms. Splitting the transaction among a contingent account agreement and a receipt-style invoice mattered because no single taxable obligation appeared on the face of the documents.

Common questions

Why was the credit agreement not taxable? No payment obligation arose until a later purchase, and the agreement did not state a sum certain.

Why was the signed invoice not taxable? It acknowledged the goods but contained no written promise to pay.

What three elements did the Department require? A written promise to pay, a sum certain, and the borrower's signature.

Citations and references

• Fla. Stat. §§ 201.08(1) and 213.22
• Fla. Admin. Code rr. 12B-4.052(6) and 12B-4.054(12)
• Lee v. Kenan, 78 F.2d 425 (5th Cir. 1935)
• Maas Brothers, Inc. v. Dickinson, 195 So. 2d 193 (Fla. 1967)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94B4-019

Original ruling text

Dec 01, 1994

Re: Technical Assistance Advisement No. 94(B)4-019
Documentary Stamp Tax; Revolving Charge Credit Application,
Credit Agreement and Invoice
XXX (hereinafter Taxpayer)

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 credit application, credit agreement and the
invoice used by the Taxpayer in financing purchases of XXX are
subject to documentary stamp tax under s. 201.08(1), F.S.

You have enclosed the following forms for our
determination:

1. Revolving Charge Credit Application; and
2. Credit Agreement; and
3. Invoice.

Background

Taxpayer is engaged in the business of selling XXX at
retail throughout the state of Florida. As part of that
business, Taxpayer extends credit to its customers. The credit
transactions are effectuated by a customer of the Taxpayer
submitting to Taxpayer a revolving charge credit application, a
copy of which was provided as Exhibit B (the "Application"),
which includes a credit agreement ("Credit Agreement"). Under
the terms of the Credit Agreement, the customer agrees to pay
for purchases made on his or her account from time to time. In
addition, the customer is required to pay interest on the
outstanding balance in the account from time to time. The

customer is required to pay either the new balance on a monthly
statement or a minimum monthly payment shown on the statement.

At the time a customer purchases XXX, an invoice is issued
(the "Invoice") which is signed by the customer acknowledging
the purchase of the merchandise. The Invoice acknowledges that
the purchase is subject to the terms of the Credit Agreement
which the customer had signed. A copy of an illustrative
invoice was provided as Exhibit C.

Ruling Requested.

Taxpayer requests a statement of the Department of Revenue
providing that the Application, the Credit Agreement and the
Invoice are not subject to the Stamp Tax.

Taxpayer's Position.

Rule 12B-4.052, F.A.C., defines a revolving charge account
as an instrument or instruments prescribing the terms of retail
installment transactions which may be made thereafter from time
to time pursuant thereto under which the buyer's total unpaid
balance thereunder, whenever incurred, is payable in
installments over a period of time and under the terms of which
a finance charge is to be computed in relation to the buyer's
balance from time to time. Rule 12B-4.054(12), F.A.C., is based
upon the decision in Maas Brothers, Inc. v. Dickinson, 195 So.2d
193 (Florida 1967). In Maas Brothers, the court determined that
a charge account application agreement dependent upon the
happening of a contingency was not subject to the Stamp Tax. In
addition, a document merely acknowledging receipt of goods does
not constitute a written obligation to pay money within the
meaning of Section 201.08(1), Florida Statutes.

Rule 12B-4.054(12), F.A.C., provides that a retailer's
flexible charge account application agreement which is dependent
upon the happening of a contingency before any obligation is
created, that is, the purchase of goods and the signing of a
sales slip which is a mere acknowledgment of delivery of goods,
and does not in itself contain any promise to pay is not subject
to tax.

As in Maas Brothers, supra, the Taxpayer's customer is
under no obligation to pay money at the time of execution of the
Application and the Credit Agreement. The obligation to pay any
sum is dependent upon the customer subsequently making a
purchase of XXX. The Invoice, which is executed at the time the
customer makes the purchase, merely acknowledges receipt of the
goods purchased and does not contain a written obligation to pay
any sum. Consequently, Taxpayer believes that no Stamp Tax is
due on the Application, the Credit Agreement or the Invoice used
for the purpose of consumer financing.

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.

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

The forms submitted, Application, Credit Agreement and
Invoice, do not meet requirements for taxing purposes and are
therefore not subject to the Florida Documentary Stamp 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
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,

James E. Silvey
Tax Law Specialist
Technical Assistance

JES/jes