Did Florida's 1994 intangible tax apply after receivables were sold out of state before January 1?

Subject

Accounts Receivable

Plain-English summary

The receivables were not subject to the Florida intangible personal property tax after they were sold before January 1 to the out-of-state affiliate. The buyer was commercially domiciled outside Florida, had no Florida business situs, and owned the receivables on the statutory January 1 date.

The Florida seller also had no tax on the transferred receivables because it no longer owned them on January 1. Its promissory note from the affiliate was taxable standing alone, but the note was excluded as an intercompany account when the affiliated corporations filed the described consolidated return.

What this means for you

This historical result depended on actual ownership before January 1, the foreign affiliate's lack of Florida situs, the seller's limited ministerial servicing role, and consolidated-return treatment.

Common questions

Did the foreign affiliate owe Florida intangible tax on the receivables? No, because the ruling found no Florida business situs.

Did the Florida seller owe tax after transferring title before January 1? No.

Was the promissory note automatically exempt? No. It was taxable by itself but eliminated as an intercompany account on the consolidated return.

Citations and references

• Fla. Stat. §§ 199.052(1), (10), 199.175(2), and 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94C2-017

Original ruling text

Sep 06, 1994

Re: Technical Assistance Advisement No. 94(C)2-017 Intangible Personal Property Tax - Accounts Receivable Sections 199.052(1) and (10) and 199.175(2), F.S. XXX (Corporation A) XXX (Corporation B)

Dear :

Your recent request for a technical assistance advisement has been received in this office.

Facts

Corporation A is organized under the laws of the State of Florida and is domiciled in Florida. Corporation B is also organized under the laws of the State of Florida and is domiciled in Florida. Corporation A is a member of an affiliated group of which Corporation B is the common parent, and Corporation A is included in Corporation B's consolidated return for intangible tax purposes. Corporation A has accounts receivable that are generated in Florida and also intercompany receivables.

Within the affiliated group there is a foreign subsidiary (Subsidiary) organized under the laws of a foreign state and is commercially domiciled and maintains its principal office in a foreign state. Subsidiary will have no business situs in Florida and will not have any agents, employees, or representatives of any kind in Florida other than Corporation A, who will only perform ministerial activities at the discretion of Subsidiary.

Prior to January 1, Corporation A is anticipating the sale of its accounts receivable and other receivables to Subsidiary at face value in exchange for a promissory note. Corporation A will continue to perform, at the discretion of Subsidiary, collection, processing, accounting, bookkeeping and record

keeping services related to the receivables, but will have no discretionary authority over them.

On or after January 2 of the following year, it is anticipated that Subsidiary will sell back to Corporation A the receivables and the promissory note will be satisfied. Subsidiary and Corporation A will be included in Corporation B's consolidated Florida intangible tax return.

Requested Advisement

To what extent are the receivables that are purchased by Subsidiary and owned by them on January 1 subject to the Florida intangible tax?

Will Corporation A be subject to the Florida intangible tax on the receivables it sells to Subsidiary prior to January 1 and which are owned by Subsidiary on January 1?

If Corporation A and Subsidiary are included in Corporation B's consolidated Florida intangible tax return, will the note receivable from Subsidiary to Corporation A be excluded from the taxable base on the consolidated intangible tax return?

Discussion and Law

The receivables acquired by Subsidiary from Corporation A will not be taxable under Florida's intangible Tax Act. Section 199.52(1), F.S., requires that every person who on January 1 owns, manages or controls intangible property which has a taxable situs in this state, file an intangible tax return and pay the tax. When the owner of taxable intangible property is domiciled outside the State of Florida, only those intangibles which have a business situs in Florida are subject to tax as provided in s. 199.175, F.S. Since Subsidiary has no tax situs in Florida, none of the receivables purchased by Subsidiary from Corporation A are subject to intangible tax in Florida.

With respect to the receivables transferred from Corporation A to Subsidiary prior to January 1, Corporation A will have no intangible tax liability for the receivables

transferred prior to January 1. Section 199.052(1), F.S., provides that a return must be filed only for taxable intangible property owned by a person subject to tax in this state and having a taxable situs in this state. Title of ownership of the receivables was transferred to Subsidiary before the January 1 ownership date required by the statute.

The promissory note acquired by Corporation A from Subsidiary is subject to the intangible tax. However, the filing of a consolidated return by Corporation A, Corporation B and Subsidiary will eliminate the promissory note as it represents an intercompany account. Under the provisions of s. 199.052(10), F.S., affiliated groups of corporations may elect to file consolidated intangible tax returns. When filing a consolidated return intercompany accounts receivable are excluded from taxation.

Conclusion

Based upon the statutory provisions and the information provided in your request, the receivables purchased by Subsidiary from Corporation A prior to January 1 will not be subject to the Florida intangible personal property tax by Subsidiary or Corporation A. The promissory note from Subsidiary to Corporation A as consideration for the receivables will not be subject to the Florida Intangible personal property tax in the consolidated return as it represents an intercompany account.

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,

Nadine C. Posey
Tax Audit Specialist III
Technical Assistance

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