Did Florida's 1994 intangible tax apply after receivables were sold to a new out-of-state affiliate?

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 planned out-of-state affiliate. The new buyer was to be commercially domiciled outside Florida, have no Florida business situs, and own the receivables on the statutory January 1 date.

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

What this means for you

Unlike TAA 94C2-017's existing affiliate, this ruling addressed a newly formed foreign subsidiary. The result still depended on completed ownership before January 1, no Florida situs, limited ministerial servicing, and consolidated-return inclusion.

Common questions

Did the new foreign affiliate owe Florida intangible tax on the receivables? No, on the stated no-situs facts.

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

Was the affiliate's promissory note taxable? It was taxable by itself but excluded 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 94C2-018

Original ruling text

Sep 06, 1994

Re: Technical Assistance Advisement No. 94(C)2-018
Intangible Personal Property Tax - Accounts Receivable
Sections 199.052(1),(10), 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. All of its stock is owned
by Corporation B, a Florida corporation, domiciled in Florida.
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.

Corporation B will form a new subsidiary (Subsidiary) which
will be organized under the laws of a foreign state, and will be
commercially domiciled and maintain 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

NCP/mh