Did a Florida data-entry service center give foreign affiliates' accounts receivable a Florida taxable situs for intangible tax?

Subject

Taxable Situs

Plain-English summary

The affiliates' accounts receivable did not acquire a Florida taxable situs merely because a Florida service center entered data and printed bills. The affiliates did no business in Florida, owned no Florida property, had no Florida employees or offices, and earned no revenue from Florida activity.

The parent company's Florida service center performed only ministerial processing. It did not solicit, accept, or fill orders; control the underlying transactions; record the affiliates' receivables on the parent's books; receive or collect customer payments; make affiliate management decisions; or authorize its employees to act for the affiliates.

Section 199.052 expressly excluded ministerial functions and processing activity from control or management. Because the receivables also did not arise from business conducted in Florida, neither the parent nor the affiliates owed intangible tax on those receivables under the stated facts.

What this means for you

Locating back-office processing in Florida did not by itself establish taxable situs. The operational boundary mattered: the Florida center handled data and paperwork, while ownership, transaction authority, customer dealings, collections, and management stayed elsewhere.

Common questions

Did printing bills in Florida create taxable situs? No, when it was only a ministerial processing task.

What facts supported the conclusion? The affiliates had no Florida business, property, offices, employees, or Florida-source revenues, and the service center lacked authority over their transactions and receivables.

Would collection or management activity matter? The advisement's result depended on those functions being absent and on the statutory exclusion for ministerial and processing work.

Citations and references

• Fla. Stat. §§ 199.032, 199.052(1), 199.023(3), and 199.175(1)-(2)
• Fla. Stat. § 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94C2-26

Original ruling text

Dec 23, 1994

Re: Technical Assistance Advisement No. 94(C)2-26
Intangible Tax - Taxable Situs
Sections 199.052 & 199.175, F.S.
XXX (Parent)

Dear :

Your letter requesting a Technical Assistance Advisement
(TAA) has been referred to this office for response.

Statement of Facts

Parent is a XXX corporation with its corporate offices in
XXX. Parent makes and markets information systems, software
products and professional services. Parent is qualified to do
business in Florida. Parent files consolidated corporate income
and intangibles tax returns in Florida.

Parent owns, either directly or indirectly, various foreign
subsidiaries and domestic subsidiaries operating abroad. The
relationship between Parent and the foreign subsidiaries
(Subject Affiliates) is the subject of this request for
technical advice. The revenues of the Subject Affiliates are
also generated through the sale of information systems, software
products and professional services. None of the Subject
Affiliates conduct business in Florida. None of the Subject
Affiliates is qualified to do business in Florida. None of the
Subject Affiliates owns any property or has offices in Florida.
None of the Subject Affiliates has employees in Florida. None
of the revenues earned by the Subject Affiliates arise from
business conducted in Florida.

Parent is in the process of establishing a Service Center
to be located in Florida. The Service Center will be a part of
Parent. The Service Center will perform data-entry functions.
Some of these data-entry functions will be performed for the
Subject Affiliates. The Subject Affiliates will forward copies

of purchase orders, sales orders, accounting journal entries,
accounts payable reports, accounts receivable reports and
similar reports to the Florida Service Center, either in paper
form or by electronic transmission. The Service Center
personnel will input data from these various orders and reports.
In addition, the Service Center will print bills and other
administrative paperwork for the Subject Affiliates. However,
the Service Center will not solicit orders, accept orders, fill
orders, be a party to or exercise any control over the
transactions that underlie the orders, bills and reports. Parent
will not enter on its books any of the accounts receivable of
the Subject Affiliates. The Service Center personnel will have
no authority to act on behalf of the Subject Affiliates in
dealing with their customers or with other third parties. The
Service Center will not receive payments from customers of the
Subject Affiliates. The Service Center will not be responsible
for any collection activity. The Service Center will not be
responsible for any hiring or management decisions relating to
the Subject Affiliates. None of the Service Center employees
will be employees, directors, officers, or shareholders of the
Subject Affiliates. The Service Center will perform only the
ministerial functions of entering data into the Parent's
computer system and processing paperwork. For this data entry
service, the Subject Affiliates will pay the Service Center a
fee equal to costs incurred plus five percent.

Ruling Requested

It is requested that a Technical Assistance Advisement be
issued that Parent and the Subject Affiliates have no intangible
tax liability with respect to accounts receivable owned,
controlled or managed by the Subject Affiliates under the
circumstances described.

Discussion of Law

Chapter 199, F.S., provides for the levy of intangible
personal property taxes at the rate of two mills. The statutes
require that the tax levied by s. 199.032, F.S., be paid by June
3Oth of each year. An intangible tax return must be filed with
the Department of Revenue by every person authorized to do

business in this state or doing business in this state,
regardless of domicile, who on January 1 owned, controlled or
managed intangible personal property that has a taxable situs in
Florida. (See s. 199.052(1), F.S.) The term "person" includes
any individual, firm, partnership, joint adventure, or
corporation. (See s. 199.023(3), F.S.) Section 199.175(1),
F.S., provides that intangible property shall have a taxable
situs in this state when it is owned, managed, or controlled by
any person domiciled in this state.

With respect to the first basis for situs, as outlined in
section 199.175(1), F.S., (i.e., Florida domicile), Parent and
the Subject Affiliates will have their principal places of
business outside of Florida. Therefore, they will not have
commercial domiciles in Florida. Even if Parent were determined
to have a commercial domicile in Florida, the data-entry and
processing functions performed at the Service Center would not
constitute the control or management of the accounts receivable
of the Subject Affiliates. Section 199.052(1), F.S., provides
that control or management does not include any ministerial
function or any processing activity. All of the functions
described above as performed by the Service Center constitute
ministerial functions and processing activity.

With respect to the provisions of s. 199.175(2), F.S., the
Subject Affiliates are not transacting business with customers
in this state. None of the accounts receivable of the Subject
Affiliates are derived from, arise out of, or are issued in
connection with any business conducted in Florida. The Subject
Affiliates do not conduct business in Florida. In summary, the
Subject Affiliates are contracting with Parent to provide dataentry and processing services at a Florida location. These
circumstances do not create a Florida taxable situs for the
accounts receivable of the Subject Affiliates.

Summary

Based upon the provisions of the statutes discussed above
and the scenario as described, it is the opinion of this office
that neither the Parent nor the Subject Affiliates will be
subject to the intangible tax with regard to the receivables of

the Subject Affiliates being processed at the service center 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 that 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,

J.V. Parramore, Jr.
Tax Law Specialist
Technical Assistance

JVP/mh