Were four out-of-state note-closing, custody, and motor-vehicle financing arrangements exempt from Florida documentary stamp tax?

Plain-English summary

All four described procedures avoided Florida documentary stamp tax because the taxable notes or finance agreements were completed and delivered outside Florida and the lender kept the required evidence.

1. A borrower executed the note before an out-of-state notary and delivered it to the lender's closing representative outside Florida. The affidavits documented both events.
2. An authorized nonemployee agent accepted the note for the lender outside Florida and then forwarded it with the affidavits.
3. An out-of-state custodian held the completed note before later sending it to Florida for safekeeping. A closing affidavit or custodian affidavit and an out-of-state legend documented its history.
4. An out-of-state motor-vehicle dealer and consumer completed the financing agreement outside Florida, the dealer assigned it outside Florida, and the assigned contract was mailed to the Florida lender.

Related Florida-prepared loan documents, personal-property security, and a possible UCC filing did not change the result because no related document contained or incorporated the repayment promise stated in the note.

What this means for you

The exemption depended on the lender proving the exact place and sequence of execution, delivery, agent acceptance, custody, and assignment. Later physical possession in Florida for safekeeping did not undo a completed out-of-state transaction.

Common questions

Q: Could an authorized agent accept delivery outside Florida? A: Yes, if the lender could prove the agent's authority and the out-of-state delivery.

Q: Could a custodian later send the note to Florida? A: Yes. The ruling required the described affidavits or legend showing the note's out-of-state history.

Q: Did Florida loan preparation or a UCC filing make the note taxable? A: No under the stated facts, because the other documents did not contain or incorporate the promise to pay.

Q: Were assigned out-of-state vehicle finance agreements taxable when mailed to Florida? A: No. The agreements and assignments were completed outside Florida before mailing.

Citations and references

• Fla. Stat. § 201.08 — documentary stamp tax on written obligations
• Fla. Stat. § 671.201(14) — delivery of instruments
• Fla. Admin. Code rr. 12B-4.053(35), 12B-4.054(7), (15) — out-of-state notes and assigned finance agreements
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 95B4-010

Original ruling text

Aug 24, 1995

Re: Technical Assistance Advisement No. 95(B)4-010 Documentary Stamp Tax; Out of State Notes XXX (Bank)

Dear :

You have petitioned for a Technical Assistance Advisement pursuant to s. 213.22, F.S., and Rule 12-11.003, F.A.C.

Issue

Whether each of the transactions described below is exempt from the Florida documentary stamp tax.

Factual Background

Bank is a bank holding company whose wholly-owned subsidiaries include commercial banks (collectively, "Lender"). In the event that Lender engages in a lending transaction which is not secured by Florida real property and which may be subject to Florida documentary stamp tax, Lender will follow certain loan closing procedures intended to exempt such transaction from the documentary stamp tax. Such transactions and closing procedures are as follows:

A. Execution and Delivery of Promissory Notes

The respective borrower ("Borrower") makes an application for a loan in the State of Florida. Upon approval of this extension of credit by Lender, Borrower executes a promissory note or other written obligation to pay money (the "Note"), a loan agreement, a security agreement (or other similar document evidencing the security interest in personalty, if any, granted to Lender) and any other documents evidencing the loan and the Borrower's relationship with the Lender (collectively, the "Loan Documents"). In addition, a UCC-1 financing statement may

be filed in Florida in the case of secured loans. All loan documents are prepared and negotiated in the State of Florida and, except in the case of the promissory notes, will be executed and delivered by the Borrower in the State of Florida. No loan document other than the promissory note contains a written promise to repay money, although the other loan documents contain the borrower's covenant and agreement to pay all sums due under the note in accordance therewith and with the other loan documents. In addition, none of the loan documents incorporate by reference the promissory note. The promissory note will be executed outside of the State of Florida in the presence of a notary public of the state in which the promissory note will be executed by or on behalf of the Borrower. The promissory note contains a written promise to pay a sum certain in money, is signed by the borrower and has an attached acknowledgement that is properly notarized by an out-of-state notary. Further, affidavits of out-of-state execution and delivery are executed by the loan officer, the attorney for the lender or an agent or employee of the Lender (a "Closing Representative") and incorporate an acknowledgement which will be notarized by a notary public of the state in which delivery of the promissory note is accepted on behalf of the Lender. After out-of-state acceptance of the note by the Closing Representative, the Closing Representative carries or mails the note back into the State of Florida for safekeeping. The scenario described in this paragraph shall be referred to hereinafter as "Situation No. 1".

In the event that a lender's Closing Representative is not present when the Borrower executes the note outside of Florida, an agent ("Agent") of the Lender (who is not an employee of or an attorney for the Lender) will accept the note on the Lender's behalf and then forward the note by United States mail or courier to the Lender in Florida for safekeeping, together with the Closing Affidavits. In such a case, the Closing Affidavits will reflect delivery of the note to the Agent outside of Florida. The scenario described in this paragraph shall be referred to hereinafter as "Situation No. 2".

Finally, in the alternative, after execution and delivery to the Lender's Closing Representative or Agent of the note out-of-state, the note may be held for a period of time by an out-of state custodian (the "Custodian") for safekeeping. The Custodian may later transmit such notes from time to time by United States mail or courier to the Lender in Florida for safekeeping. Notes held by the Custodian may or may not be notarized or accompanied by the Closing Affidavits, but the Custodian will execute an affidavit to the effect that the notes were received by the Custodian from the Closing Representative or Agent outside of Florida and that such notes have never been sent to the Lender in Florida since they were received by the Custodian. In addition, the notes will bear a legend or stamp to the effect that they were made, executed and delivered outside of Florida. The scenario described in this paragraph shall be referred to hereinafter as "Situation No. 3".

B. Assignment of Out-of-State Financing Agreement

Out-of-state motor vehicle dealers (the "Dealers") sell automobiles to consumers pursuant to conditional sales contracts or other purchase money security agreements whereby the Dealers finance the purchase price of the vehicles and retain a lien on the vehicle to secure the amount financed (the "Financing Agreement"). Upon execution and delivery of the Financing Agreement outside of Florida by the Dealers and the consumers, the Dealers submit the Financing Agreements to Lender for assignment to Lender. Lender may reject or purchase the Financing Agreement from Dealer.

If Lender determines to purchase the Financing Agreement, Dealer executes an assignment which is incorporated at the end of the body of the Financing Agreement (the "Assignment"), but which constitutes a separate agreement from the Financing Agreement between the Dealer and consumer. The assignment is made and executed outside of Florida. Upon execution, Dealer forwards the Financing

Agreement and the Assignment to the Lender in Florida. The Lender does not execute or sign the assignment. The scenario described in this paragraph shall be referred to hereinafter as "Situation No. 4".

Authorities In Support Of Confirming Advisements

Bank asserts that the advisements requested herein should be confirmed as stated, based upon the following authority.

Section 201.08 of the Florida Statutes imposes documentary stamp tax on promissory notes, nonnegotiable notes, written obligations to pay money, or assignments of salaries, wages, or other compensation made, executed, delivered, sold or transferred or assigned in the state, and each renewal thereof, in the amount of 35 cents per $100 or fraction thereof of indebtedness evidenced thereby (the "Documentary Stamp Tax"). Florida Administrative Code Rule 12B-4.053(35) states that the Department of Revenue will presume that if a note is made payable to a Florida lender and the note is held by the Florida lender in Florida, then tax will be due unless the lender can establish that the note was made, executed and delivered to the lender outside of the State.

As stated in Rule 12B-4.053(35), F.A.C., proof sufficient to establish that a note is not subject to tax includes:

"(a) A sworn affidavit made before an out-of-state notary public at the time of signing of the note by the borrower(s) and delivery of the note to the lender attesting that the signing and delivery of the note occurred in the presence of the out-of-state notary; or "(b) The note itself could bear a notarization and acknowledgement as to where the note was executed, together with an affidavit made before an out-of-state notary by the lender attesting that the note was delivered to the lender or its agent out-of-state....; or "(c) Any other proof that the borrower made, executed and delivered the note in another state to a Florida

lender...."

The Closing Affidavits will be made before an out-of-state notary public attesting that the note was signed by the Borrower and delivered to the Lender outside of the State of Florida in the presence of a notary public. Accordingly, the Lender is able to provide sufficient evidence that the note is not made, executed or delivered in Florida in the event of a transaction contemplated by Situation No. 1.

Further, in the event that an agent of Lender is present at the time of execution of the note, as described in Situation No. 2, the note is still deemed delivered at the time such agent accepts the note on the Lender's behalf. As defined in Florida Statutes s. 671.201(14), delivery with respect to instruments, documents of title, chattel paper or certificated securities means voluntary transfer of possession. However, a payee need not take manual possession of a note to constitute delivery. Instead, the note is also deemed delivered if it is placed under the control of a third party agent for the payee. This situation is in fact contemplated by Rule 12B-4.053(35), F.A.C., as indicated by the reference to delivery to a lender's agent in Rule 12B-4.053(35)(b), F.A.C., above.

Upon the occurrence of a transaction contemplated by Situation No. 2, the Closing Affidavits will be made before an out-of-state notary public attesting that the note was signed by the Borrower and delivered to the Agent in the presence of such notary public. Accordingly, Lender is able to provide sufficient evidence that the note is not made, executed or delivered in Florida in the event of a transaction contemplated by Situation No. 2.

Likewise, upon a transmittal of a note by Custodian to Lender in Florida accompanied by a Closing Affidavit as described in Situation No. 3, Lender is able to provide sufficient evidence that such note is not made, executed, delivered or transferred in Florida. The phrase "sold or transferred" in Section 201.08, F.S., refers to a sale, in any manner and for any consideration, of a note by the maker thereof. In the event that notes shipped for safekeeping to

Lender in Florida pursuant to Situation No. 3 are not accompanied by a Closing Affidavit, the Custodian will execute an affidavit to the effect that the notes were received by the Custodian from the Agent outside of Florida and that such notes have never previously been sent to the Lender in Florida since they were received by the Custodian. In addition, such notes will bear a legend or stamp to the effect that they were made, executed and delivered outside of Florida.

In connection with a transaction described in Situation No. 4, the note is made and executed outside of Florida by the consumer and delivered to and accepted by the automobile dealer at that time. The dealer then executes the assignment outside of the State of Florida and mails the assigned contract to the Lender in Florida. With respect to promissory notes, Section 201.08, F.S., and Rule 12B-4.053(35), F.A.C., apply only to the making, executing and delivering of notes outside of Florida (and not to their subsequent assignment). The reference in Florida Statutes Section 201.08 to "assigned in the state" modifies and refers only to "assignments of salaries, wages or other compensation," and therefore Situation No. 4 does not trigger documentary stamp tax.

In addition, Rule 12B-4.054(15), F.A.C., provides that conditional sales agreements, evidencing the sale of motor vehicles, from a customer to a motor vehicle dealer in Georgia, discounted and assigned to a finance company doing business in Florida, are not subject to documentary stamp taxes under Florida Statutes, when such agreements are entirely entered into and executed in Georgia, and the finance company enters into the matter after the conditional sales contract is binding. This regulation is founded upon Florida Attorney General Opinion 06211 (Jan. 18, 1962) which contemplated facts substantially similar to those described in Situation No. 4. Accordingly, based upon the authority of F.A.C. Rules 12B-4.054(15) and 12B4.054(7), the assignment of the Financing Agreement is a transaction exempt from the Documentary Stamp Tax.

Department's Position

Based on the Florida Statute and Florida Administrative

Rules cited, the Department agrees that the Lender will be able to provide sufficient evidence that the note is not made, executed or delivered in Florida in the event of a transaction contemplated by Situation No. 1 and that the note would not be subject to the documentary stamp tax.

Further, the Lender will be able to provide sufficient evidence that the note is not made, executed or delivered in Florida and that the Lender could provide evidence that the agent was acting with the Lender's authority to accept the note on its behalf in the event of a transaction contemplated by Situation No. 2. Therefore, the note would not be subject to the documentary stamp tax.

Likewise, upon a transmittal of a note by Custodian to Lender in Florida accompanied by a Closing Affidavit as described in Situation No. 3, the Lender will be able to provide sufficient evidence that such note is not made, executed, delivered or transferred in Florida and the note would not be subject to the documentary stamp tax in the event that the note is shipped for safekeeping to Lender in Florida.

As to the transaction described in Situation No. 4, the note is made and executed and delivered outside of Florida and assigned outside of the State of Florida, and the assigned contract is mailed to the Lender in Florida. Therefore, the Department agrees that the assignment of the Financing Agreement and the promissory notes in the transactions described are not subject to documentary stamp tax.

This response constitutes a Technical Assistance Advisement under Section 213.22, Florida Statutes, which is binding on the Department only under the facts and circumstances described in the request for this advice as specified in Section 213.22, Florida Statutes. 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, Florida Statutes, which are subject to disclosure to the public under the conditions of Section 213.22, Florida Statutes. 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/