How did Florida tax two conditional-sales-contract procedures when customers signed outside Florida but one procedure routed the original contracts through Florida before final acceptance?

Plain-English summary

Florida treated the two proposed contract flows differently because of when the original contract entered the state.

In Scenario One, the customer signed outside Florida and returned the contract to out-of-state sales staff. The company then accepted and executed it outside Florida. Later Florida possession for assignment did not create tax, although the company needed positive proof of the out-of-state completion.

In Scenario Two, the customer signed outside Florida but the original contract came into Florida for credit approval, information verification, and data entry before being sent out again for company acceptance. The Department treated that Florida step as delivery and imposed documentary stamp tax despite the later out-of-state acceptance.

In either scenario, filing only a UCC-1 financing statement was not taxable if the security agreement or contract was not filed with it. Assignment of the company's contract interest to a third party also was not taxable. Recording the conditional sales contract itself would make it taxable as a mortgage based on the secured amount.

What this means for you

Formal acceptance language did not override the document's actual route. A contract could be delivered in Florida before it became binding, so workflow and custody mattered as much as signature location.

Common questions

Q: Why was Scenario One exempt?
A: Execution, acceptance, and delivery all occurred outside Florida before the completed contract later entered the state.

Q: Why was Scenario Two taxable?
A: The original contract entered Florida for substantive credit approval and processing before final acceptance, which the Department treated as delivery.

Q: Was filing a UCC-1 alone taxable? A: No, provided the obligatory contract or security agreement was not filed with it and the required notation was included.

Q: Was assigning the completed contract taxable? A: No under the stated facts.

Citations and references

• Fla. Stat. § 201.08(1) — documentary stamp tax on written obligations
• Fla. Admin. Code rr. 12B-4.053(35), 12B-4.054(30) — out-of-state proof and UCC-1 filings
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 95B4-011

Original ruling text

Aug 24, 1995

Re: Technical Assistance Advisement No. 95(B)4-011 Documentary Stamp Tax; Out of State Notes XXX (hereinafter the Company)

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 Florida documentary stamp taxes are payable in connection with contracts constituting written obligations for the payment of money when the documents are executed and delivered out of Florida.

Statement of Facts

The Company is an out of state corporation that is authorized to conduct business in Florida.

The XXX Company offers customers located throughout the United States the ability to finance their purchases XXX products through the execution of conditional sales agreements.

The Company desires to implement a procedure regarding the execution, delivery and acceptance of contracts with non-Florida customers with respect to the factual scenarios set forth below:

Scenario One

In connection with non-Florida customers, sales personnel of the Company located outside of the State of Florida would complete the contracts and accompanying UCC-1 Financing Statements out of state. The customers would then execute the contracts and UCC-1 Financing Statements outside the State of

Florida and return the executed documents to the Company's out of state sales personnel.

After execution by the customer, the contracts would be forwarded by the Company's sales personnel out of state for acceptance and execution by a representative of the Company out of state. Although the credit approval of each contract is made by the Company's credit analysts located in Florida, the contract is not binding upon the Company until acceptance and execution out of state.

After acceptance and execution out of state, some of the fully executed contracts would be forwarded to an office of the Company located in Florida for assignment of all of the Company's rights therein to a third party. In addition, the UCC-1 Financing Statements would be forwarded to Florida for filing. No documents would be recorded or filed in the State of Florida other than the UCC-1 Financing Statements, which would be filed with the Florida Secretary of State.

Scenario Two

After execution of the contracts by customers outside of the State of Florida the Company's out of state sales personnel forward the original contracts to Florida for credit review, verification of information and entry of data into the Company's computer system. Upon credit approval, verification of information, and data entry, the approved contracts would be forwarded out of state for acceptance and execution by the Company. The contracts would not be binding until acceptance and execution by the Company out of state.

After acceptance and execution out of state, some of the fully executed contracts would be forwarded to an office of the Company located in Florida for assignment of all of the Company's rights therein to a third party. In addition, the UCC-1 Financing Statements would be forwarded to Florida for filing. No documents would be recorded or filed in the State of Florida other than the UCC-1 Financing Statements, which would be filed with the Florida Secretary of State.

Rulings Requested

Based upon the facts set forth above, you request a Technical Assistance Advisement to the following effect:

1. Under Scenario One, the contracts are not subject to
   the documentary stamp tax imposed by s. 201.08, F.S., since the contracts are not made, executed or delivered in the State of Florida, even though the contracts may be sent to Florida after they have been fully executed outside the State of Florida by both the customer and the Company.
2. Under Scenario Two, the contracts would also not be
   subject to the documentary stamp tax imposed by s. 201.08, F.S., since the contracts are not made, executed or delivered in the State of Florida.
3. Under both Scenario One and Scenario Two, the filing
   of the UCC-1 Financing Statements with the Florida Secretary of State is not subject to documentary stamp tax as long as the security agreement or contract is not included for filing or recording.
4. Under both Scenario One and Scenario Two, the
   assignment of the Company's interest in the contracts would not be subject to documentary stamp taxes.

Discussion of Relevant Authorities

You provided that s. 201.08(1), F.S., imposes a documentary stamp tax on promissory notes and other written obligations to pay money that are made, executed or delivered in the state of Florida. The tax is imposed at a rate of 35 cents on each $100 or fraction thereof of the indebtedness or other obligation evidenced thereby.

Rule 12B-4.054(30) of the F.A.C., provides that the filing or recording of a UCC-1 Financing Statement in Florida is not subject to documentary stamp tax under s. 201.08, F.S., unless the promissory note, security agreement or other obligatory document is included for filing or recording.

Taxpayer's Position

Your position is that the contracts in the factual circumstances described above should not be subject to documentary stamp tax because they are signed by the customer outside the State of Florida, delivered to the Company outside the State of Florida, and accepted and executed by the Company outside the State of Florida. Your conclusion that the contracts are not subject to documentary stamp taxes should not be affected by the forwarding of the contracts to Florida for credit review, verification of information and entry of data from the contracts into the Company's computer system prior to acceptance and execution by the Company, since such actions do not alter the fact that the contracts are made, executed and delivered outside the State of Florida. Since s. 201.08(1), F.S., imposes documentary stamp taxes only on written obligations to pay money that are made, executed or delivered in the state, the contacts are not taxable under that statute.

Further, your position is that since no security agreement or evidence of indebtedness will be filed or recorded in connection with the contracts, no documentary stamp tax is required upon the filing of the UCC-1 Financing Statements in Florida.

In addition, pursuant to Rule 12B-4.054, F.A.C., your position is that the assignment of a conditional sale contract does not come within the terms of the documentary stamp tax act. Accordingly, the assignment of the Company's interest in the contracts would not be taxable, regardless of whether such assignment was executed in or outside of the State of Florida.

Law and Analysis

Section 201.08(1), F.S., "imposes a 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, transferred, or assigned in the state..." Newly adopted Rule 12B-4.053(35), F.A.C., provides that the Department 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 the state. Proof sufficient to establish that a note is not subject to tax may include:

(a) A sworn affidavit made before an out of state notary public at the time of the 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 conditional sales contract itself could bear a notarization and acknowledgment as to where the note was executed. Then this could be supplemented by an affidavit made before an out of state notary by your company attesting that the contract 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.

Rule 12B-4.054(30), F.A.C., provides that the filing or recording of a UCC-1 Financing Statement in Florida is not subject to documentary stamp tax under s. 201.08, F.S., unless the promissory note, security agreement or other obligatory document is included for filing or recording. The financing statement must include a notation that the documentary stamp tax has been paid or that it is not due.

Department's Position

Scenario One: Since the contracts are executed by the customer out of state and since the contract is accepted and delivered out of state, no documentary stamp tax is due even though credit approval is made in Florida and the contract may come into Florida after execution and delivery out of state. The assignment in Florida to a third party is not taxable and the filing of a UCC-1 in Florida is not taxable since a security agreement is not filed with the UCC-1 in Florida. If the conditional sales contract is recorded, it is taxable as a mortgage based on the amount secured.

However, the Department will assume that all contracts in Florida are taxable unless positive proof can establish that the contracts were executed and delivered out of Florida. Suggested proof maybe found in Rule 12B-4.053(32), F.A.C.

Scenario Two: Even though the contracts will be executed out of Florida, documentary stamp tax will be due based on the fact that delivery occurs in Florida. Delivery occurs based on the fact that the contract is brought into Florida for credit approval, verification of information and entry of the data into the Company's computer system and the approved contracts are then forwarded out of Florida. The fact that the contract may not be binding until it is accepted and executed out of Florida does not overcome the fact that delivery occurs when the contract is brought into Florida and approved in Florida. The filing of the UCC-1 in Florida does not affect the taxability of the contract.

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/jes