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