Did receivables bought by a Tennessee parent from its Florida subsidiary acquire Florida taxable situs when the subsidiary performed directed processing and collection work?

Plain-English summary

The Tennessee parent's receivables did not acquire Florida taxable situs merely because its Florida subsidiary performed directed processing and collection work.

The parent owned, managed, and controlled the receivables from Tennessee. The receivables arose from customers in the Caribbean and Latin America, not from business conducted by the parent with Florida customers. The subsidiary's booking, recordkeeping, and collection functions were performed at the parent's direction and were treated as ministerial or processing activities rather than Florida control or management by the parent.

What this means for you

The ruling distinguished limited servicing work in Florida from ownership, management, or business activity that would create Florida situs.

Common questions

Q: Did the parent have a Florida commercial domicile?
A: No. Its principal office was in Tennessee, and the subsidiary's ministerial work did not create one.

Q: Did the receivables arise from the parent's business with Florida customers?
A: No.

Q: Did the published ruling separately answer every issue it listed, including the subsidiary's transfer and the intercompany note?
A: No. The published analysis expressly resolves the Florida-situs question for the receivables owned by the parent but does not state separate answers to those two listed issues.

Citations and references

• Fla. Stat. § 199.032 — annual intangible personal property tax
• Fla. Stat. § 199.052(1) — filing duty; exclusion of ministerial and processing activity from control or management
• Fla. Stat. § 199.023(3) — definition of person
• Fla. Stat. § 199.175(1)-(2) — domicile and business situs
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 95C2-005

Original ruling text

Feb 08, 1995

Re: Technical Assistance Advisement No. 95(C)2-005
Intangible Tax - Taxable Situs - Accounts Receivable
Sections 199.052 & 199.175, F.S.
XXX (Parent)
XXX (Subsidiary)

Dear :

Your letter requesting a Technical Assistance Advisement
has been referred to this office for response. Your specific
request concerns the taxation of accounts receivable sold by
Subsidiary to Parent in exchange for a promissory note.

Statement of Facts

Parent is organized under the laws of the State of Delaware
and wholly-owns Subsidiary. Parent maintains its principal
office in Tennessee. Subsidiary is a corporation organized
under the laws of the State of Florida and maintains its
principal office in Florida. Subsidiary's primary business
involves the sale and marketing of the products manufactured by
Parent to customers located in the Caribbean region and in Latin
America. In the course of business, Subsidiary establishes
credit lines for some of its customers. On or before December
31, 1994 Subsidiary will transfer the receivables resulting from
the credit lines to Parent. The receivables will be sold at
face value for a promissory note that will bear a market rate of
interest and will otherwise reflect arms length terms and
conditions.

During the period that the Parent owns the receivables,
Parent will manage and control the receivables from its office
in Tennessee. Subsidiary will perform certain processing,
accounting and other ministerial functions with respect to
Parent's receivables. These functions will be limited to
booking, record-keeping and collection functions performed at
Parent's direction. Subsidiary's collection activities will be

taken only as directed by Parent. Subsidiary will not act as
agent or representative of Parent with regard to the
receivables. On or after January 2, 1995, Parent will transfer
the receivables back to Subsidiary in satisfaction of its
promissory note to Subsidiary. Subsidiary and Parent will file
a consolidated Florida Intangible tax return.

Issues

Based upon the scenario above, technical advice is
requested on the following issues:

1. To what extent are the receivables purchased by Parent
   subject to the Florida intangible tax?
2. Will Subsidiary be subject to intangible tax on the
   receivables it transfers to Parent prior to January 1,
   1995?
3. If Subsidiary and Parent file a consolidated
   intangible tax return, will the note from Parent to
   subsidiary be included as a taxable item on the
   consolidated return?

Provisions and Discussion of Law

Chapter 199, F.S., provides for the levy of intangible
personal property taxes at the rate of 2 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 had a Florida taxable
situs. (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), Florida Statutes,
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
s. 199.175(1),F.S., i.e., Florida domicile, Parent has its

principal place of business outside of Florida. It follows that
the intangible property of the parent may be taxed only if the
parent has a taxable situs in Florida. The ministerial and
processing functions performed by Subsidiary would not
constitute the control or management of the accounts receivable
of Parent. 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. Therefore, the parent will not have a
commercial domicile in Florida. Accordingly, its intangibles do
not have a taxable situs in Florida based on the domicile of the
parent.

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

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,

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

JVP/mh