Were receivables taxable when a Florida corporation sold them at face value to a no-nexus subsidiary before January 1 and bought them back after January 2?

Plain-English summary

The receivables and related intercompany note were not included in the Florida intangible-tax base under the stated year-end arrangement.

The no-nexus subsidiary bought the receivables before January 1 and owned them on the valuation date. It sold them back after January 2. The Department found no tax on the subsidiary or the Florida parent for those receivables, and the note was eliminated as an intercompany account on the consolidated return.

What this means for you

The result depended on actual ownership on January 1, the subsidiary's lack of Florida situs, and consolidated-return treatment.

Common questions

Q: Were the receivables taxable to the out-of-state subsidiary?
A: No.

Q: Were they taxable to the Florida parent?
A: No, because it had sold them before January 1.

Q: Was the note included in the consolidated tax base?
A: No. It was eliminated as an intercompany account.

Citations and references

• Fla. Stat. §§ 199.023(3), 199.032, 199.052(1), and 199.175(1) — person, tax, return, and situs provisions
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 95C2-012

Original ruling text

Apr 07, 1995

Re: Technical Assistance Advisement No. 95(C)2-012
Intangible Personal Property Tax; Taxability of Receivables
Sold to Out-of-State Subsidiary
XXX (Corporation)
XXX (Subsidiaries)
XXX (foreign Subsidiary)

Dear :

This is in response to your recent request for a technical
assistance advisement.

Issue

Whether retail receivables, wholesale receivables or other
receivables are subject to the Florida intangible personal
property tax if they are sold to an out-of-state subsidiary
before December 31, and then sold back to the parent or related
company after the January 1 valuation date.

Facts

Corporation is organized under the laws of the State of
Florida and has its principal and administrative offices in the
state. Corporation and its Subsidiaries file a consolidated
Florida intangible tax return. Corporation and its Subsidiaries
engage in the production, processing and sale of various
products, and transportation. The purchasers of such products
consist primarily of wholesale dealers, but also include retail
customers. These sales generate accounts receivable.

Corporation also has a foreign Subsidiary that has no nexus
with Florida. It is organized under the laws of a state other
than Florida and is commercially domiciled with its principal
office in another state. The foreign Subsidiary has no business
situs in Florida and does not have any agents, employees, or
representatives in this state.

Prior to January 1, Corporation sold certain accounts
receivable and other trade receivables to foreign Subsidiary at
face value in exchange for promissory notes. On or after
January 2 of the following year, foreign Subsidiary sold back to
Corporation the receivables acquired in satisfaction of the
promissory notes. The foreign Subsidiary is included in
Corporation's consolidated Florida intangible tax return.
Subsidiaries provide certain ministerial functions for the
foreign Subsidiary.

Requested Advisement

To what extent are the receivables that were purchased by
foreign Subsidiary and owned by Subsidiary on January 1 subject
to the Florida intangible tax?

Will Corporation be subject to the Florida intangible tax
on the receivables it sold to foreign Subsidiary prior to
January 1 and which are owned by foreign Subsidiary on January
1?

If Corporation and foreign Subsidiary are included in
Corporation's consolidated Florida intangible tax return, will
the notes receivable from foreign Subsidiary to Corporation be
excluded from the taxable base on Corporation's consolidated
intangible tax return?

Discussion and 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
30 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 as provided in 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.

Conclusion

Based upon statutory provisions and the information
provided in your letter, foreign Subsidiary is not subject to
Florida intangible tax on the receivables purchased from
Corporation prior to January 1 and owned by foreign Subsidiary
on January 1. Corporation is not liable for the intangible tax
on the receivables sold to foreign Subsidiary prior to January

1. Intercompany accounts are eliminated when filing a
   consolidated return. Therefore, the notes receivable will be
   excluded from the taxable base on Corporation's consolidated
   intangible tax return.

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,

Nadine C. Posey

Tax Audit Specialist III
Technical Assistance

NCP/mh