Were Florida-generated receivables taxable after a foreign corporation transferred them and their security interests to a no-nexus subsidiary before January 1?

Plain-English summary

The receivables and related intercompany note were not included in Florida's intangible-tax base.

The seller transferred receivables and its security interests to a no-nexus subsidiary before January 1. The subsidiary owned them on the valuation date and sold them back after January 2. The Department found no tax on either entity for the receivables and eliminated the note on the consolidated return.

What this means for you

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

Common questions

Q: Did Florida tax the subsidiary's receivables?
A: No.

Q: Did the seller owe tax after transferring them?
A: No.

Q: Was the intercompany note taxable?
A: It was eliminated from the consolidated tax base.

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 95C2-013

Original ruling text

Apr 07, 1995

Re: Technical Assistance Advisement No. 95(C)2-013
Intangible Personal Property Tax; Taxability of Receivables
Sold to Out-of-State Subsidiary
XXX (Corporation A)
XXX (Corporation B)
XXX (Subsidiary)

Dear :

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

Issue

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

Facts

Corporation A is organized under the laws of a state other
than Florida with its principal office in that state. However,
some of its receivables are generated in Florida. Corporation
A's stock is owned by Corporation B which is also a foreign
Corporation. Corporation A, Corporation B and their related
companies have historically filed Florida intangible tax returns
for each company required to file. Corporation A intends to
change its method of filing its intangible tax return to a
consolidated return consisting of Corporation A and all of its
subsidiary companies.

Subsidiary is organized under the laws of another state and
has no nexus with Florida. Subsidiary has no business situs in
Florida and does not have any agents, employees, or
representatives in this state.

Prior to January 1, Corporation A sold certain accounts
receivable to Subsidiary at face value in exchange for a
promissory note. Concurrent with the sale of receivables to
Subsidiary, Corporation A assigned its security interest in the
affected product to Subsidiary. However, because of the
administrative burden and expense, Subsidiary did not amend any
such security interests to identify Subsidiary as the new
secured party. On or after January 2 of the following year,
Subsidiary sold back to Corporation A the receivables acquired
in satisfaction of the promissory note. Corporation A and
Subsidiary were included in Corporation A's consolidated Florida
intangible tax return.

Requested Advisement

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

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

If Corporation A and Subsidiary are included in Corporation
A's consolidated Florida intangible tax return, will the note
receivable from Subsidiary to Corporation A be excluded from the
taxable base on Corporation A'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, Subsidiary is not subject to Florida
intangible tax on the receivables purchased from Corporation A
prior to January 1 and owned by it on January 1. Corporation A
is not liable for the intangible tax on the receivables sold to
Subsidiary prior to January 1. Intercompany accounts are
eliminated when filing a consolidated return. Therefore, the
note receivable will be excluded from the taxable base on
Corporation A'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