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

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