Did Florida tax receivables sold before January 1 to a non-Florida affiliate, or the promissory note received by Florida sellers filing a consolidated return?

Plain-English summary

Neither the Florida sellers nor the non-Florida buyer owed Florida intangible tax on the sold receivables under the described year-end transaction.

Two Florida subsidiaries sold the receivables at face value before January 1 to a manufacturing affiliate domiciled outside Florida that did no Florida business. The sellers continued collecting, accounting, remitting proceeds, and maintaining records, but had no management or control over the buyer's receivables.

The sellers therefore had no liability on the receivables they no longer owned, and the buyer had no liability because it lacked Florida business activity, employees, agents, or representatives generating the intangibles.

The promissory note received by the sellers could be eliminated as an intercompany receivable on the parent's consolidated intangible-tax return if the statutory stock-ownership test was satisfied.

What this means for you

The ruling separated receivable ownership from ministerial servicing and made the consolidated-return treatment conditional on the affiliated group's qualifying stock ownership.

Common questions

Q: Were the Florida sellers taxed on the sold receivables?
A: No. They did not own, manage, or control them after the sale.

Q: Was the non-Florida buyer taxed?
A: No. It did no Florida business and had no Florida personnel or representatives creating the receivables.

Q: Did collection and recordkeeping make the sellers managers?
A: No under the limited duties described.

Q: Was the affiliate note taxable?
A: It was eliminated on a consolidated return if the stock-ownership test was met.

Citations and references

• Fla. Stat. § 199.052, including § 199.052(10) — filing and consolidated returns
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 95C2-027

Original ruling text

Aug 25, 1995

Re: Technical Assistance Advisement 95(C)2-027

Intangible Tax; Property Subject To Tax - Accounts & Notes
Receivable
XXX (Parent)
XXX (Subsidiary)
XXX (Sales)
XXX (Manufacturing)

Dear :

Your letter of June 19, 1995 requesting a Technical
Assistance Advisement on the sale of receivables at year end has
been received by this office. The scenario presented for
consideration is summarized below:

Parent has three subsidiary corporations, Manufacturing, a
non-Florida corporation that does no business in Florida,
and Subsidiary and Sales, both Florida corporations.
Subsidiary, Sales and Manufacturing executed an intangible
property transfer prior to January 1, 1995. Subsidiary and
Sales sold accounts receivable to Manufacturing. The
receivables were sold at face value in exchange for a
promissory note. The transfer agreement and the note were
executed in and delivered outside of Florida. After
January 2, 1995, Subsidiary and Sales repurchased the
accounts receivable from Manufacturing. During the time
Manufacturing owned the receivables, Subsidiary and Sales
performed ministerial duties with regard to the receivables
sold to Manufacturing. These duties included collecting
the receivables, accounting for the same, remitting the
proceeds to Manufacturing, and maintaining the books and
records necessary for the collection of the receivables
sold. At no time during Manufacturing's ownership of the
receivables were Subsidiary or Sales allowed to exercise
any management or control over the receivables of
Manufacturing. Parent will file a consolidated intangible

tax return and include Subsidiary and Sales as part of the
consolidated group.

Based upon the scenario presented above you have requested
technical advice on the following questions:

1. Will Subsidiary or Sales be subject to the intangible
   tax on the receivables sold to Manufacturing?

Response:

Section 199.052, F.S., requires that every person
owning intangible property having a taxable situs in
this State must file an intangible tax return and
report all intangible property that they own, manage
or control. Based on the information provided, neither
Subsidiary nor Sales has a tax liability arising from
the accounts receivable sold to Manufacturing.

2. Will Manufacturing have a tax liability for the
   accounts receivable it purchased from Subsidiary and
   Sales?

Response:

Manufacturing is domiciled outside Florida, and has no
employees, agents or representatives in this State
transacting business with customers in this State out
of which an intangible arises. Therefore,
Manufacturing has no liability for Florida's
intangible tax.

3. Will the note receivable from Manufacturing to
   Subsidiary and Sales be subject to the intangible tax
   if a consolidated return is filed that includes
   Subsidiary and Sales in the affiliated group?

Response:

Section 199.052(10), F.S., allows a parent company and
its subsidiaries to file a consolidated intangible tax

return. This section also provides that the stock
investment in the included subsidiary corporations and
all intercompany receivables of included corporations
are excluded from taxation. So long as the stock
ownership test for consolidated filing is satisfied
for Subsidiary and Sales, the note from Manufacturing
to Subsidiary and Sales will be eliminated from the
consolidated 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,

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

JVP/mh