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