Was a motor-vehicle lease subject to Florida documentary stamp tax when it lacked an unconditional payment obligation and title stayed with the lessor?

Plain-English summary

Florida concluded that the motor-vehicle lease was not subject to documentary stamp tax.

The lease did not contain an unconditional obligation to pay money. It also did not provide that the lessee automatically became the owner once total rental payments equaled the property's value.

The agreement included a purchase option and allowed early termination. Unless the customer exercised the purchase option at the end of the lease, ownership remained with the lessor. Those terms kept the agreement outside the taxable lease rule applied by the Department.

What this means for you

Vehicle and equipment lessors

The tax analysis turned on the lease's payment and ownership language, not merely the fact that the customer could eventually purchase the property.

Contract and finance teams

Distinguish an optional purchase from an automatic transfer after a fixed stream of payments. The latter was the ownership feature identified in the rule quoted by the ruling.

Accountants and tax professionals

Review the entire agreement for unconditional payment obligations, automatic ownership, early termination, and residual title. A differently drafted lease could produce a different result.

Common questions

Q: Was the lease subject to documentary stamp tax?
A: No.

Q: Did the lease contain an unconditional promise to pay?
A: No.

Q: Did ownership automatically transfer when rental payments equaled the vehicle's value?
A: No.

Q: Could the customer buy the vehicle?
A: Yes, through a purchase option at the end of the lease.

Q: Who owned the vehicle if the option was not exercised?
A: The lessor.

Q: Can another lease rely on this TAA?
A: Not automatically. The advisement states that it binds the Department only on the payment, ownership, option, termination, and other lease terms described.

Citations and references

• Fla. Stat. § 201.08(1) — written obligations to pay money
• Fla. Admin. Code r. 12B-4.054(9) — documentary stamp treatment of tangible-personal-property leases
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96B4-015

Original ruling text

Nov 13, 1996

Re: Technical Assistance Advisement No: 96(B)4-015
Documentary Stamp Tax-Equipment Leases
Section 201.08(1), F.S.
Rule 12B-4.054(9), F.A.C.
XXX (Corporation)
XXX (Lease)

Dear :

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

Statement of the Facts

The Corporation primarily leases motor vehicles to
customers throughout the United States. The majority of the
leases cover a 24 month period. The lease contract has certain
provisions which include a purchase option and early termination
of the contract. Except when the customer exercises the purchase
option at the end of the lease, the ownership of the equipment
remains with the lessor.

Advisement

An advisement is requested as to the applicability of
documentary stamp tax to the described lease agreement.

Provision of the Law

Section 201.08(1), F.S., imposes a documentary stamp tax on
promissory notes, nonnegotiable notes, or written obligations to
pay money executed or delivered in this state. Where the
document constitutes a lease of tangible personal property, Rule
12B-4.054(9), F.A.C., provides:

A lease of tangible personal property which does not
contain an unconditional obligation to pay money is not

subject to tax, unless the lease provides that the lessee
will become the unconditional owner of the property when
the total of the rental payments equals the value of the
property being leased.

Conclusion

The lease agreement contains no language which constitutes
an unconditional obligation to pay money. Additionally, the
title to the property does not transfer to the lessee when the
total rental payments equal the value of the property being
leased. Therefore, the lease agreement addressed in this
technical assistance advisement will not be subject to the
documentary stamp tax.

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,

Celestine Grantham
Senior Tax Specialist
Tax Policy and Dispute

Resolution
Office of General Counsel

CG/mh