Under Florida's 1996 intangible tax, were receivables sold before January 1 by a Florida-office parent to an out-of-state subsidiary taxable?

Plain-English summary

Florida found no intangible-tax liability for receivables sold before January 1 to an out-of-state subsidiary that managed and controlled them outside Florida.

The parent maintained its principal office in Florida, but the purchaser had no Florida organization, commercial domicile, office, business assets, agents, employees, or representatives. The sale occurred at face value for a promissory note executed and delivered outside Florida.

The parent continued the listed recordkeeping, collection, remittance, reporting, and routine customer communications under an arm's-length servicing agreement. The subsidiary could put receivables back after January 2 for cancellation of the note, but the Department still approved the requested no-liability result.

What this means for you

• The purchaser's January 1 ownership, management, and control occurred outside Florida.
• The subsidiary had no Florida business presence.
• Routine servicing and a later put-back did not change the approved result.

Common questions

Q: Were the sold receivables taxable? A: No.

Q: Did the parent's Florida office create situs for the buyer? A: No, on the stated facts.

Q: Did the later put-back right change the result? A: No.

Citations and references

• Fla. Stat. § 199.032 — annual intangible tax
• Fla. Stat. § 199.175 — Florida taxable situs
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-012

Original ruling text

Feb 02, 1996

RE: TAA 96(C)2-012
Florida Intangible Tax - Taxable Situs
XXX ("Seller"),
XXX ("Purchaser")

Dear:

Your letter of December 27, 1995, requested a Technical Assistance Advisement on the application of intangible tax on the above referenced matter. This response to your request constitutes a Technical Assistance Advisement under Chapter 12-11, Florida Administrative Code, and is issued to you under

the authority of s. 213.22, Florida Statutes.

Facts

Seller is the parent company of Purchaser. Seller maintains its principal office in Florida but is not organized under the laws

of Florida. Purchaser is not organized under the laws of Florida, not commercially domiciled in Florida, and does not maintain an office in Florida. Also, Purchaser does not have any business assets, agent, employee, or representative of any

kind in Florida.

On December 22, 1995, Seller sold certain accounts receivable to Purchaser, evidenced by an intangible property transfer agreement. The receivables were sold at face value in exchange for a promissory note. The transfer agreement and note were executed and delivered outside of Florida. Purchaser will manage and control the receivables from its office outside of

Florida.

Seller will enter into a service agreement with Purchaser to

provide the following services:

• Identifying all sold receivables as sold in their

accounting records.

• Ensuring that receivables that are sold are in
  compliance with any credit and collection policies of the Purchaser or that the receivables are not in default.

• Maintaining the books and records necessary for the
  collection of the sold receivables (i.e., accounting records).

• Reporting activities, outstanding balances, and aging
  of receivables to Purchaser on a periodic basis (typically monthly).

• Collecting the receivables (receiving payments) and
  accounting for same.

• Remitting proceeds to the Purchaser.

• Routine communications with the obligator regarding
  late payments.

• Routine communications with the obligator regarding
  credit problems.

• Notifying the Purchaser of uncollected accounts.

• Sending routine reminder notices to obligators for

late payments.

A servicing agreement, based on arm's length terms and

conditions, has been established between Purchaser and Seller.

After January 2, 1996, Purchaser may put back some or all of the receivables to Seller in consideration for cancellation of the note. Purchaser will be included in the Seller's consolidated

Florida Intangible Tax Return.

Requested Advisement

That there will be no Florida intangible tax liability on the

receivables which were sold to Purchaser.

Discussion and Law

For purposes of the annual tax imposed under s. 199.032, F.S., intangible personal property shall have a taxable situs in this state when it is owned, managed, or controlled by any person domiciled in this state on January 1 of the tax year, as

provided in s. 199.175, F.S. Further, intangible personal

property has taxable situs in this state when it is deemed to have business situs in Florida and it is owned, managed, or controlled by a person transacting business in this state, even though the owner may claim domicile elsewhere. Intangibles shall be deemed to have business situs in Florida when they receive the benefit and protection of Florida laws and courts and they are derived from, arise out of, or are issued in connection with business transacted in this state with a

customer in this state.

Conclusion

Based upon statutory provisions and the information provided in your request, the requested advisement is answered in the

affirmative.

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 based 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 will follow the instructions in your

statement of proposed deletions.

Sincerely,

Val Poliuto

Statutory Compliance Section

Control #24317
VIP/kk