Under Florida's 1996 intangible tax, were receivables sold before January 1 among non-Florida-domiciled affiliates taxable, and were the intercompany notes taxable?

Plain-English summary

The selling subsidiaries were not liable for Florida intangible tax on the receivables because they no longer owned them on January 1. The purchasing affiliate also was not taxable, provided it had no Florida commercial domicile.

Two subsidiaries with Florida locations but no Florida commercial domicile sold their receivables before January 1 to a third subsidiary that likewise lacked Florida commercial domicile. The sellers performed only ministerial duties and retained no management or control. They repurchased the receivables after January 2 by canceling the promissory notes.

If the affiliated corporate group elected to file a consolidated intangible-tax return, the notes issued for the receivables were eliminated as intercompany accounts and were not taxable.

Unlike the original April 25 response, whose closing said it was only the writer's opinion, this revised document expressly constitutes a Technical Assistance Advisement under section 213.22.

What this means for you

Under the historical annual tax addressed by the ruling, January 1 ownership, commercial domicile, management and control, and the consolidated-return election determined the result. A Florida location did not by itself equal Florida commercial domicile on the facts described.

Common questions

Q: Why did the selling subsidiaries owe no tax on the receivables?
A: They did not own them on January 1.

Q: Why did the purchasing subsidiary owe no tax?
A: The conclusion was conditional on the purchaser having no Florida commercial domicile.

Q: Did the sellers' continued servicing make them owners or managers?
A: No. The ruling described their duties as ministerial and said they retained no control or management.

Q: Were the promissory notes taxable?
A: Not if the group elected a consolidated intangible-tax return; the notes were eliminated as intercompany accounts.

Citations and references

• Fla. Stat. § 199.032 — annual intangible tax
• Fla. Stat. § 199.052(10) — intercompany accounts on a consolidated return
• Fla. Stat. § 199.175 — commercial domicile and taxable situs
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-052R

Original ruling text

Status: Replaces TAA 96C2-052 issued April 25, 1996

            May 03, 1996

Re: Technical Assistance Advisement No. 96(C)2-052 REVISED
Intangible Personal Property Tax
Sales of Accounts Receivable to Foreign Subsidiary
XXX (Taxpayer)
XXX (Subsidiary 1)
XXX (Subsidiary 2)
XXX (Subsidiary 3)

Dear :

This is in response to your request for a Technical
Assistance Advisement regarding the sale of accounts receivables
between interrelated corporations.

          Statement of Facts

The Taxpayer is a holding company and has subsidiaries, two
of which have locations in Florida. Neither subsidiary is
commercially domiciled in this State.

Prior to January 1, 1996, the two subsidiaries sold their
receivables to a third subsidiary, which also has no commercial
domicile in this State. Promissory notes were executed and
delivered outside the State in exchange for the receivables.
The two subsidiaries performed only ministerial duties with
regard to these receivables but retained no control or
management over the intangibles. After January 2, 1996, the
subsidiaries repurchased the receivables in consideration for
the cancellation of the promissory notes.

         Provision of the Law

Section 199.032, F.S., imposes intangible tax on intangible
personal property which has a taxable situs in this State on
January 1 of each year. Section 199.175, F.S., provides that

Page 2

intangible personal property has a taxable situs in this State
when it is owned, managed, or controlled by any person domiciled
in this State. A business entity having its principal office
and executive operations in this State is considered to have
commercial domicile in Florida.

Regarding the taxability of the notes, s. 199.052 (10),
F.S., provides that intercompany accounts, including notes
between affiliates, are not subject to tax when the affiliated
group of corporations elects to file a consolidated intangible
tax return.

              Conclusion

The two subsidiaries which sold their receivables would not
be liable for the intangible tax, because they did not own the
receivables on January 1 of the tax year. The subsidiary which
purchased the receivables prior to January 1, would also not be
subject to tax provided it had no commercial domicile in this
State. Finally, regarding the taxability of the notes, if the
group of corporation elects to file a consolidated intangible
tax return, the notes between the affiliates would not be
subject to tax and would be eliminated as an intercompany
account.

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

Page 3

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