Were receivables taxable on January 1 after a Florida business sold them for cash and assumed liabilities to an out-of-state purchaser?

Plain-English summary

Florida found no January 1 intangible-tax liability on receivables sold before year end to a commercially domiciled out-of-state purchaser.

The Florida business sold the receivables at face value for cash and the purchaser's assumption of liabilities. While the purchaser held them, the seller performed only ministerial duties and exercised no management or control. The seller repurchased the assets after January 2 for cash and an assumption of liabilities.

The Department said the seller did not own or control the receivables on January 1, so they lacked Florida taxable situs through the seller. A later repurchase did not change that snapshot. The purchaser also had no Florida tax on the receivables, provided it conducted no business in Florida.

What this means for you

• January 1 ownership and control determined the result.
• The seller's retained work had to remain ministerial rather than managerial.
• The purchaser's conclusion was expressly conditioned on conducting no Florida business.
• The ruling body describes cash and assumed liabilities despite the source heading's reference to a note.

Common questions

Q: Did the Florida seller owe tax on the receivables on January 1?
A: No.

Q: Did repurchasing the receivables after January 2 change the result?
A: No.

Q: Did the purchaser owe Florida intangible tax?
A: No, provided it conducted no business in Florida.

Citations and references

• Fla. Stat. § 199.032(1) — annual intangible tax
• Fla. Stat. § 199.052(1) — ministerial functions and filing
• Fla. Stat. § 199.175(1) — taxable situs
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-056

Original ruling text

May 13, 1996

Re: Technical Assistance Advisement No. 96(C)2-056
Intangible Tax - Sale of Receivables in exchange for a Note
XXX (Taxpayer)

XXX (Purchaser)

Dear :

Your request for a Technical Assistance Advisement
concerning the affect on intangible tax of a sale of accounts
receivable in exchange for cash has been reviewed and is

addressed in the following paragraphs.

Statement of the Facts

The Taxpayer transacts business in Florida. Prior to
January 1, the Taxpayer sold its receivables to the Purchaser.
The Purchaser is commercially domiciled outside the state of
Florida. The receivables were sold at face value for cash and
the assumption of the Taxpayer's liability. Subsequent to the
sale, the Taxpayer continued to performed only ministerial
duties with regards to the receivables, but exercised no
management or control over the receivables while in the
possession of the Purchaser. After January 2, 1996, the
Taxpayer repurchased the receivables in consideration for cash
and the assumption of the liabilities. You request the

Department's advisement on the taxability of this transaction.

Provision of the Law

In accordance with ss. 199.032(1) and 199.052(1), F.S.,
intangible personal property which has a taxable situs in this
State as of January 1 of each year is subject to the intangible
tax. Section 199.175(1), F.S., defines taxable situs as being
owned, managed, or controlled by a person or business domiciled
in this State on January 1 of the tax year. For purposes of the
intangible tax, s. 199.052(1), F.S., provides that "management

or control" does not include ministerial functions.

Conclusion

Since the Taxpayer did not own or control the intangible
personal property on January 1 of the year, such property would
not have a taxable situs in this State for intangible personal
property tax purposes. The sale back to the Taxpayer on January
2 or thereafter would not affect the tax treatment of the
accounts receivable on January 1. The Purchaser has no
commercial domicile in this State. Therefore, provided the
Purchaser conducts no business in this State, the receivables it
owns, manages, or controls on January 1 would not be subject to

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