Did a year-end sale of receivables leave the Florida seller or the out-of-state buyer owing Florida intangible tax on the receivables?

Plain-English summary

Florida found no intangible-tax liability on the transferred receivables for either the Florida seller or the out-of-state buyer on the stated facts.

The Florida-domiciled corporation sold all of its receivables to an out-of-state limited entity before January 1 in exchange for a note. While the buyer owned them, the corporation performed specified recordkeeping, collection, reporting, and customer-communication services. The buyer had no Florida operations or employees, and the seller needed written permission to act beyond the listed services.

The Department said the seller did not own, manage, or control the receivables on January 1, so it was not taxed on them. It also found that the buyer had no Florida taxable situs. Although the request mentioned the note received by the seller, the stated responses did not separately decide the note's tax treatment.

What this means for you

• January 1 ownership, management, and control drove the seller's receivables result.
• The buyer's lack of Florida operations or employees supported the no-situs conclusion.
• The ruling should not be read as an express holding about the seller's note because the Department did not separately state one.

Common questions

Q: Did the Florida corporation owe tax on the sold receivables? A: No. It did not own, manage, or control them on January 1.

Q: Did the out-of-state buyer have Florida taxable situs? A: No, based on the submitted facts.

Q: Did the Department rule on the note received by the seller? A: The request mentioned the note, but the Department's stated responses did not separately resolve its tax treatment.

Citations and references

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

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96C2-063

Original ruling text

May 31, 1996

Re: Technical Assistance Advisement No. 96(C)2-063 Intangible Tax - Property Subject To Tax XXX (Corporation) XXX (Limited)

Dear :

This letter is response to your recent request for a technical assistance advisement concerning the sale of certain assets prior to December 31, 1995.

Facts

Corporation is commercially domiciled in Florida and has its principal and administrative offices located in this State. Corporation has numerous operations located in the United States and throughout the world.

Part of Corporation's business is to extended credit to its customers. When a customer charges Corporation's services using a credit card or purchases the service through an agent an account receivable is generated. It is these receivables that are the subject of the transaction.

At the close of business on XXX all receivables owned by Corporation will be sold to Limited in exchange for a note. At the time of the transfer Corporation entered into an agreement with Limited to provide services, that were in effect for the period limited owns the Florida receivables. Limited has no operations or employees in Florida and will conduct no business operation in Florida. Pursuant to the Service Agreement, Corporation provided Limited the following services:

a) Identifying all receivables contributed to Limited in its accounting records. b) Insuring that receivables that are sold are in compliance with any credit and collection policies of

Limited, or that the receivables are not in default prior to contribution. c) Maintaining the books and record necessary for collection of the receivables. d) Reporting activities, outstanding balances, and aging of receivables to Limited. e) Recording cash payments on the receivables. f) Remitting proceeds to Limited. g) Routine communications with customers regarding payment and credit problems. h) Notifying Limited of uncollected accounts. i) Sending routine billing and late payment notices to customers.

Corporation had no authority to engage in activities on behalf of Limited, other than those enumerated in the Service Agreement, without the express written permission of Limited.

Corporation and Limited will file a consolidated intangible tax return. At the opening of business on January 2, 1996, Limited transferred the accounts receivable back to Corporation for the cancellation of the note.

Discussion of Law

For the 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 a person domiciled in this state on January 1 of the tax year. Section 199.175, F.S., states that "any person domiciled in this state" means (a) any natural person who is a legal resident of the state; (b) any bank or financial institution, company, corporation, partnership, or other entity organized or created under Florida law, except a trust; or (c) any person, including a trust, who has established a commercial domicile in this state. A business or other artificial entity acquires a commercial domicile in Florida when it maintains its chief or principal place of business in this state where executive or management functions are performed or where the course of business operations is determined.

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

Ruling Requested

Based upon the above described transaction the following rulings are requested:

1) Will Corporation be subject to the intangible tax on the receivables it transfers to Limited prior to January 1, 1996 or the note received from Limited?

Response: Based upon the facts presented Corporation will not own, manage or control on January 1, 1996 the receivables that Corporation sold to Limited. Therefore, Corporation will not be subject to the intangible tax on the receivables transferred to Limited.

2) To what extent, if any will Limited be subject to the intangible tax?

Response: Limited will have no taxable situs in Florida based upon the facts presented above.

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
Tax Policy and Dispute Resolution
Office of General Counsel

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