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

JVP/mh