Did Florida documentary stamp tax apply to employee-plan loan notes made to participants inside and outside Florida?

Subject

Promissory Note

Plain-English summary

Florida documentary stamp tax applied to the employee-plan loan notes made, executed, or delivered to participants in Florida. The Department found no Florida statutory or regulatory exemption for the ERISA plan and concluded that the authorities presented did not establish federal preemption of the state tax.

The result differed for loans to participants outside Florida. A promissory note and security agreement made, executed, and delivered outside Florida to an out-of-state borrower, and not sold, transferred, or assigned in Florida, was not subject to the tax if it was not recorded in Florida.

The ruling also explained that a taxable written obligation must contain, directly or by reference, an unconditional promise to pay, a sum certain in money, and the borrower's signature.

What this means for you

For the plan-loan structure addressed here, the participant's location and where the note was made, executed, delivered, transferred, assigned, or recorded drove the Florida documentary stamp result. The Florida location of the plan's trustee did not by itself make every participant loan taxable.

Common questions

Q: Were notes for Florida participants taxable? Yes, when the plan loan was made, executed, or delivered in Florida.

Q: Did ERISA exempt the notes? No. The Department found no Florida exemption and said the cited cases did not sufficiently establish ERISA preemption.

Q: Were notes for out-of-state participants taxable? Not under the described facts when the notes were made, executed, and delivered outside Florida, were not sold, transferred, or assigned in Florida, and were not recorded in Florida.

Q: What three elements identified a written obligation to pay money? An unconditional promise to pay, a sum certain in money, and the borrower's signature.

Citations and references

• Fla. Stat. § 201.08(1) — documentary stamp tax on promissory notes and other written obligations to pay money
• Fla. Admin. Code r. 12B-4.052(6) — elements required within the document or incorporated documents
• Fla. Admin. Code r. 12B-4.053(35) — treatment of certain out-of-state notes not secured by a Florida mortgage
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 97B4-008

Original ruling text

Jun 12, 1997

Re: Technical Assistance Advisement No. 97(B)4-008
Documentary Stamp Tax; Promissory Note and Security
Agreement under s. 201.08, F.S.
XXX (Taxpayer/Company)

Dear :

You have petitioned for a technical assistance advisement
pursuant to s. 213.22, F.S., and Rule 12-11.003, F.A.C.

Statement of Fact

The Taxpayer, whose principal place of business is out of
state, sponsors the Plan. The Plan is for an "employee pension
benefit plan" as defined by ERISA. The Plan is intended to be a
stock bonus plan to generally provide a means to employees to
become a shareholder in the Company through the establishment of
a formal plan under which contributions by and on behalf of
participants are supplemented by contributions of affiliates of
the Company which have adopted the Plan.

The assets of the Plan are held in a tax-qualified trust by
a Trustee incorporated and located in the State of Florida.

The Plan provides that it may make loans from the trust
fund from time to time to participants who are located in
numerous states.

The plan imposes various limitations and conditions on the
making of such loans pursuant to the requirements of ERISA and
the Internal Revenue Code of 1986. All loan applications are
processed out-of-state by a service provider affiliated with the
Plan's Trustee. Loans from the Plan are approved by delegates
of the Plan Administrator out-of-state. Promissory notes
relating to Plan loans are prepared by the service provider outof-state. The endorsement of checks and acceptance of the loan
take place within the state in which the participants resides.

All other administration of Plan loans takes place out-of-state.

Requested Advisement

Are documentary stamp taxes imposed by s. 201.08, F.S., on
the promissory notes described in the two situations presented
below?

(1) Each time a Plan loan is made to its participants in
the State of Florida.
(2) Each time a Plan loan is made to its participants
outside the State of Florida.

Discussion and Law

Section 201.08(1), F.S., imposes documentary stamp tax on
promissory notes, written obligations to pay money, or
assignments of salaries, wages, or other compensation made,
executed, delivered, sold, transferred, or assigned in the
state. The tax shall be 35 cents on each $100 or fraction
thereof of the indebtedness or obligation evidenced thereby.

Under s. 201.08, F.S., and Rule 12B-4.052(6), F.A.C., to be
subject to the documentary stamp tax, a written obligation to
pay money must contain the following three elements within the
four corners of the document or must reference other documents
containing these elements:

1. An unconditional promise to pay,
2. A sum certain in money, and
3. The signature of the borrower.

As stated in Rule 12B-4.053(35), F.A.C., promissory notes,
nonnegotiable notes, and written obligations to pay money made,
executed, and delivered in another state, and not secured by a
Florida mortgage are not subject to Florida's documentary stamp
tax.

Department's Position

The Plan loan outlined in the first situation is made,

executed, or delivered in the state of Florida, in which
taxpayers reside. There is no provision in the Florida Statutes
nor Florida Administrative Rules to exempt the ERISA Plan from
taxation. Further, the cases cited in your memorandum do not
constitute sufficient authority to conclude that ERISA preempts
Florida's taxing statutes. Therefore, Florida has the
jurisdiction and power to tax these notes under s. 201.08, F.S.

The promissory note and security agreement arising out of
the transaction described under the second situation was made,
executed, and delivered outside the state of Florida to an outof-state borrower and was not sold, transferred, or assigned in
this state. Therefore, the note and security agreement is not
subjected to tax under s. 201.08, F.S., if it is not recorded in
Florida.

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,

Baldan E. Sulker
Senior Tax Specialist

Tax Policy and Dispute
Resolution
Office of General Counsel

BES/mh