Were points paid to buy down a mobile-home loan's interest rate included in the Florida taxable sales price?

Subject

Mobile Home Purchase; Financing Charges

Plain-English summary

The $2,019 paid to reduce the mobile-home loan's interest rate to 7% was part of the taxable sales price because the final contract did not separately state it as a finance charge. The buyers therefore were not entitled to a sales-tax refund on the points.

An earlier sales contract and Truth-in-Lending disclosure had separately listed the mobile home's cash price and financing charges. Under that structure, Florida said only the cash selling price should have been taxed.

The buyers later signed a second sales contract. It folded the point buydown into cash sales price, stated that it contained the parties' entire understanding, and expressly superseded all other contracts. That later document controlled, making the full stated price taxable.

What this means for you

Finance charges are excluded from taxable price only when the operative sales agreement states the cash selling price and adds interest or carrying charges as separate, distinct items.

Earlier disclosures do not preserve the exclusion if a later signed contract combines the charge into price and supersedes prior documents. Review the final integrated agreement before calculating tax.

Common questions

Q: Are interest and finance charges always taxable on a retail installment sale? No. The rule excluded them when separately stated from the property's cash selling price.

Q: Why did the original contract not control? The later signed contract said it contained the entire agreement and superseded all others.

Q: Did labeling the payment as an interest-rate buydown help? Not in the final contract. The points were included in cash price rather than separately stated.

Q: Was a refund due? No. Tax was properly calculated from the final contract's combined selling price.

Citations and references

• Fla. Stat. §§ 212.05, 212.06 — Florida sales and use tax
• Fla. Admin. Code r. 12A-1.017 — interest and finance charges excluded only when separately stated
• Fla. Admin. Code r. 12A-1.014 — refund rule cited in the advisement heading
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98A-027

Original ruling text

SUMMARY

The taxpayer signed a contract to purchase a mobile home. The contract included a separate itemization of points to buy down the interest rate. Tax was calculated on the sales price excluding the points. The taxpayer subsequently signed a second contract in which the sales price included the points. The second contract also included a statement that said it superseded all previous oral or written contracts. Tax was correctly calculated on the sales price including the points. The taxpayer is not due a refund of tax paid on the points, because the points were not separately stated from the sales price in the contract.

Apr 21, 1998

Re: Technical Assistance Advisement 98A-027 Sales and Use Tax - Mobile Home Purchase; Financing Charges Sections: 212.05, 212.06, F.S. Rules: 12A-1.014, and 12A-1.017, F.A.C. Petitioner: XXX (herein "Taxpayer") SSN: XXX and XXX

Dear :

This letter is a response to your petition dated January 19, 1998, for the Department's issuance of a Technical Assistance Advisement ("TAA") concerning the above referenced party and matter. Your petition has been carefully examined and the Department finds it to be in compliance with the requisite criteria set forth in Chapter 12-11, F.A.C. This response to your request constitutes a TAA and is issued to you under the authority of s. 213.22, F.S.

DISCUSSION OF FACTS

In your letter you state that you recently bought a mobile home

from a Florida dealer. This purchase is being financed through a second company. Under the loan agreement, you paid the finance company $2,019.00 in order to buy the interest rate on the loan down to 7%. You were charged sales tax on this additional amount, as well as on the listed cash sales price of the mobile home.

REQUESTED ADVISEMENT

You ask if sales tax was due on the additional amount paid to buy down the interest rate on the loan.

Discussion, Analysis, and Conclusion of Law

Rule 12A-1.017, Florida Administrative Code, states that:

The amount paid by any purchaser as interest or as a finance charge is taxable unless such interest or finance charge is separately stated from the consideration received for the tangible personal property transferred in a retail sale. For example, where articles are sold in a taxable transaction under an installment payment arrangement, retail title contract or purchase money mortgage for a stated amount payable in installments at intervals over a period of time, the entire amount is taxable. If, on the other hand, a cash selling price is stated and interest and carrying charges are added thereto as separate and distinct items, only the cash selling price is taxable.

You have provided both the original sales contract between you and the mobile home dealer, dated April 12, 1997, and a copy of the Federal Truth-in-Lending Act disclosure form. Each of these documents separately lists a cash sales price for the mobile home, which is separate from any finance charges. As such, sales tax should have been collected only on this cash sales price.

You have also provided a second sales contract between you and the mobile home dealer, dated May 9, 1997. On this contract, finance charges are not separately stated, but are included as part of the cash sales price. This contract, which is signed by

the taxpayers, states that "This agreement contains the entire understanding between you [the seller] and me [the buyer] and no other representation or inducement, verbal or written, has been made which is not contained in the contract." Additionally, this contract states "This contract supercedes all others."

In the second contract, the point buy down was added to the actual final cash price, and not separately stated. Pursuant to Rule 12A-1.017, F.A.C., the point buy down, which is a charge for interest, must be separately stated to be excluded from the taxable selling price. The second contract specifically states that it supercedes all other contracts, and was accepted by the taxpayers, as evidenced by their signatures on the contract. In this second contract, tax was properly calculated on the selling price of the unit, even though the point buy down was included as part of the selling price. Therefore, because the finance charges are not separately stated, and in light of the limiting language contained in the contract, no refund of tax is due to the taxpayer.

This response constitutes a Technical Assistance Advisement under Section 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 Section 213.22, F.S. Our response is predicated upon 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 from that which is 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 Section 213.22, F.S. Your name, address, and any other details that 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 this response.

Sincerely,

Sara D. Faulkenberry
Tax Law Specialist
Technical Assistance and Dispute Resolution 850-414-9838 [email protected]

Control No. 32639