Which credit-union open-end loan forms triggered Florida documentary stamp tax on advances?

Subject

Credit Union Forms

Plain-English summary

Only the combined Truth-in-Lending disclosure, open-end credit agreement, and credit application was documentary-stamp taxable on the initial advance made when the borrower executed it. That document contained all three elements Florida required: a promise to pay, a sum certain, and the borrower's signature.

The other reviewed forms were not taxable written obligations:

• A later loan-disbursement request lacked both a promise to pay and the borrower's signature.
• A funds-advance voucher stated the amount, and endorsement of a check could supply a signature, but the voucher did not itself contain all three elements or expressly incorporate the check and prior agreement for the missing elements.
• An interest-rate addendum supplied rate information but not the required promise, sum, and signature.

The ruling also said an advance activated by credit card, charge card, or debit card was not subject to documentary stamp tax under the cited rule.

What this means for you

The tax analysis followed the face of each document. Since July 1, 1997, the source said the promise, definite amount, and borrower signature had to appear in one document unless that document expressly incorporated another writing containing the missing element.

A form's practical connection to a broader credit arrangement was not enough. The incorporation language and the actual advance method mattered.

Common questions

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

Q: Was every advance under the open-end plan taxable? No. The ruling taxed the initial advance made with execution of the complete agreement but did not tax the reviewed later disbursement request.

Q: Did endorsing the advance check make the voucher taxable? No. Although endorsement supplied a signature, the voucher did not expressly incorporate the check and prior agreement to assemble all required elements.

Q: Were card-activated advances taxable? No under the rule cited in the advisement.

Citations and references

• Fla. Stat. § 201.08 — documentary stamp tax on written obligations to pay money
• Fla. Stat. § 201.08(6) — required elements in one document unless another document is expressly incorporated
• Fla. Admin. Code r. 12B-4.053(20) — advances activated by credit, charge, or debit card
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98B4-007

Original ruling text

May 18, 1998

Re: Technical Assistance Advisement No. 98(B)4-007 Documentary Stamp Tax/Credit Union Forms s. 201.08, F.S. XXX (Lender)

Dear :

This is in response to your request for a Technical Assistance Advisement in which you ask if the Florida documentary stamp tax imposed by s. 201.08, F.S., is due upon certain credit union loan forms.

Proposed Transaction

The forms under consideration are:

1. Truth-in-Lending Disclosure Statement and Agreement
   for Open-end Credit Plan and Credit Application (Form XX) Part B-Credit Union Copy and Part C-Credit Union Copy
2. Funds Advance Voucher (No Form Number)
3. Interest Rate Addendum to Truth-in-Lending Disclosure
   Statement and Agreement (No Form Number)
4. Request for Loan Disbursement (No Form Number)

Discussion and Law

Section 201.08, F.S., imposes tax on written obligations to pay a sum certain in money that are signed by the borrower.

The following three elements are required under s. 201.08, F.S., for the imposition of documentary stamp tax on a written obligation to pay:

1. A promise to pay.
2. A sum certain in money.
3. Signature of the Borrower.

Effective July 1, 1997, due to creation of s. 201.08(6), F.S., by Section 2, Chapter 97-123, Law of Florida, in order for a document to be subject to tax the essential elements must be contained in one document, unless another document containing the remaining elements is expressly incorporated into the original document.

Item 1 above (Truth-In-Lending Disclosure Statement and Agreement for Open-end Credit Plan and Credit Application) states: "I promise to pay you the aggregate of all sums advanced...." The Credit Application portion of this form states the amount of the first advance (sum certain). The form requires the signature of the borrower. This form contains all the elements necessary to subject it to documentary stamp tax under s. 201.08, F.S., on the first advance made directly to the borrower.

Part C of this form contains a provision for receiving advances under a credit card. Under Rule 12B-4.053 (20), F.A.C., effective December 30, 1997, if an advance is activated with the use of a credit card, charge card, or debit card, the advance is not subject to documentary stamp tax.

Subsequent advances submitted on a Request for Loan Disbursement Form (Item 4) would not be subject to the tax. Item 4 does not contain the promise to pay nor the signature of the borrower.

The Funds Advance Voucher (Item 2) contains the amount advanced (a sum certain). No signature is required on the form itself. However, the form specifies:

Endorsement and/or negotiation of the check issued by the borrower(s) or on behalf of the borrower(s) constitutes acceptance of the terms and conditions of this Funds Advance Voucher and of the previously executed Disclosure Statement and Agreement.

Endorsement of the check is the signature of the borrower.

This form is not subject to tax under s. 201.08, F.S., because the form itself does not contain the three required elements to subject it to the tax. The form does not expressly incorporate another document (check) containing the signature of the borrower or the promise to pay.

The Interest Rate Addendum (Item 3) gives information about interest rate charges and does not contain the three required elements to subject it to the tax under s. 201.08, F.S.

Department's Position

Item 1 is subject to documentary stamp tax under s. 201.08, F.S., on the initial advance if the initial advance is made at the time of the execution of the document. Items 2, 3 and 4 are not subject to documentary stamp tax under s. 201.08, F.S.

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 treatment different from that 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,

M.E. Clemens, C.P.A.

Senior Tax Specialist
Technical Assistance and Dispute Resolution Office of General Counsel

MEC/mh