Could an equipment lessor execute its master-lease documents in Florida for out-of-state customers without owing documentary stamp tax?

Plain-English summary

The equipment-lease documents could be executed in Florida without documentary stamp tax under the revised ruling.

The master lease expressly incorporated each lease order, and the Department treated the progress-payment rider as incorporated into the agreement. Those three papers therefore formed a single document. Even together, however, they did not create an unconditional promise to pay a sum certain because the actual lease commencement depended on a separate delivery-and-acceptance receipt.

That receipt supplied the delivery and acceptance date but was not expressly incorporated into any other document. Section 201.08(6) prevented the Department from using it to determine whether the other instruments were taxable. Without it, the incorporated papers did not complete a taxable written obligation.

What this means for you

For Florida documentary stamp tax, contract structure and express-incorporation language can control which papers are read together. Here, some documents were combined, but the separate paper needed to complete the payment obligation could not be considered because it was not expressly incorporated.

Common questions

Q: Did the master lease and lease order form one document?
A: Yes. The master lease expressly said that it and each lease order constituted a net lease.

Q: Was the progress-payment rider part of that document?
A: Yes. The Department treated a rider as incorporated into the document to which it was annexed.

Q: Why did the combined document still avoid tax?
A: It lacked an unconditional promise to pay a sum certain and an actual commencement date without the delivery-and-acceptance receipt.

Q: Why could the Department not use the receipt?
A: The receipt was not expressly incorporated into the other documents, and section 201.08(6) barred reference to it for determining their taxability.

Citations and references

• Fla. Stat. § 201.08 — documentary stamp tax on written obligations
• Fla. Stat. § 201.08(6) — taxability from the document's face and expressly incorporated papers
• Fla. Admin. Code r. 12B-4.052(6) — express-incorporation language
• Computer Sales Intl. v. State Department of Revenue, 656 So.2d 1382 (Fla. App. 1 Dist. 1995) — delivery and acceptance in a multi-document lease
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98B4-009R

Original ruling text

Revises TAA 98B4009

            Dec 24, 1998

Re: Technical Assistance Advisement No. 98(B)4-009 Revised
Documentary Stamp Tax; Master Lease Agreements
s. 201.08(6), F.S.
XXX (hereinafter Taxpayer)
XXX (hereinafter Lease Agreement)

Dear :

Your letter requesting a Technical Assistance Advisement
has been referred to this office for response. The specific
scenario for which advice has been requested is summarized
below.

          Statement of the Facts

The taxpayer provides equipment leases for its customers in
and outside the state of Florida. Each lease transaction will
require execution of four separate documents: a Master Lease
Agreement, a Lease Order, a Delivery and Acceptance Receipt, and
a Progress Payment Rider.

         Request for Advisement

The taxpayer requests advice as to whether the documents
can be executed in Florida by the lessor without the out of
state customers being subject to documentary stamp tax.

          Provisions of the Law

Section 201.08, F.S., imposes tax on written obligations to
pay money that are made, executed, delivered, sold, transferred
or assigned in this state.

Section 201.08(6), F.S. (enacted effective July 1, 1997),
provides in part:

Page 2

Taxability of a document pursuant to this section shall be
determined solely from the face of the document and any
separate document expressly incorporated into the document.
Taxability of a document pursuant to this section shall not
be determined by reference to any separate document
referenced or forming part of the same contract or
obligation unless the separate document is expressly
incorporated into the document....

Rule 12B-4.052(6), F.A.C., addresses language which
expressly incorporates one document into another. Rule 12B-
4.052(6)(b)4.g., F.A.C., provides:

[document] and [document] constitute a single document.

The Master Lease Agreement specifically states:

THIS LEASE AGREEMENT TOGETHER WITH EACH LEASE ORDER
CONSTITUTES A NET LEASE...

It is the position of the Department that the language in
the Master Lease expressly incorporates the Lease Order,
constituting a single document. However, the issue still
remains whether the "net lease" represents a taxable document at
the time of execution.

The taxability of a lease containing separate documents was
at issue in Computer Sales Intl. v. State Department of Revenue,
656 So.2d 1382, (Fla. App. 1 Dist. 1995). In Computer Sales,
supra, the commencement date of the lease was determined by the
delivery and acceptance certificate. The plaintiff argued the
certificate was a separate document and extrinsic evidence which
could not be considered in determining the taxability of the
lease. The court ruled that the lease had Florida situs once
the delivery and acceptance occurred, and allowed the acceptance
certificate to be considered part of the lease for tax purposes.

The Delivery and Acceptance Receipt provides the date the
equipment is delivered and accepted by the lessee, thus
providing the commencement for the lease. The Delivery and
Acceptance Receipt does not expressly incorporate any other

Page 3

document into it, nor is it expressly incorporated into any
other document. Pursuant to the newly enacted statute, this
document cannot be considered in determining the taxability of
the net lease.

The fourth document in this lease is a Progress Payment
Rider. Black's Law Dictionary defines Rider as:

Any kind of a schedule or writing annexed to a document
which cannot well be incorporated in the body of such document.
Such are deemed to be incorporated into the terms of the
document.

According to the definition found in the Black's Law
Dictionary, a rider is incorporated into the terms of another
document. The rider at issue incorporates the terms upon which
the lessor will purchase the equipment from the seller.
Thereafter, the lessor will lease the equipment to the lessee.
The rider contains a promise to pay between the lessor and
lessee. However, it does not contain a sum certain or the
actual commencement date of the lease.

             Conclusion

Pursuant to 201.08(6), F.S., the Lease Agreement, Lease
Order, and the Progress Payment Rider are incorporated to form a
single document. These instruments, however, do not constitute
an unconditional promise to pay a sum certain in money. The
contract is not complete without the Delivery and Acceptance
Receipt. The receipt is not expressly incorporated into any
other document and, therefore, cannot be referred to in order to
determine the taxability of the other instruments. Accordingly,
these documents can be executed in Florida without being subject
to this tax.

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

Page 4

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,

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

CG/mh