Was an auction buyer's premium or broker commission included in consideration for Florida documentary stamp tax?

Subject

Consideration for Purchase of Real Property

Plain-English summary

The auction buyer's premium or broker commission was part of the consideration subject to Florida documentary stamp tax. The auction terms added the percentage premium to the winning bid, and the real-estate purchase agreement stated a total contract price that included that amount.

The buyer argued that only money paid directly to the seller should count because the broker was a third party. Florida rejected that distinction. The statute and rule included the total money paid or agreed to be paid for the conveyance, and this contract made the broker's commission part of the property's purchase price.

What this means for you

An auction fee's label or payment recipient does not necessarily remove it from documentary stamp consideration. When the purchase agreement folds a required premium into the total price for the conveyance, Florida may tax the full amount.

Common questions

Q: Did it matter that the commission went to a third-party broker? No. The contract made the commission part of the total amount paid for the property.

Q: Had documentary stamp tax already been paid on the full price? Yes. The facts said tax was paid on the purchase price including the commission, and the ruling confirmed that treatment.

Q: Did the ruling say every separately arranged broker fee is consideration? No. It addressed a contract that expressly added the premium to the top bid and included it in the total contract price.

Citations and references

• Fla. Stat. § 201.02(1) — documentary stamp tax and consideration for a real-property conveyance
• Fla. Admin. Code r. 12B-4.012(2)(a) — money, debt, mortgages, and encumbrances included in consideration
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98B4-010

Original ruling text

Jul 29, 1998

Re: Technical Assistance Advisement No. 98(B)4-010
Documentary Stamp Tax - Consideration for Purchase of Real
Property
s. 201.02(1), F.S.
XXX (hereinafter seller)
XXX (hereinafter buyer)
XXX (hereinafter broker)

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 Facts

The buyer attended an auction and placed the winning bid on
a piece of real property. The terms and condition of the sale
provided that a XXX percent Premium/commission would be added to
all top bids and included in the total contract price for the
property. The Real Estate Purchase Agreement stated the full
purchase price as $XX, which included the $XX
premium/commission. Documentary stamp tax was paid on the full
purchase price. You believe s. 201.02(1), F.S., provides that
only the amount given directly to the seller is consideration
for the conveyance of real property. Since the broker is a
third party, you believe the broker's commission should not be
included as consideration.

Provision of the Law

Section 201.02(1), F.S., states in part:

On deeds, instruments, or writings whereby any lands,
tenements, or other real property, or any interest therein,
shall be granted, assigned, transferred, or otherwise

conveyed to, or vested in, the purchaser or any other
person by his direction, on each $100 of the consideration
therefor the tax shall be 70 cents.... For purposes of
this section, consideration includes, but is not limited
to, the money paid or agreed to be paid; the discharge of
an obligation; and the amount of any mortgage, purchase
money mortgage lien, or other encumbrance, whether or not
the underlying indebtedness is assumed....

Rule 12B-4.012(2)(a), F.A.C., provides in part:

"Consideration" under s. 201.02, F.S., includes, but shall
not be limited to, money paid or to be paid, the amount of
any indebtedness discharged by a transfer of any interest
in real property, mortgage indebtedness and other
encumbrances which the real property interest being
transferred is subject to....

Conclusion

Consideration includes the total amount paid or to be paid
for the conveyance of the real property. The contract provides
that the commission is to become part of the total contract
price for the purchase of the property in question. Therefore,
consideration for the property is the full contract price, which
includes the broker's commission.

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,

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

CG/mh