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