Did Florida documentary stamp tax apply to the bank's revolving-credit, business-line, and margin-loan forms?

Subject

Taxation of Various Bank Forms

Plain-English summary

None of the eight submitted bank forms was subject to Florida documentary stamp tax on the stated facts. The products included a consumer revolving line of credit, secured and unsecured business credit lines, and a margin loan backed by securities.

Florida's tax applied only when the face of a document, together with anything it expressly incorporated, contained a signed, unconditional obligation to pay a sum certain. The business-line agreement depended on future advances and no money was advanced when it was signed, so the promise was not fixed and absolute at execution. The documents also did not expressly incorporate one another.

A standard UCC-1 financing statement filed in Florida was not taxable so long as the form itself did not become a written promise to pay or a security agreement. No mortgage or security agreement would be filed or recorded in Florida under the described transactions.

What this means for you

Documentary stamp tax turned on the wording and legal effect of each document, not simply on the existence of a credit facility. A line-of-credit package can produce a different result if one form contains or incorporates a fixed obligation, or if a taxable mortgage or security agreement is filed or recorded.

Common questions

Q: Was the Business BankLine note taxable when signed? No. It was conditional on future advances and did not then promise payment of a fixed sum.

Q: Were checks and withdrawal requests taxable? No. The Department found that none of the submitted access documents was taxable and none expressly incorporated the other agreements.

Q: Was filing a UCC-1 automatically taxable? No, provided the financing statement did not itself constitute a written promise to pay or a security agreement.

Citations and references

• Fla. Stat. § 201.08(1) — tax on written obligations and recorded security instruments
• Fla. Stat. § 201.08(6) — taxability determined from the document's face and expressly incorporated documents
• Fla. Admin. Code r. 12B-4.052(6) — unconditional signed obligation to pay a sum certain
• Fla. Admin. Code r. 12B-4.054(5) — promises not fixed and absolute at execution
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 98B4-012

Original ruling text

Oct 21, 1998

Re: Technical Assistance Advisement No. 98(B)4-012 Documentary Stamp Tax; Taxation of Various Bank Forms under s. 201.08, F.S. XXX (hereinafter the Bank)

Dear :

This is in answer to your request for a Technical Assistance Advisement on the following question:

Are the submitted forms subject to imposition of documentary stamp taxes:

1. Ready Reserve/Bank Line Application;
2. Form of Ready Reserve/Bank Line Agreement and
   Disclosure Statement;
3. Form of Withdrawal Request;
4. Form of Check;
5. Form of Business BankLine Note and Agreement
   (unsecured);
6. Business BankLine Note and Agreement(secured) and
   Security Agreement;
7. Application for Business BankLine Line of Credit;
8. MarketLink Margin Agreement.

Facts Presented by Petitioner

The following is the description of the transactions outlined in your letter:

... [the "Bank"] is a national banking association... currently in the process of converting the systems of two banking institutions in the state of Florida as a result of a merger and has now begun commercial and consumer loan operations in the state of Florida.

One of the products offered by the Bank to its customers is

its Ready Reserve/Bank Line Account. The Ready Reserve/Bank Line Account is a revolving line of credit which is not secured by a mortgage nor any other security agreement which will be filed or recorded in the state of Florida. The Ready Reserve/Bank Line Account will be set up through an application submitted by the customer.... Upon approval the customer and the bank will execute a Ready Reserve/Bank Line Agreement and Disclosure Statement.... This document will be executed and delivered within the geographic boundaries of the state of Florida.

Once the Ready Reserve/Bank Line Account is established[,] the customer accesses the account in several ways. The customer may access the account by executing a standard form of counter withdrawal request and delivering it to the Bank, by writing a check on the account, through the use of an ATM or debit card or through an overdraft protection feature.... The withdrawal request and/or check may each be executed and delivered within the state of Florida. Overdraft protection is automatic in that if the customer had insufficient funds in its related checking account then funds will be automatically transferred from the Ready Reserve/Bank Line Account to cover any check written on the related account, as long as the check is within the customer's credit limit.

A second product is a Business BankLine which is offered by the Bank to its business customers. The Business BankLine is a line of credit product which is substantially similar to the Ready Reserve/Bank Line Account and is accessed in the same way. The Business BankLine may be unsecured or secured by non-real estate business assets. A UCC-1 Financing Statement may be filed in Florida but no mortgage or security agreement is filed or recorded. The Business BankLine is evidenced by the execution of a Business BankLine note and agreement....

A third product offered by the Bank to its customers is its MarketLink Margin Loan. The MarketLink Margin Loan allows the customer to borrow funds against the customer's own securities which are held by the Bank. MarketLink Margin

Loans are evidenced by a MarketLink Margin Agreement.... MarketLink Margin Agreements are accessed telephonically and funds are transferred into the customer[']s checking account.

Discussion and Law

Relevant to your petition, s. 201.08(1), F.S., provides that for written obligations to pay money "made, executed, delivered, sold, transferred, or assigned in the state" and for each renewal of the same, the tax shall be 35 cents on each $100 or fraction thereof of the indebtedness or obligation evidenced thereby. On mortgages, security agreements and evidences of indebtedness "filed or recorded in this state, and for each renewal of the same, the tax shall be 35 cents on each $100 or fraction thereof of the indebtedness or obligation evidenced thereby."

Section 201.08(1), F.S., imposes documentary stamp tax on written obligations to pay money. The document must contain an unconditional written obligation to pay a sum certain in money, signed by the obligor. See Rule 12B-4.052(6), F.A.C.

Section 201.08(6), F.S., states that taxability of a document "shall be determined solely from the face of the document and any separate document expressly incorporated into the document."

Under Rule 12B-4.054(5), F.A.C., a written promise to pay money which is not fixed and absolute at the time of execution is not subject to documentary stamp tax.

Department's Position

The Ready Reserve/Bank Line Account Agreement, Business BankLine line of credit and MarginLink Margin Loan are secured by non-real estate assets. There will be no mortgages or security agreements filed or recorded within the state of Florida. Filing a standard UCC-1 Financing Statement is not subject to documentary stamp tax, provided that it is in a form

that does not constitute a written promise to pay or a security agreement.

The Business BankLine line of credit is evidenced by an agreement called a Business BankLine Note and Agreement. The document is not structured like a typical note. The document does not contain an unconditional promise to pay a sum certain in money. The obligation is conditioned on amounts being advanced to the borrower under the agreement. Since no amounts are advanced at the time of the execution of the respective agreements, the promise to pay is not subject to documentary stamp tax.

Finally, none of the agreements nor any of the accessing documentation expressly incorporate terms of the other documents. Therefore, none of them are subject to documentary stamp 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 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,

Baldan E. Sulker
Senior Tax Specialist
Tax Policy and Dispute Resolution
Office of General Counsel

BES/mh