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