Did Florida documentary stamp tax apply to the master leases, schedules, acceptance certificates, or progress-payment documents used in these equipment leases?

Plain-English summary

Florida found no documentary stamp tax liability from any of the reviewed equipment-lease documents, whether executed or delivered inside or outside Florida.

The master lease and schedule expressly incorporated one another, but the lessee's payment obligation did not become fixed until an acceptance certificate was delivered and every condition precedent was satisfied. The acceptance certificate itself contained no promise to pay and was not expressly incorporated into the lease documents.

The progress-payment agreement incorporated the master lease or schedule, but payment remained contingent on the lessor actually funding the interim advance. The progress-payment certificate neither contained a promise to pay nor expressly incorporated the other documents.

What this means for you

The TAA applied a document-by-document, face-of-the-instrument analysis. Mere reference to another contract was not express incorporation, and a payment promise that remained conditional at execution was not taxable under the cited rule.

Common questions

Did the master lease and schedule count as one document? Yes, because they expressly incorporated one another, but the combined payment obligation was still conditional.

Did signing an acceptance certificate create tax liability? No. It did not itself promise payment and was not expressly incorporated.

What about the progress-payment agreement? It was not taxable because the payment obligation depended on the lessor funding the progress payment.

Did execution in Florida change the answer? No, under the facts and document language reviewed.

Citations and references

• Fla. Stat. § 201.08(1), (6)
• Fla. Admin. Code r. 12B-4.052(6)(b)(2)
• Fla. Admin. Code r. 12B-4.054(5)
• Fla. Stat. § 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99B4-002

Original ruling text

SUMMARY

The Master Lease and the Schedule contain language of
express incorporation, and can be viewed as one document.
However, in both the True Lease and Financing Lease
scenarios, the lessee's obligation to pay is subject to a
condition precedent at the time of execution. The
obligation to pay rent does not become fixed and
unconditional until an Acceptance Certificate is executed
and delivered to the Taxpayer by the lessee, and until all
of the conditions set forth in the respective conditions
precedent paragraphs have been fulfilled. Neither the
Master Lease nor the Schedule expressly incorporate the
Acceptance Certificate, and the Acceptance Certificate
expressly incorporates neither the Master Lease nor the
Schedule. Therefore, execution and delivery of the Master
Lease and Schedule do not result in documentary stamp tax
liability.

The Acceptance Certificate does not expressly incorporate
the other documents. Neither is it expressly incorporated
by the other documents. The Acceptance Certificate does
not itself contain a promise to pay a sum certain in money.
Therefore, execution of the Acceptance Certificate does not
result in documentary stamp tax liability, regardless of
where execution and delivery take place.

The Progress Payment Agreement does expressly incorporate
the Master Lease or Schedule. However, the Progress
Agreement is contingent upon the Taxpayer funding the
interim progress payment. Therefore, execution and
delivery of the Progress Payment Agreement is not subject
to the documentary stamp tax regardless of where execution
and delivery occur.

The Progress Payment Certificate does not expressly
incorporate the Master Lease, Schedule, or Progress Payment
Agreement; neither is it expressly incorporated by the
other documents. Furthermore, it does not contain a
promise to pay money. Therefore, execution and delivery of
the Progress Payment Certificate will not result in

documentary stamp tax liability, regardless of where
execution and delivery occur.

Feb 11, 1999

Re: Technical Assistance Advisement No. 99(B)4-002
Documentary Stamp Tax/Equipment Lease Agreements
Section 201.08(1),(6), F.S., and
Rule 12B-4.052(6)(b), F.A.C.
XXX (Bank Holding Company)
XXX (Lessor/Taxpayer)

Dear :

This is in response to your request for a Technical
Assistance Advisement pursuant to s. 213.22, F.S., and Rule 1211.003, F.A.C.

Facts Presented by Petitioner

The following is the description of the transactions
outlined in your letter. You have also enclosed for our
determination with your letter the forms used in the lease
transactions, as follows:

1. Master Lease Agreement
2. Master Lease Schedule
3. Acceptance Certificate (True Lease)
4. Master Finance Lease Agreement
5. Master Finance Lease Schedule
6. Acceptance Certificate (Finance Lease)
7. Progress Payment Agreement
8. Progress Payment Certificate

Bank Holding Company owns one hundred percent (100%) of the
issued and outstanding stock of each of the other taxpayers.
The remaining taxpayers are national banking associations or
state banks which do business in the State of Florida.

The Taxpayers, by and through their leasing divisions, are
in the business of leasing equipment. The Taxpayers use two
sets of lease documents. One type is characterized for federal
tax and accounting purposes as a true or operating lease, and
the other is characterized as a financing or capital lease.

Both sets of lease documents are substantially similar.
Each relationship is documented with three documents. The
overall relationship is evidenced with a Master Lease Agreement,
or Master Finance Lease Agreement ("Master Lease"). This
document contains the obligation to pay, default remedies and
other general terms of the lease relationship. The Master Lease
does not contain a description of the equipment, or any of the
specific terms of payment. These terms are contained on a
second document called a Master Finance Lease Schedule, or a
Master Lease Schedule ("Schedule"), which contains a specific
description of the property leased, cost, location, monthly
payment terms, commencement of payments, and terms of any
purchase option. The Master Lease specifically incorporates the
terms of the Schedule by reference.

The third document is an Acceptance Certificate. Pursuant
to the terms of the Master Lease, the obligation of the lessee
to make lease payments is expressly subject to the execution and
delivery of an Acceptance Certificate with regard to each item
of equipment leased. The Acceptance Certificate references the
Master Lease, but it is not incorporated into the Master Lease,
nor does it incorporate the Master Lease by reference.

When a vendor desires progress payments in advance of the
delivery of the equipment, Taxpayer and the lessee execute a
Progress Payment Agreement. The Progress Payment Agreement
contains a promise to pay interim rental payments, as set forth
in the Schedule. Pursuant to paragraph five of the Progress
Payment Agreement, the lessee's obligation to pay the lessor
commences on the date of funding. At the time of funding the
progress payment, Taxpayers require the lessee to execute a
Progress Payment Certificate. The Progress Payment Certificate
references the Master Lease, Schedule and Progress Payment
Agreement, but it does not incorporate any of those documents.

Upon execution of the Progress Payment Certificate, Taxpayers
fund the progress payment, and the lessee's obligation to make
interim payments commences.

All of the foregoing documentation requires the signature
of the lessee.

Requested Ruling by Petitioner

1. Assuming the Master Lease, Schedule, and Acceptance
   Certificate are all executed and delivered in the state of
   Florida, does execution and delivery of the Master Lease,
   Schedule, or Acceptance Certificate create any liability
   for documentary stamp tax?

2. Assuming the Master Lease and Schedule are executed and
   delivered outside the state of Florida, does subsequent
   execution or delivery of an Acceptance Certificate within
   the state of Florida create any documentary stamp tax
   liability?

3. Does execution and delivery within the state of Florida
   of the Progress Payment Agreement and Progress Payment
   Certificate create documentary stamp tax liability?

4. Assuming the Progress Payment Agreement is executed and
   delivered outside the state of Florida, does subsequent
   execution or delivery of the Progress Payment Certificate
   within the state of Florida create any documentary stamp
   tax liability?

Law and Discussion

Section 201.08(1), F.S., imposes documentary stamp tax on
promissory notes and other written obligations to pay money
which are made, executed or delivered in Florida, and upon
mortgages, trust deeds, security agreements and other evidences
of indebtedness which are filed or recorded in Florida.

Section 201.08(6), F.S., provides that:

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. When multiple documents
evidence, secure, or form part of the same primary debt,
tax pursuant to this section shall not be imposed more than
once, on the total indebtedness evidenced, notwithstanding
the existence of multiple documents.

Rule 12B-4.052(6)(b)(2), F.A.C., provides that:

A document does not expressly incorporate another document
by implication or by mere reference and description of the
other document.

Rule 12B-4.054(5), F.A.C., states that:

A written promise to pay money which is not fixed and
absolute at the time of execution is not subject to tax.

Conclusion

The Master Lease and the Schedule contain language of
express incorporation, and can be viewed as one document.
However, in both the True Lease and Financing Lease scenarios,
the lessee's obligation to pay is subject to a condition
precedent at the time of execution. The obligation to pay rent
does not become fixed and unconditional until an Acceptance
Certificate is executed and delivered to the Taxpayer by the
lessee, and until all of the conditions set forth in the
respective conditions precedent paragraphs have been fulfilled.
Neither the Master Lease nor the Schedule expressly incorporate
the Acceptance Certificate, and the Acceptance Certificate
expressly incorporates neither the Master Lease nor the
Schedule. Therefore, execution and delivery of the Master Lease
and Schedule do not result in documentary stamp tax liability,
whether the documents are executed and delivered inside or

outside of Florida.

The Acceptance Certificate does not expressly incorporate
the other documents. Neither is it expressly incorporated by
the other documents. The Acceptance Certificate does not itself
contain a promise to pay a sum certain in money. Therefore,
execution of the Acceptance Certificate does not result in
documentary stamp tax liability, regardless of where execution
and delivery take place. Therefore, your questions 1 and 2 are
answered in the negative.

The Progress Payment Agreement does expressly incorporate
the Master Lease or Schedule. However, the Progress Agreement
is contingent upon the Taxpayer funding the interim progress
payment. Therefore, execution and delivery of the Progress
Payment Agreement is not subject to the documentary stamp tax
regardless of where execution and delivery occur.

The Progress Payment Certificate does not expressly
incorporate the Master Lease, Schedule, or Progress Payment
Agreement; neither is it expressly incorporated by the other
documents. Furthermore, it does not contain a promise to pay
money. Therefore, execution and delivery of the Progress
Payment Certificate will not result in documentary stamp tax
liability, regardless of where execution and delivery occur.
Therefore, your questions 3 and 4 are also answered in the
negative.

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
Technical Assistance and Dispute Resolution
Office of General Counsel

BES/mh