Did Florida documentary stamp tax apply to equipment lease agreements whose payment obligation began only after delivery, or to separate delivery-and-acceptance receipts?

Plain-English summary

Florida found no documentary stamp tax on either the operating lease or the financing lease reviewed. Each lease made the lessee's obligation to pay conditional on delivery of the equipment, and delivery might never occur. The lease therefore did not contain an unconditional obligation to pay a sum certain when executed.

The separate delivery-and-acceptance receipts were also not taxable. They contained no promise to pay money and were not expressly incorporated into the lease agreements. Under the face-of-document rule described in the TAA, the receipts could not be used to make the leases taxable.

What this means for you

The ruling turns on the wording and incorporation structure of the specific documents. A lease containing an unconditional payment obligation, or a separate document expressly incorporated into it, could present different facts.

Common questions

Did the result differ between the operating and financing leases? No. Both used the same delivery condition for commencement and payment.

Why were the leases not taxable written obligations? Payment was subject to the condition precedent of equipment delivery, so no unconditional obligation to pay a sum certain existed at execution.

Why were the delivery receipts not taxable? They contained no promise to pay money and were not expressly incorporated into the lease agreements.

Citations and references

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

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99B4-004

Original ruling text

SUMMARY

The Delivery and Acceptance Receipts are not expressly
incorporated into the Lease Agreements. Neither are the
Lease Agreements expressly incorporated into the Delivery
And Acceptance Receipts. In that the Lease Agreements are
not conditioned in any way on execution of the Delivery and
Acceptance Receipts, the Delivery and Acceptance Receipts
are not relevant to whether the Lease Agreements are
subject to documentary stamp tax pursuant to section
201.08, F.S. The Delivery and Acceptance Receipts do not
contain any promises to pay money, and therefore are not
subject to documentary stamp tax pursuant to section
201.08, F.S.

The terms of the Lease Agreements themselves do make any
obligation to pay money conditional on delivery of the
tangible personal property to be leased. At the time the
Lease Agreements are executed, delivery may never occur.
Thus, these Lease Agreements do not contain an
unconditional obligation to pay a sum certain in money.
Therefore, the Lease Agreements reviewed are not subject to
the tax imposed by section 201.08, F.S.

Feb 15, 1999

Re: Technical Assistance Advisement No. 99(B)4-004
Documentary Stamp Tax; Leases
Section 201.08, F.S.; Rule 12B-4.052(6)(b), F.A.C.
XXX (hereinafter taxpayer)

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.

Facts Presented by Taxpayer

The taxpayer is in the business of leasing tangible
personal property to parties in Florida. The taxpayer uses two
types of lease agreements. One is characterized for federal
income tax purposes as an operating lease, and the other is
characterized as a financing lease. Each lease provides that
the lease commences as of the date that any of the equipment is
delivered to the lessee or its agent.

Both leases also use a separate Delivery and Acceptance
Receipt which is signed by the lessee acknowledging the
acceptance of the equipment. The Delivery and Acceptance
Receipt triggers the commencement of the terms of the lease as
well as the lessee's obligation to pay the lease payments. The
receipt does not contain the promise to pay nor is it expressly
incorporated into the lease, where the obligation to pay is
contained.

Request for Advisement

Based on the facts, an advisement is requested addressing
the following questions:

Are Florida documentary stamp taxes due and payable upon
either the Operating Lease Agreement or the Financing Lease
Agreement if the foregoing are executed in Florida? If
yes, how are the taxes calculated?

Provisions of Law

Section 201.08, F.S., imposes tax on written obligations to
pay a sum certain in money, that are made, executed, delivered,
sold, transferred or assigned in this state. A promise to pay
that is subject to a condition precedent at the time of
execution is generally not taxable. Rule 12B-4.054(5), F.A.C.

Section 201.08(6), F.S., (enacted effective July 1, 1997),
provides in part:

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...

Rule 12B-4.052(6), F.A.C., provides guidance on what
constitutes express incorporation.

Position of the Department

The Delivery and Acceptance Receipts are not expressly
incorporated into the Lease Agreements. Neither are the Lease
Agreements expressly incorporated into the Delivery And
Acceptance Receipts. In that the Lease Agreements are not
conditioned in any way on execution of the Delivery and
Acceptance Receipts, the Delivery and Acceptance Receipts are
not relevant to whether the Lease Agreements are subject to
documentary stamp tax pursuant to section 201.08, F.S. The
Delivery and Acceptance Receipts do not contain any promises to
pay money, and therefore are not subject to documentary stamp
tax pursuant to section 201.08, F.S.

The terms of the Lease Agreements themselves do make any
obligation to pay money conditional on delivery of the tangible
personal property to be leased. At the time the Lease
Agreements are executed, delivery may never occur. Thus, these
Lease Agreements do not contain an unconditional obligation to
pay a sum certain in money. Therefore, the Lease Agreements
reviewed are not subject to the tax imposed by section 201.08,
F.S.

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