Which equipment-lease and dealer-financing documents owed Florida documentary stamp tax?

Subject

Lease Agreement, Wholesale Financing Agreement, Business Agreement

Plain-English summary

The fixed equipment-lease obligations were taxable, while the lease assignment and contingent financing agreements were not on the stated facts. The master lease and its expressly incorporated equipment schedule fixed interim and initial-term rent, creating a taxable promise to pay a sum certain. Assigning the lease payments did not create another tax.

The wholesale financing form stated no credit-line amount, and the business financing line might never be used, so neither created a fixed obligation when executed and neither was taxable if unrecorded. The separate equipment lease fixed the amount despite early-termination language and was taxable if signed in Florida.

What this means for you

Florida determined taxability from the face of each document and documents expressly incorporated into it. References such as “subject to” or “pursuant to” did not necessarily incorporate another agreement.

Common questions

Q: Was the master equipment lease taxable? Yes.

Q: Was the assignment of lease payments taxable again? No.

Q: Were the two dealer-financing agreements taxable? No, when unrecorded and still contingent or unstated as to a fixed sum.

Q: Was the separate equipment lease taxable? Yes, if the lessee signed it in Florida.

Citations and references

• Fla. Stat. § 201.08(1), (6) — written obligations and document-face test
• Fla. Admin. Code r. 12B-4.052(6) — express incorporation
• Fla. Admin. Code r. 12B-4.054(5), (9) — contingent obligations and leases
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00B4-004

Original ruling text

SUMMARY

QUESTION: The question is whether the Master Equipment
Lease Agreement and assignment of lease, Agreement for
Wholesale Financing, Business Financing Agreement, and
Equipment Lease Agreement are subject to the Florida
Documentary Stamp Tax?

ANSWER - BASED ON FACTS BELOW: The Master Lease Agreement
is subject to tax but the assignment of the lease is not
subject to tax. The Agreement for Wholesale Financing and
the Business Financing Agreement are not subject to tax.
The Equipment Lease Agreement is subject to tax if signed
by the lessee in Florida.

Mar 30, 2000

Re: Technical Assistance Advisement No. 00B4-004
Documentary Stamp Tax - Lease Agreement, Wholesale
Financing Agreement, Business Agreement
Section 201.08, F.S.; Rule 12B-4.052(6), F.A.C.
XXX (hereinafter Taxpayer)
XXX (hereinafter Master Equipment Lease Agreement)
XXX (hereinafter Agreement for Wholesale Financing)
XXX (hereinafter Business Financing Agreement)
XXX (Equipment Lease Agreement)

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 As Presented by Petitioner

The Master Equipment Lease Agreement consists of four pages
and a two page Equipment Schedule. The Taxpayer is not the

lessor on this transaction, but has taken an assignment of the
lease payments from the lessor. The lease documents were signed
by the lessee in the State of Florida. The question whether the
documentary stamp tax applies to the documents was raised and
has become a matter of dispute between the assignor and the
assignee.

The second document is titled Agreement for Wholesale
Financing, and relates to the inventory finance business of
Taxpayer. This agreement is executed between a Florida based
dealer and an out-of-state branch office of the Taxpayer. The
"floorplan" agreement is basically used by the dealer to finance
the purchase of inventory. The amount of the credit line is not
stated in the document, but it is usually put forth in a
separate terms letter issued to the Dealer by the Taxpayer's
branch office outside the State. The amount of the credit line
will vary based upon dealer performance and the nature of the
industry. It is believed this document does not result in a
promise to pay a sum certain.

The third document is the Business Financing Agreement, and
grants a dealer a line of credit, which is based upon the
dealer's accounts receivable. This agreement is signed by a
dealer in Florida, and by the Taxpayer's branch office outside
the State. Since the document only grants a line of credit,
which may or may not be used by the dealer, it is believed that
the Business Financing Agreement does not constitute a written
promise to pay a sum certain.

The final document is the Equipment Lease Agreement and is
utilized in the Taxpayer's leasing business.

Request for Advisement

You request that the Department review the lease documents
to determine whether: 1) the original lease transaction as
documented is subject to the documentary stamp tax, and 2)
whether the assignment of the lease to the Taxpayer is subject
to the tax. Additionally, you request advice regarding the
applicability of the tax to the wholesale and business financing
agreements. Regarding the Equipment Lease Agreement, you

request advice whether the lease would be taxable if signed by a
lessee located within the State of Florida.

Provisions of Law

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:

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), F.A.C., states:

Taxability of a written obligation to pay money is
determined from the form and face of the document.

1. Whether a document is taxable is determined by
   reference to that document and any other document or
   documents expressly incorporated therein.

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

3. Express incorporation occurs when words in a document
   under examination provide that another document or

documents are incorporated into the document under
examination.

4. Following are examples of terminology whereby a
   document is expressly incorporated into the document
   under examination.

a. [document] is incorporated herein
b. [document] the terms of which are incorporated
herein
c. [document] is made a part hereof
d. [document] is a part of [this document]
e. the agreement consists of [this document] and
[separate document] the same as if it were fully
set forth herein
f. [document] shall become a part of [document]
g. [document] and [document] constitute a single
document.

5. Following are examples of terms in a document under
   examination that do not expressly incorporate another
   document, unless the document under examination
   otherwise contains language that meets the criteria of
   subparagraphs (b)3. or (b)4. above.

a. in the attachment hereto
b. is subject to
c. is subject to the terms of
d. pursuant to
e. pursuant to the terms of
f. as set forth in
g. reference is made to
h. governed by

6. An integration clause or a default remedy clause, does
   not, by itself, expressly incorporate another
   document, unless the clause contains language that
   meet[s] the criteria of 12B-4.052(6)(b)3. or 4. above.

Rule 12B-4.054(9), F.A.C., states:

Leases: A lease of tangible personal property which does
not contain an unconditional obligation to pay money is not
subject to tax, unless the lease provides that the lessee
will become the unconditional owner of the property when
the total of the rental payments equals the value of the
property being leased.

Rule 12B-4.053(3), F.A.C., states:

... A note mailed to a bank in another state and payable in
that state is taxable where the note is made in Florida,
the loan is used in Florida, and the loan is in all
essential factors a Florida transaction....

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

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

The documentary stamp tax in Florida is due on written
obligations to pay money made, executed or delivered in this
state. The document must contain an unconditional promise to pay
a sum certain, must be signed by the obligor, and must be fixed
and absolute at the time of execution. The taxability of the
document and the amount due must be determined solely from the
form and face of the document and, generally, cannot be affected
by extrinsic facts or other documents unless expressly
incorporated into the document by reference.

Conclusions of the Department

The following provides our analysis regarding the
agreements used by the Taxpayer.

1. Master Equipment Lease Agreement. This form, along
   with the Equipment Schedule, which expressly
   incorporates all the terms of the Master Equipment
   Lease Agreement, contains a promise to pay a sum
   certain. Thus, the agreement is deemed to be subject
   to tax based upon the Interim Rent and the Initial

Term Rent. However, the assignment of the lease is
not subject to tax.

2. Agreement For Wholesale Financing. This form is not
   taxable if it is not recorded in Florida. The form
   does not contain the promise to pay a sum certain at
   the time of execution of this document.

3. Business Financing Agreement. This form is not subject
   to the documentary stamp tax if it is not recorded in
   Florida. This is a contingent obligation and funds
   might never be advanced under the agreement.

4. Equipment Lease Agreement. This form contains a
   promise to pay a fixed amount. Although the agreement
   provides for early termination, the obligation to pay
   the sum certain is not released as a result of
   terminating the agreement prior to the stipulated
   date. This document will be subject to tax if signed
   by the lessee in Florida.

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, your request
and related backup documents are public records under Chapter
119, F.S., and are subject to disclosure to the public under the
conditions of s. 213.22, F.S. Confidential information must be
deleted before public disclosure. In an effort to protect
confidentiality, we request you provide the undersigned with an
edited copy of your request for Technical Assistance Advisement,
the backup material and this response, deleting names, addresses
and any other details which might lead to identification of the

taxpayer. Your response should be received by the Department
within 15 days of the date of this letter.

Sincerely,

Celestine Grantham
Senior Tax Specialist
Technical Assistance and Dispute Resolution
Office of General Counsel

CG/mh