Did an equipment lease, schedule, and acceptance certificate trigger documentary stamp tax?

Subject

Equipment Lease Agreement

Plain-English summary

The reviewed equipment-lease documents did not create Florida documentary stamp tax. The equipment schedule expressly incorporated the lease, so those two could be read together, but the lessee's payment obligation did not become fixed and unconditional until delivery of an acceptance certificate.

The acceptance certificate only referenced the other documents; it did not expressly incorporate them and contained no promise to pay a sum certain. The result was the same whether the documents were executed or delivered inside or outside Florida.

What this means for you

Documents in one transaction were not automatically combined. Express incorporation and the location of a fixed, sum-certain payment promise controlled the ruling.

Common questions

Q: Were the lease and schedule read together? Yes.

Q: Did the acceptance certificate complete a taxable obligation? No.

Q: Did Florida execution or delivery change the result? No, on these documents.

Citations and references

• Fla. Stat. § 201.08(1), (6) — documentary stamp tax and incorporated documents
• Fla. Admin. Code r. 12B-4.052(6)(b) — express incorporation
• Fla. Admin. Code r. 12B-4.054(5) — promise not fixed and absolute
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 00B4-012

Original ruling text

SUMMARY

QUESTION: Are the Equipment Lease Agreement, Equipment
Schedule and Acceptance Certificate subject to tax if
executed and delivered in the state of Florida or outside
the State of Florida?

ANSWER BASED ON FACTS BELOW: The Equipment Lease Agreement
and Equipment Schedule contain language of express
incorporation, and can be viewed as a single document.
However, the lessee's obligation to pay rent does not
become fixed and unconditional until an Acceptance
Certificate is executed and delivered to the Taxpayer by
the lessee. The Acceptance Certificate is not expressly
incorporated by the other documents, it does not expressly
incorporate the other documents, nor does it contain a
promise to pay a sum certain in money. Therefore, none of
these documents are subject to documentary stamp tax. This
is true regardless of whether these documents are executed
and delivered in the state of Florida or outside the state
of Florida.

Oct 11, 2000

Re: Technical Assistance Advisement No. 00B4-012
Documentary Stamp Tax/Equipment Lease Agreement
Section 201.08(1), (6), F.S.
Rule 12B-4.052(6)(b), F.A.C.
XXX (Taxpayer)

Dear :

You have petitioned for a technical assistance advisement
pursuant to s. 213.22, F.S., and Rule 12-11.003, F.A.C.

Statement of Facts As 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 documents used in the lease
transactions, as follows:

1. Equipment Lease Agreement
2. Equipment Schedule
3. Acceptance Certificate

The Taxpayer is in the business of leasing equipment and is
an affiliate of various banks in Florida. Through a series of
reorganizations, Taxpayer now has responsibility for significant
leasing activities in Florida.

Each lease relationship is documented with three documents.
The same basic documentation is used regardless of whether the
lease is a "true or operating lease" or a "financing or capital
lease". The overall relationship is evidenced with an Equipment
Lease Agreement (the "Lease"). This document contains the
obligation to pay, default remedies and other general terms of
the lease relationship. The Lease does not contain a
description of the equipment, or the specific terms of payment.
These items are contained on a second document called an
Equipment Schedule. The Equipment Schedule contains a specific
description of the property leased, location, monthly payment
terms or whether any riders apply. The Equipment Schedule
specifically incorporates the terms of the Lease by reference.

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

Each of the foregoing documents requires the signature of
the lessee and will be executed and/or delivered in Florida.

Requested Advisement

Assuming the Lease, Equipment Schedule and Acceptance

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

Assuming the Lease and Equipment 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?

Discussion and 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 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 is not 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 is not 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.

Department's Position

The Equipment Lease Agreement and Equipment Schedule
contain language of express incorporation, and can be viewed as
a single document. However, the lessee's obligation to pay rent
does not become fixed and unconditional until an Acceptance
Certificate is executed and delivered to the Taxpayer by the
lessee. This is true regardless of whether these documents are
executed and delivered in the state of Florida or outside the
state of Florida.

The Acceptance Certificate is not expressly incorporated by
the other documents, it does not expressly incorporate the other
documents, nor does it 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 it is executed or delivered. Thus, your questions 1 and 2
are 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 advise 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,

Baldan E. Sulker
Senior Tax Specialist
Technical Assistance & Dispute Resolution
Office of General Counsel

BES/mh