When did a Florida UCC-1 filing, security agreement, or variable trade-credit invoice trigger documentary stamp tax?

Plain-English summary

Filing only a Florida UCC-1 financing statement describing collateral did not make the unfiled security agreement taxable. If the agreement itself was filed with the UCC-1 or recorded in public records, its security interest became a taxable lien based on the obligation secured.

Standing alone, the agreement was not a taxable written obligation to pay money because it did not specify a sum certain. Invoices could be separately taxable if they contained a promise to pay a sum certain and were signed by the distributor or delivered to the seller in Florida, including when expressly incorporated documents supplied the required terms.

Contract language deeming execution outside Florida could not override actual physical signing in Florida. Once the security agreement was filed or recorded, variable tax was measured by invoices outstanding minus payments, and tax became due whenever new credit obligations were secured.

What this means for you

Analyze the UCC filing, security agreement, and invoices as separate documents, then test express incorporation, actual signing and delivery, recording, and the changing secured balance.

Common questions

Was a UCC-1 alone taxable? No, if the security agreement or other obligatory document was not also filed or recorded.

Was the unrecorded agreement a taxable promise to pay? No, because it lacked a sum certain.

What happened after recording the security agreement? It became taxable on the outstanding secured credit obligations.

Citations and references

• Fla. Stat. § 201.08(1)(a) and (b) and Fla. Admin. Code rr. 12B-4.052(6), 12B-4.053(1), and 12B-4.054(29), as cited in the advisement.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 11B4-011

Original ruling text

Executive Director
Lisa Vickers

TAX: Documentary Stamp Tax
TAA NUMBER: 11B4-011
ISSUE: Documentary Stamp Tax – Florida UCC-1 Financing Statement; Security Agreement
STATUTE CITE(S): Sections 201.08(1)(a) and 201.08(1)(b), F.S.
QUESTION# 1: Is documentary stamp tax due on a security agreement where only a Florida UCC-1 Financing Statement
containing a description of the collateral is filed or recorded with the Secretary of State in order to perfect the security interest
granted to the Seller/Creditor by the Buyer/Debtor in the product sold by the Seller to the Buyer as collateral security for
payment thereof?
ANSWER# 1: Provided the security agreement is not filed or recorded with the UCC-1 Financing Statement, it is not a taxable
document under s. 201.08(1)(b), F.S. If the security agreement is filed with the UCC-1 Financing Statement or recorded in the
public records, it becomes a secured lien and would be taxable based on the obligation it secures.
QUESTION# 2: If the security agreement itself does not specify a sum certain that the Debtor promises to pay the Creditor but
is physically signed by the Debtor in Florida, would it be subject to documentary stamp tax under s. 201.08(1)(a), F.S.?
ANSWER# 2: As a document unto itself, if the security agreement does not specify a sum certain that the Distributor promises
to pay, it would not be taxable as a written obligation to pay money under s. 201.08(1)(a), F.S., even though it was signed by
the Debtor in Florida.

QUESTION# 3: How would the documentary stamp tax be calculated with respect to the recorded
security agreement when the indebtedness or obligation evidenced by amounts invoiced is variable
depending on the fluctuating volume of the product sold on credit during the term thereof?
ANSWER# 3: What is owed to the Creditor by the Debtor at any one time is determinable by computing
the total of the amounts shown on the invoices sent to the Debtor by the Creditor for the product
purchased on credit, and subtracting the payments made by the Debtor for the credit purchases.
Documentary stamp tax would be due under s. 201.08(1)(b), F.S., whenever there are credit obligations of
the Debtor secured by the security agreement.
August 11, 2011

XXX
XXX
XXX

Re:

Technical Assistance Advisement No. 11B4-011
Documentary Stamp Tax – Florida UCC-1 Financing Statement; Security Agreement
Sections 201.08(1)(a) and 201.08(1)(b), F.S.
XXX. (the “Seller”)
XXX (the “Distributor”)

Child Support Enforcement – Ann Coffin, Director z General Tax Administration – Jim Evers, Director
Property Tax Oversight – James McAdams, Director z Information Services – Tony Powell, Director

www.myflorida.com/dor
Tallahassee, Florida 32399-0100

Technical Assistance Advisement 11B4-011
Page 2

Dear XXX:
This is in response to your letter dated XXX, requesting a determination whether a security
agreement and a Florida UCC-1 Financing Statement (the “Florida UCC-1”) are subject to documentary
stamp tax under Section 201.08(1), Florida Statutes (F.S.) This response constitutes a Technical
Assistance Advisement under Chapter 12-11, Florida Administrative Code (F.A.C.), and is issued to you
under the authority of Section 213.22, F.S.
FACTS PRESENTED BY PRACTITIONER
The Seller, a XXX corporation registered to do business in XXX and XXX, XXX (the “Product”)
to the Distributor. The Product is then distributed and sold to retail outlets within a specified territory in
Florida. The Seller and Distributor entered into a Distribution Agreement (the “Agreement”), which is
broken down into twenty sections containing additional agreements and covenants that the parties,
intending to be legally bound, agree to. Payment terms for the Product are set forth in Section XXX of the
Agreement which states in its entirety, “XXX shall sell the Products to Distributor at the Pick-Up Price,
DDP [address of Distributor’s warehouse] Incoterms 2000. Distributor shall be invoiced for the Products
hereunder [ ] by [ ] XXX.” XXX retains the right to extend credit and does extend credit to the Distributor
on the sale of the Product from time to time.
A security agreement is provided for in the Agreement, Section XXX (hereinafter, the “Security
Agreement”), and states that Distributor grants the Seller a security interest in the Product sold by the
Seller to the Distributor on credit (if any) as collateral security for payment thereof. The Distributor
acknowledges that the Agreement constitutes a security agreement between the Seller, as secured
creditor, and the distributor, as debtor, for purposes of the Uniform Commercial Code (the
“UCC”). Furthermore, the Distributor agrees to execute and deliver to the Seller financing statements and
other instruments as the Seller may reasonably request in order to perfect its security interest, and the
Distributor appoints the Seller as attorney-in-fact to execute and file financing statements and other
instruments pursuant to the UCC.
A Florida UCC-1 will be filed by the Seller to perfect the security interest granted to it by the
Distributor, and the description of the collateral under the security interest will read substantially as
follows:
All products purchased by the Debtor from Creditor on credit which are owned by the Debtor,
whether in inventory, in shipment, in the possession of a third party or otherwise.
The Agreement does not contain the amount, if any, of the Distributor’s indebtedness or obligation
to the Seller resulting from purchases of the Product on credit.
Instead, the invoices issued to the
Distributor by the Seller are the documents which evidence the amount of the Distributor’s indebtedness,
if any, to the Seller at any given time. The amount of the outstanding indebtedness owed by the
Distributor to the Seller for purchases of the Product on credit varies based on the amount of the Product
purchased and the repayments made to the Seller for past Products purchased on credit.

Technical Assistance Advisement 11B4-011
Page 3

A copy of the Agreement, which contains the Security Agreement, may or may not be filed with
the Florida UCC-1, however there will not be a copy of any invoice filed evidencing a sale of the Product
from the Seller to the Distributor. Section XXX of the Agreement provides that regardless of the domicile,
citizenship or residence of the parties or the place where the Agreement is physically executed or
performed, it shall be deemed to be executed and delivered in XXX, XXX, and shall be enforced,
governed by and construed in all respects in accordance with internal laws (but not the law of conflicts) of
the XXX, applicable to contracts executed and to be performed entirely therein. The Agreement was
executed by the Seller in XXX, signed by the Distributor in Florida, and delivered to the Seller in XXX.
REQUESTED RULING
Guidance is sought with respect to the applicability of documentary stamp tax imposed under s.
201.08(1), F.S., and the exemption provided in Rule 12B-4.054, F.A.C., to the transaction description.
Specifically, a ruling is requested as to the applicability of documentary stamp tax under the following five
scenarios based on the transaction description.

1. Is documentary stamp tax applicable and payable when the Florida UCC-1 contains a description of
   the collateral but the Agreement containing the Security Agreement is not filed or recorded with the
   Florida UCC-1?
2. Is documentary stamp tax applicable and payable when the Agreement does not evidence an
   indebtedness or obligation to pay money?
3. Is documentary stamp tax applicable and payable when the Agreement does not specify a specific
   amount of indebtedness or obligation due?
4. Is documentary stamp tax applicable and payable when the Agreement is not executed and
   delivered by all parties thereto in the state of Florida and/or is deemed executed and delivered
   outside of Florida?
5. If documentary stamp tax is applicable, how is the tax calculated with respect to the Agreement
   where the indebtedness or obligation evidenced thereby, if any, is variable depending on the
   fluctuating volume of Product sold during the term thereof?
   LAW AND DISCUSSION
   Paragraph 201.08(1)(a), F.S., imposes documentary stamp tax on promissory notes and other
   written obligations to pay money, executed, signed or delivered in Florida. A document executed, signed
   or delivered in Florida is taxable if it contains an unconditional obligation to pay, or repay, a sum certain
   in money and the signature of the obligor. The tax is based on the amount of the obligation at the rate of
   $.35 per $100 or fraction thereof.
   Subsection 201.08(6), F.S., provides that the taxability of a document shall be determined solely
   from the face of the document and any separate document(s) expressly incorporated into the document.
   Rule 12B-4.052(6), 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. Examples of terminology
   whereby a document is expressly incorporated into the document under examination include, but are not

Technical Assistance Advisement 11B4-011
Page 4

limited to: (document) is incorporated herein; (document) the terms of which are incorporated herein;
(document) is made a part hereof; (document) is made a part of; and (document) shall become a part of.
Rule 12B-4.053(1), F.A.C., provides that the tax is on the “Promise to Pay” and each renewal
thereof, and to be a “note or other obligation” it must be signed by the maker or obligor to be taxable
therein.
Therefore, in order to be taxable under Section 201.08(1)(a), F.S., a promissory note or other
written obligation to pay money must have the following three elements within the four corners of the
document or must incorporate other documents containing these elements:

1. An unconditional written promise to pay;
2. A sum certain in money; and
3. The signature of the borrower.
   Section 201.08(1)(b), F.S., requires payment of documentary stamp tax when a mortgage, trust
   deed, security agreement, or other evidence of indebtedness is filed or recorded in this state at the rate
   of $.35 per $100 or fraction thereof, based on the indebtedness or obligation evidenced thereby. (e.s.)
   A note or other written obligation to pay money is not subject to tax under s. 201.08(1)(a), F.S., if
   it is signed, executed, and delivered to the lender outside the state. However, a mortgage or security
   agreement filed or recorded in Florida to secure an out of state note or written obligation to pay money is
   taxable under s. 201.08(1)(b), F.S., based on the indebtedness secured.

Rule 12B-4.054(29), F.A.C., states:
Financing Statements. - Chapter 679, Uniform Commercial Code: The filing or recording in
Florida of a UCC Financing Statement is not taxable under Section 201.08(1), F.S., unless the
note, security agreement or other obligatory document is also filed or recorded. However, a
notation relative to stamp tax is required on the UCC Financing Statement whether tax is due or
not. The notation shall state that proper stamp taxes under Chapter 201, F.S., have been placed on
the promissory instruments and will be placed on any additional promissory instrument, or that tax
is not required. (e.s.)
The questions posed in the request pertain to the taxability of the Agreement under s. 201.08(1)(a),
F.S., or the taxability of the Security Agreement contained within the Agreement under s. 201.08(1)(b),
F.S. Therefore, the Department’s responses will be determined based on the appropriate statutory section
or regulation for which guidance is sought on either document.

DEPARTMENT’S POSITION
QUESTION # 1

Technical Assistance Advisement 11B4-011
Page 5

Pursuant to Rule 12B-4.054(29), F.A.C, no documentary stamp tax is required on the Agreement
under s. 201.08(1)(b), F.S., where only the Florida UCC-1 Financing Statement containing a description
of the collateral is filed or recorded with the Secretary of State in order to protect the security interest
granted to the Seller by the Distributor in the Product sold by the Seller to the Distributor on credit as
collateral security for payment thereof.
QUESTIONS # 2 AND #3
As a document unto itself, the Agreement does not specify a sum certain that the Distributor
promises to pay, and is not a taxable document under s. 201.08(1)(a), F.S.
The Agreement provides that the documents which evidence the indebtedness owed to the Seller
from the Distributor for the Product purchased on credit are the invoices issued to the Distributor. Section
XXX of the Agreement provides that the terms of sale and payment by the Distributor for the Products is
governed by and in accordance with the “Terms of Sale” set forth in the invoices. If the invoices
themselves contain a promise to pay a sum certain in money and are signed by the Distributor in Florida,
or are delivered to the Seller in Florida, they are taxable as written obligations to pay money under s.
201.08(1)(a), F.S. Documentary stamp tax would also be due under s. 201.08(1)(a), F.S., if the invoices
and any other documents expressly incorporated therein, when read together, contain a promise to pay a
sum certain in money and either is signed by the Distributor or delivered to the Seller in this state.
The portion of the Agreement which grants the seller a security interest in the Product sold by the
Seller to the Distributor on credit (if any) as collateral security for payment thereof is the Security
Agreement contained in Section XXX. The security interest is in the Product, and the Agreement
containing the Security Agreement which grants the security interest does not have to reference or
describe the invoices which evidence the secured indebtedness for tax to apply under s. 201.08(1)(b), F.S.,
when the Agreement containing the Security Agreement is filed or recorded.
QUESTION # 4
A note or other written obligation to pay money is taxable under s. 201.08(1)(a), F.S., if it is
executed by the borrower or delivered to the lender in Florida. In this case, the language contained in the
request specifically states that the Agreement was physically executed by the Seller in XXX, signed by the
Distributor in Florida, and delivered to the Seller in XXX. The provisions of s. 201.08(1)(a), F.S., are not
overcome by the Agreement purporting to “deem” that the Distributor signed it outside the State of
Florida when the Distributor physically signed it in Florida. Rule 12B-4.052(6)(b), F.A.C., expressly
provides that “the taxability of a written obligation to pay money is determined from the form and face of
the document.”
QUESTION # 5
Once the Agreement containing the Security Agreement is filed with the Florida UCC-1 or
recorded in the Florida public records, it becomes a taxable document under s. 201.08(1)(b), F.S., on the
indebtedness or obligation evidenced thereby. A lien filed or recorded in Florida which secures an
indebtedness is a taxable document under s. 201.08(1)(b), F.S., even if the obligation it secures is not
taxable under s. 201.08(1)(a), F.S. The fact that the invoices are the documents which evidence the
specific amount owed to the Seller by the Distributor does not preclude the Seller, as Secured Creditor,

Technical Assistance Advisement 11B4-011
Page 6

from exercising its rights under the Security Agreement. The language contained in the Security
Agreement portion of the Agreement under Section XXX grants the Secured Creditor “a security interest
in Product sold by the Secured Creditor to the Debtor on credit as collateral security for payment thereof.”
What is owed to the Seller by the Distributor at any one time is determinable by computing the total of the
amounts shown on the invoices sent to the Distributor for the Product purchased on credit, and subtracting
the payments made by the Distributor for the credit purchases. Documentary stamp tax is due whenever
there are credit obligations of the Debtor secured by the Security Agreement. Tax should be paid using
DR-228 on the 20th day of the month following the month when there is a new amount secured.
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,

Joy. B. Eldred, CPA
Tax Law Specialist
Technical Assistance and Dispute Resolution
JBE/tlf
Record ID: 99850