Did Florida documentary stamp tax apply to the initial and later advances under a business-loan agreement?

Plain-English summary

The Florida Department of Revenue split the documentary stamp tax result between the initial business-loan advance and later monthly advances.

The agreement contained the borrower's signature and an unconditional written promise to pay. The initial amount, including fees or charges, was fixed and absolute when the agreement was executed, so that amount was taxable. Later advances depended on stated conditions and were not fixed and absolute at execution, so they were not taxable written obligations at that time.

Filing a UCC-1 financing statement alone did not trigger tax because the underlying security document was not filed or recorded. If a mortgage, lien, security agreement, or other evidence of indebtedness were filed or recorded in Florida, tax would apply based on the maximum secured amount.

What this means for you

Business lenders

Separate fixed funded amounts from future contingent advances when reviewing a revolving or staged-loan agreement for documentary stamp tax.

Secured-transactions teams

A UCC-1 alone and a recorded security instrument have different consequences under the ruling. Coordinate the document-tax review before recording collateral documents.

Common questions

Q: Was the initial advance taxable?
A: Yes, because it was a fixed sum under a signed unconditional promise to pay.

Q: Were the later advances taxable when the agreement was signed?
A: No. They depended on future conditions and were not fixed and absolute.

Citations and references

• Fla. Stat. §§ 201.08(1)(a), (1)(b), and (6), and 213.22
• Fla. Admin. Code r. 12B-4.054(4) and (29)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 14B4-004

Original ruling text

Executive Director
Marshall Stranburg

QUESTION: IS A LOAN AGREEMENT SUBJECT TO DOCUMENTARY STAMP TAX
PURSUANT TO SECTION 201.08(1)(a), FLORIDA STATUTES, BASED ON THE INITIAL
AMOUNT DISBURSED BY TAXPAYER, AND ARE ANY SUBSEQUENT LOANS
DISBURSED BY TAXPAYER SUBJECT TO TAX?

ANSWER: SINCE THE INITIAL AMOUNT DISBURSED IS A SUM CERTAIN, AND THE
LOAN AGREEMENT CONTAINS AN UNCONDITIONAL PROMISE TO PAY AND THE
SIGNATURE OF THE BORROWER, THEN THE INITIAL AMOUNT IS SUBJECT TO
DOCUMENTARY STAMP TAX. THE SUBSEQUENT LOANS ARE CONTINGENT, AND
THEY ARE NOT SUBJECT TO TAX.
July 8, 2014
Re: Technical Assistance Advisement – TAA 14B4-004
Documentary Stamp Tax – Promissory Notes and Written Obligations to Pay Money
Section 201.08(1)(a), Florida Statutes (F.S.)
XXXXXX
XXXXXX (collectively as “Taxpayer”)

Dear XXXXXX:
This is in response to your request dated XXXXXX, for a Technical Assistance Advisement
(TAA) pursuant to s. 213.22, F.S., and Rule 12-11, Florida Administrative Code (F.A.C.),
regarding application of Florida’s documentary stamp tax as imposed under s. 201.08(1)(a), F.S.,
on a XXXXXX (“Agreement”) governing a XXXXXX loan program operated by Taxpayer. An
examination of your letter has established that you have complied with the statutory and
regulatory requirements for issuance of a TAA. Therefore, the Department is hereby granting
your request for a TAA.
Facts as Presented by Petitioner
Taxpayer provides business loans to certain small businesses located within Florida. The loans
are governed by Agreement, a copy of which was provided to the Department for review.
Taxpayer’s principal places of business are located outside of Florida.

Child Support Enforcement – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – James McAdams, Director  Information Services – Damu Kuttikrishnan, Director

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

Page 2

Each Agreement is signed by the borrower in Florida and is effective when either Taxpayer
accepts and signs Agreement or when Taxpayer disburses the initial loan amount (“Initial
Amount”), whichever occurs earlier. Initial Amount is stated as “Initial Loan” in XXXXXX
Agreement.
Agreement is in effect for a period of XXXXX days (“Initial Term”) after disbursement of Initial
Amount.
Subject to certain terms and conditions as provided in Agreement, on a fixed day of each
subsequent month after disbursement of Initial Amount (“Disbursement Date”), Taxpayer will
lend the borrower an additional amount as follows:
•

For the first XXXXXX months of Initial Term, each additional amount (“Subsequent
Loan”) may not exceed the Initial Amount and may not be less than $XXXXXX.

•

For any additional XXXXXX-month period of Agreement, each Subsequent Loan may
not exceed the amount notified to the borrower by Taxpayer at least XXXXXX days prior
to the first scheduled disbursement date occurring in that XXXXXX-month period,
provided that the loan amount for any month in the period may not exceed $XXXXXX,
and may not be less than $XXXXXX.

Taxpayer has no obligation to make a Subsequent Loan on any Disbursement Date if either of
the following occurs as of the Disbursement Date:
•

The borrower’s outstanding balance, which includes all loans, loan fees, and all other
amounts due under Agreement, is greater than the requested Subsequent Loan as of the
business day prior to Disbursement Date; or

•

Subsequent Loan requested is less than $XXXXXX.

To secure the loans and all other amounts due under Agreement, the borrower grants a security
interest to Taxpayer in all properties, assets, and rights owned by the borrower (“Collateral”).
Taxpayer will file a UCC-1 Financing Statement in Florida, but the document evidencing the
security interest will not be filed with the UCC-1, nor will the document evidencing the security
interest be recorded in the public records of any county in Florida.
Request for Advisement
You request a determination by the Department, as to the following:

1. Whether agreement will be subject to documentary stamp tax pursuant to s. 201.08(1)(a),
   F.S., based on the Initial Amount disbursed by Taxpayer?
2. Are any Subsequent Loans disbursed by Taxpayer subject to tax?

Page 3

Law and Discussion
Section 201.08(1)(a), F.S., provides that on a written obligation to pay money which is made,
executed, delivered, sold, transferred, or assigned in the State, and for each renewal of the same,
the documentary stamp tax shall be $0.35 cents on each $100.00 or fraction thereof of the
indebtedness or obligation evidenced thereby. Under s. 201.08(6), F.S., the taxability of a
document is to be determined solely from the four corners of that document and any other
document expressly incorporated into such document.
Section 201.08(1)(b), F.S., provides, in part, that on mortgages, trust deeds, security agreements,
or other evidences of indebtedness filed or recorded in this state, and for each renewal of the
same, the tax shall be 35 cents on each $100 or fraction thereof of the indebtedness or obligation
evidenced thereby.
In order to be taxable under s. 201.08(1)(a), F.S., a written obligation to pay money must have
the following three elements within the four corners of the document or must expressly
incorporate other documents such that, when the documents are read together, they contain these
elements:

1. A written promise to pay;
2. A sum certain in money; and
3. The signature of the borrower.
   Rule 12B-4.054(4), Florida Administrative Code (F.A.C.), provides that a written obligation to
   pay money which is not fixed and absolute at the time of execution is not subject to tax.
   Rule 12B-4.054(29), F.A.C., provides that the filing or recording in Florida of a UCC Financing
   Statement is not taxable under s. 201.08(1), F.S., unless the note, security agreement, or other
   obligatory document is also filed or recorded.
   Position of the Department
   Agreement contains an unconditional written promise to pay and the signature of the borrower.
   Initial Amount disbursed by Taxpayer, including any fees or charges, is a sum certain in money
   that is fixed and absolute at the time Agreement is executed and delivered, and would be subject
   to documentary stamp tax.
   Subsequent Loans are contingent upon certain conditions being met and are not fixed and
   absolute at the time Agreement is executed and delivered. Subsequent Loans would not be
   subject to documentary stamp tax.
   The UCC-1 is not subject to documentary stamp tax imposed by s. 201.08(1)(b), F.S. If a
   mortgage, lien, security agreement, or other evidence of indebtedness is filed or recorded in
   Florida, documentary stamp tax as imposed under s. 201.08(1)(b), F.S., will be due based on the
   maximum amount secured thereby.

Page 4

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,

Roger L. Beasley
Tax Law Specialist
Technical Assistance and Dispute Resolution
Record ID: 165258