Is assigning a Florida property owner's lessor rights under tenant leases subject to documentary stamp tax?

Plain-English summary

The Florida Department of Revenue ruled that an assignment of a property owner's lessor interests in tenant leases and licenses was not subject to documentary stamp tax. The transaction transferred the seller's right to receive the future rental stream, but did not transfer a possessory leasehold or other interest in Florida real property.

The seller had separately transferred the flea-market real estate by deed and paid $175,000 of documentary stamp tax on the $25 million allocated real-property price. A different buyer acquired $31 million of personal property, including the business contracts, leases, and licenses. The disputed assignment went with that personal-property transaction.

Rule 12B-4.013(23) taxes assignments of leases or other transfers of leasehold interests. It did not apply here because the tenants, not the lessor, held the leasehold interests, and the tenants were not assigning them.

What this means for you

Property and business sellers

Separate the deed transfer from assignments of contract rights and lessor income streams. This ruling depended on the assignment transferring no possessory real-property interest.

Buyers of rental businesses

Acquiring a landlord's contractual rights is not necessarily the same as acquiring a tenant's leasehold. The documents and the interest actually transferred control the tax result.

Accountants and tax professionals

Review the deed, purchase-price allocation, lease documents, and assignment together. A tenant's assignment of its leasehold would fall under a different rule than the lessor-rights assignment approved here.

Common questions

Q: Why was the assignment not taxable?
A: It transferred only the lessor's rights and future rents, not a possessory interest in Florida real property.

Q: Doesn't Florida tax assignments of leases?
A: Rule 12B-4.013(23) applies to leasehold-interest transfers. The Department found no leasehold interest was transferred in this assignment.

Q: Who owned the leasehold interests?
A: The tenants did, and they were not parties assigning their leases in this transaction.

Q: Was tax paid on the real-estate sale?
A: Yes. The ruling states that $175,000 was paid on the deed transferring the real property for $25 million of allocated consideration.

Citations and references

• Fla. Stat. §§ 201.02(1)(a) and 213.22
• Fla. Admin. Code r. 12B-4.013(23)

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 19B4-001

Original ruling text

QUESTION: IS THE ASSIGNMENT OF A LESSOR’S INTERESTS IN LEASES SUBJECT
TO DOCUMENTARY STAMP TAX?

ANSWER: SINCE THE ASSIGNMENT TRANSFERS ONLY THE LESSORS INTERESTS
IN THE LEASES, AND IT DOES NOT TRANSFER AN INTEREST IN FLORIDA REAL
PROPERTY, THE ASSIGNMENT IS NOT SUBJECT TO DOCUMENTARY STAMP TAX.
March 19, 2019

XXXX
XXXX
XXXX
XXXX
Re: Technical Assistance Advisement No. 19B4-001
Documentary Stamp Tax
Chapter 201, Florida Statutes (F.S.)
Dear XXXX:
This is in response to your request dated August 15, 2018, for a Technical Assistance
Advisement (TAA) pursuant to s. 213.22, F.S., and Rule Chapter 12-11, Florida Administrative
Code (F.A.C.), concerning the imposition of documentary stamp tax on an Assignment and
Assumption of Leases and Licenses. 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 PRACTITIONER
XXXX (“Taxpayer”), owned and operated a flea market in Florida. Taxpayer owned the Florida
real property and all personal property associated with the operations of the flea market. The
personal property included all contracts of the business, approximately thirty-two (32) leases,
two hundred forty (240) licenses, and other tangible and intangible personal property. The
leases and licenses were between Taxpayer and various tenants.

XXXX
March 19, 2019
Florida Department of Revenue
Page 2

On April 30, 2018, Taxpayer sold the subject real property to XXXX (“LLC 1”), and the subject
personal property to XXXX (“LLC 2”), under a single Purchase and Sale Agreement, for
$56,000,000.00. An amendment to the Purchase and Sale Agreement dated February 26, 2018,
allocated $25,000,000.00 of the purchase price to the real property, and $31,000,000.00 to the
purchase of the personal property. Documentary stamp tax of $175,000.00 was paid on the
deed that transferred the real property from Taxpayer to LLC 1.
Included in the purchase was an Assignment and Assumption of Leases and Licenses (the
“Assignment”) from Taxpayer to LLC 2, assigning Taxpayer’s rights to the tenants’ leases and
licenses to LLC 2.
REQUESTED RULING
Taxpayer is requesting the Department’s opinion as to whether the Assignment is subject to the
documentary stamp tax imposed by s. 201.02(1)(a), F.S.
It is Taxpayer’s position that the Assignment is not subject to tax since Taxpayer is not assigning
or transferring any interest in real property. Only Taxpayer’s right to receive the future stream
of rental payments from the tenants is being assigned to LLC 2.
LAW AND DISCUSSION
Section 201.02(1)(a), F.S., imposes documentary stamp tax on deeds, instruments, or writings
whereby any lands, tenements, or other real property, or any interest therein, shall be granted,
assigned, transferred, or otherwise transferred to, or vested in, the purchaser or any other
person by his or her direction. In all counties (except Miami-Dade), the rate of tax is $0.70 per
$100.00 of consideration or portion thereof, for the property interest transferred. For purposes
of this section, consideration includes, but is not limited to, the money paid or agreed to be
paid; the discharge of an obligation; and the amount of any mortgage, purchase money
mortgage lien, or other encumbrance, whether or not the underlying indebtedness is assumed.
Rule 12B-4.013(23), F.A.C., provides that all assignment of leases or other transfers of leasehold
interests in real property are subject to documentary stamp tax.
DEPARTMENT’S POSITION
The Assignment from Taxpayer to LLC 2 is not subject to documentary stamp tax pursuant to s.
201.02(1)(a), F.S. Rule 12B-4.013(23), F.A.C., does not apply since no leasehold interest was
transferred. Taxpayer is transferring its interests as lessor to LLC 2, and it is not assigning any
possessory interests in real property to LLC 2. Any leasehold interests held in the real property

XXXX
March 19, 2019
Florida Department of Revenue
Page 3

under the leases and licenses belong to the tenants and not Taxpayer, and the tenants are not
assigning their leases under the Assignment.
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 documents 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 before disclosure.
In an effort to protect the confidentiality of such information, we request you provide the
undersigned with an edited copy of your request for Technical Assistance Advisement, backup
material, and response within fifteen days of the date of this advisement.
Sincerely,

Roger L. Beasley
Tax Law Specialist
Technical Assistance and Dispute Resolution
(850) 717-6488
Record ID: 105137