Does Florida documentary stamp tax apply when a borrower makes, executes, and delivers a promissory note to a Florida bank outside the state?

Plain-English summary

Florida concluded that the described promissory note was not subject to documentary stamp tax because the borrower made, executed, and delivered it to the bank's agent outside Florida. Bringing the completed note back into Florida for safekeeping did not create tax under the cited rule.

The place and method of later funding did not change the result. Loan proceeds could be delivered by check or wire transfer in Florida without documentary stamp tax so long as the funding instrument itself did not contain a promise to pay.

Other loan documents required separate treatment. The security agreement was not taxable if it was not recorded in Florida. The promissory note and loan agreement contained language granting security interests, so the ruling said they would be taxable if recorded in Florida. A standard UCC-1 financing statement was not taxable when it merely gave notice and contained no language granting a security interest.

Common questions

Did returning the completed note to Florida make it taxable? No. The cited rule allowed the note to be brought into Florida after its out-of-state execution and delivery.

Could the bank fund the loan into a Florida account? Yes. The ruling said funding location did not control if the funding checks contained no promise to pay.

Was the security agreement automatically taxable? No. The ruling conditioned its nontaxability on the agreement not being recorded in Florida.

Was filing a UCC-1 taxable? Not when the standard financing statement contained no language granting a security interest.

Citations and references

• Fla. Stat. § 201.08(1)
• Fla. Admin. Code r. 12B-4.053(34)
• Fla. Stat. § 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99B4-001

Original ruling text

SUMMARY

The Department agrees that the note made, executed and
delivered outside the state of Florida will not be subject
to the Florida documentary stamp tax imposed by s. 201.08,
F.S. Although the funds may possibly be issued to the
borrower in Florida or wire transferred to the borrower's
bank account in Florida, taxability is determined by note
or document containing the promise to pay. Provided the
checks do not contain a promise to pay, no documentary
stamp tax would be due when the proceeds are issued to the
borrower in Florida.

Tax is not required on the security agreement, provided it
is not recorded in this state. The promissory note and the
loan agreement also contain language granting security
interests in personal property collateral. They are
subject to tax if recorded in Florida. Filing of a
standard UCC-1 financing statement is not taxable when it
does not contain language that grants a security interest.

Jan 05, 1999

Re: Technical Assistance Advisement No. 99(B)4-001
Documentary Stamp Tax - Notes Delivered and Executed
Outside the State of Florida
s. 201.08, F.S., and Rule 12B-4.053(34), F.A.C.
XXX (hereinafter Bank)

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 Presented by Petitioner

The borrower makes an application for a loan in the State
of Florida. Upon approval of the loan, the borrower; 1)
executes a promissory note or other written obligation to pay
money, 2) executes a loan agreement, and 3) renders a security
agreement to the Bank granting a security interest in certain
personalty owned by the borrower. A UCC-1 financing statement
may be filed in Florida where loans are secured by personal
property. The loans will not be secured by any real property in
Florida.

All loan documents, with the exception of the promissory
note, will be executed and delivered in Florida. Although the
other documents contain the borrower's covenants and agreement
to pay the sums due under the note, none of the other documents
expressly incorporate the note. Additionally, only the
promissory note contains the written promise to repay money.

The promissory note provides that it will be delivered in
another state. A separate affidavit not only acknowledges that
the note was delivered in another state, but also acknowledges
that it was made, signed, executed and delivered outside the
state of Florida, in the presence of an out-of-state notary.
This affidavit is completed when the note is executed and
delivered. After acceptance of the note, the closing
representative will bring the note back into Florida for
safekeeping.

After the note is executed and delivered to the Bank's
closing agent outside the state, five alternatives may be used
for funding the loans:

1. The closing representative will deliver a check from the
   Bank to the borrower for the loan proceeds. The check will
   be delivered to the borrower outside the state.

2. The Bank will wire transfer the loan proceeds to the
   borrower's bank account located outside the State of
   Florida.

3. The Bank will wire transfer the loan proceeds to the
   borrower's bank account located in Florida.

4. The loan transaction involves a line of credit. Pursuant
to an initial draw under the line of credit, some funds
will be delivered to the borrower via check at the out-ofstate closing. Subsequent advances will be made via checks
and made payable to the borrower and delivered to the
borrower in Florida.

5. Same as paragraph 4, but there is no initial advance
   under the line of credit made at the out-of-state closing.
   All advances will be made after the closing via checks
   drawn on the Bank and delivered to the borrower in Florida.

Request for Advisement

The Bank requests advisement regarding taxability, under s.
201.08, F.S., of the described transaction.

Provisions of Law

Section 201.08(1), F.S., states in part:

On promissory notes, nonnegotiable notes, written
obligations to pay money, or assignments of salaries,
wages, or other compensation made, executed, delivered,
sold, transferred, or assigned in the 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....

Rule 12B-4.053(34), F.A.C., provides:

... Promissory notes, nonnegotiable notes, and written
obligations to pay money (hereinafter, called notes) made,
executed, and delivered to a Florida lender in another
state are not subject to Florida's documentary stamp tax.
If the notes then are brought into Florida for collection
after they have been made, executed, and delivered to the
Florida lender, or its agent, in another state, no tax is
due. However, if a note is made and executed in another
state and delivered to the lender in Florida, the note

would be subject to tax. The Department will presume that
if a note is made payable to a Florida lender and the note
is held by the Florida lender in Florida, then tax will be
due unless the lender can establish that the note was made,
executed, and delivered to the lender outside the state.
Proof sufficient to establish that a note is not subject to
tax includes:

a) A sworn affidavit made before an out-of-state notary
public at the time of signing of the note by the
borrower(s) and delivery of the note to the lender
attesting that the signing and delivery occurred in the
presence of the out-of-state notary, or

b) The note itself could bear a notarization and
acknowledgement as to where the note was executed, together
with an affidavit made before an out-of-state notary by the
lender attesting that the note was delivered to the lender,
or its agent out-of-state. Execution and delivery need not
occur in the same jurisdiction, provided that both
execution and delivery occurred outside of Florida, or

c) Any other proof that the borrower made, executed, and
delivered the note in another state to a Florida lender.
Travel vouchers, airplane stubs, and hotel receipts
corresponding with the signing and delivery of the note
would be acceptable proof.

Conclusion

The Department agrees that the note made, executed and
delivered outside the state of Florida will not be subject to
the Florida documentary stamp tax imposed by s. 201.08, F.S.
Although the funds may possibly be issued to the borrower in
Florida or wire transferred to the borrower's bank account in
Florida, taxability is determined by note or document containing
the promise to pay. Provided the checks do not contain a promise
to pay, no documentary stamp tax would be due when the proceeds
are issued to the borrower in Florida.

Tax is not required on the security agreement, provided it

is not recorded in this state. The promissory note and the loan
agreement also contain language granting security interests in
personal property collateral. They are subject to tax if
recorded in Florida. Filing of a standard UCC-1 financing
statement is not taxable when it does not contain language that
grants a security interest.

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 and your request
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 by the Department
before disclosure. In an effort to protect the confidentiality
of such information, we request you notify the undersigned in
writing within 15 days of any deletions you wish made to the
request or the response.

Sincerely,

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

CG/mh