How did Florida tax a synthetic lease and later substitutions of Florida mortgage collateral?

Plain-English summary

Florida treated the synthetic lease as mortgage financing rather than taxable commercial rent. The title-holding lessor was not operating a real-property rental business and held bare legal title as part of the financing structure.

For documentary stamp tax, however, the ruling found two separate secured debts: the trust's mortgage to the lender and the petitioner's synthetic-lease mortgage to the trust. Each was taxable, so the taxpayer was not entitled to a refund based on the multiple-document rule.

Replacing Florida mortgage collateral did not create additional documentary stamp tax if the original mortgages were not satisfied, no new obligor was added, and the note was not renewed above its unpaid balance. The ruling also found no nonrecurring intangible tax on the leasehold mortgage obligation and no annual intangible-return duty for the transaction on the stated situs facts.

What this means for you

One financing structure can be a mortgage for rent-tax purposes while containing multiple separately taxable secured debts. Collateral replacement can avoid new stamp tax only within the ruling's strict continuity conditions.

Common questions

Q: Were the periodic payments taxable rent? No. The arrangement functioned as mortgage financing.

Q: Why were two documentary stamp taxes due? The trust-to-lender mortgage and petitioner-to-trust synthetic-lease mortgage secured two separate debts.

Q: When was replacement collateral not taxed again? When the original mortgage was not satisfied, no new obligor was added, and the note was not renewed above the unpaid balance.

Citations and references

• Fla. Stat. § 212.031(1)(a), (c) — commercial rent
• Fla. Stat. § 201.08(1), (6) — secured-obligation documentary stamp tax
• Fla. Stat. §§ 199.032, 199.052, 199.133, 199.175 — intangible tax
• Fla. Admin. Code r. 12A-1.070 — commercial rent
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99M-005

Original ruling text

SUMMARY

QUESTION 1: Considering all the parties to this
transaction, what is the standard to be used in determining
whether a real property transaction is a lease or mortgage?

ANSWER 1 - Based on Facts Below: In this case the
transaction resulted in a creation of a mortgage, the
payment of which was not subject to sales tax because the
lessor was not in the business of leasing or licensing the
use of real property, and held bare legal title only as an
essential part of the financing structure.

QUESTION 2: Will a substitution of collateral securing a
note cause additional documentary stamp or intangible taxes
to be due?

ANSWER 2 - Based on Facts Below: When a note and mortgage
have been properly taxed, a substitution of collateral
securing the note does not cause additional documentary
stamp or intangible taxes to be paid.

Aug 05, 1999

Re: Technical Assistance Advisement 99(M)-005
Whether a Real Property Transaction Creates a Lease or
Mortgage
ss. 199.132, 199.133, 199.175(1)(a),F.S.
s. 201.08(1) and (6), F.S.
s. 212.031(1)(a) and (1)(c), F.S.
Rule 12A-1.070, F.A.C.
XXX (herein Petitioner)
XXX (herein Lender)
XXX (herein Owner/Participant)
XXX (Owner/Trustee)
XXX (herein Lessor, or alternatively, Trust)

Dear :

This is a response, styled a Technical Assistance Advisement, to
your letter dated March 17, 1999. You ask whether Florida sales
or use tax, documentary stamp tax, or intangible tax may be
imposed on a transaction which involves the purchase and
improvement of several parcels of land and the payments for the
subsequent use of such real property under terms of an agreement
which is designated as a lease. The ultimate issue presented is
whether the transaction creates a lease of real property or is
to be viewed as a mortgage of real property.

As to each of the taxes you ask specific questions which will be
answered in later discussions.

You provided several documents that are relevant to the
transaction. These include the following:

Participation Agreement

Guaranty

Master Lease and Mortgage Agreement Trust Agreement
Lease Supplement

Mortgage, Security
Agreement & Fixture
Filing

Loan Agreement

Note

Construction Agency Agreement

In brief, the elements and the parties to the transaction are
described as follows:

Petitioner is in the business of operating XX stores (herein
Sites).

Lessor is a business trust created, under the laws of Delaware,
by Owner/Participant and Owner/Trustee. Owner/Participant is the
settlor, and is the initial beneficiary of the Trust.

Throughout the period of this transaction, the Owner/Participant
is the beneficial owner of the Trust estate that is represented
by the Sites. The Owner/Trustee is the trustee and the owner of
the Trust estate. The Sites represent the property held in the
Trust and the Sites are segregated into Property Groups
according to whether they are acquired during the first or

second half of each year. See Trust Agreement, Articles I and
II, and Trust Agreement, Section 2.1(a) and (b).

Petitioner selects the land on which future stations and stores
will be constructed or renovated. Pursuant to the Construction
Agency Agreement, the Lessor also appoints the Petitioner as its
exclusive Construction Agent in the construction, on the
purchased land, of the new Site or the renovation of existing
Sites. This authority is expressed in Section 2.7 of the
Construction Agency Agreement.

The land is purchased by, and the title is held in, the Lessor,
who obtains the larger portion (96 percent) of the required
funds from a line of credit made available to it by Lender. You
have provided the Department with a copy of the line of credit
(in the form of a revolving non-recourse promissory note) which
bears the legend "Note". This portion of the total money
necessary to finance the acquisition, construction or renovation
of the Sites is paid by drawing against the line of credit,
non-recourse promissory notes in the amount necessary for each
Site. See, Note, page 1.

The total of these draws under the promissory notes made by the
Lessor comprises the Loan as defined in Section 2.1 of the Loan
Agreement. See also, Section 2.4 of the Loan Agreement. The
payment and default provisions with respect to the promissory
note(s) are described in Article VI of the Loan Agreement.

The Petitioner is also the guarantor of the Loans by provisions
of the Guaranty. In Section 1 and Section 2 of the Guaranty,
Petitioner unconditionally guarantees the amount of the nonrecourse promissory notes issued by the Lessor.

The remainder of the required funds (4 percent), termed Equity
Amounts, are part of the monies available for the acquisition,
construction or renovation of the Sites. The term Equity
Amounts, which represent an investment by the Owner/Participant,
is defined in Section 3(a)ii of the Participation Agreement.
Thus, the financing of the acquisition, construction or
renovation of the Sites is achieved by Loans from Lender, and by
the Equity Amounts contributed by the Owner/Participant. The sum

of the Loan and Equity Amounts in respect to each Site is
referred to as the Site Balance. See, Participation Agreement,
page 32.

Note is made that the questions of Petitioner are asked solely
of the 3 year period of the Master Lease Agreement and Mortgage.
This term includes the period in which the acquisition,
construction, or renovation occurs, together with the period
which ends with the earlier of the 3 year expiration date of the
lease as described in Section 3(a) of the Master Lease Agreement
and Mortgage, or the date of the termination thereof by
agreement of the parties.

After acquisition of the land, and after the construction or
renovation, the Sites are then leased to the Petitioner
according to the terms and conditions of the Master Lease
Agreement and Mortgage. As each Site becomes operative, a Lease
Supplement is executed between Petitioner and Lessor as to each
such Site. The Lease Supplement is subject to the terms of the
Master Lease Agreement and Mortgage.

After commencement of the operation of each Site, the
Owner/Participant is to receive from Petitioner a predetermined
yield from its investment which was earlier advanced as the
Equity Amount. This yield computation is a portion of the Basic
Rent paid by the Petitioner. The yield applicable to Equity
Amounts which arises during the construction or renovation
period is capitalized. The term Basic Rent also includes the
interest and other payments that are required to be paid
applicable to the Loans.

You state, on page 3 of your letter, and during subsequent
communications, that at the completion of the construction or
renovation, and at or about the time of commencement of
operation of the Sites comprising a Property Group, the Master
Lease Agreement... is converted to an Operating Lease.... It is
the understanding of the Department that the Petitioner intends
to pay off the financing evidenced by the submitted documents by
causing the Owner/Participant's interest in such Property Group
to be purchased by another entity. Simultaneously, with respect
to such Property Group, the Lessor will enter into a true

operating lease with the Petitioner.

The characterization of the subject documents is found in
Section 20(u)(1) of the Master Lease Agreement and Mortgage,
which provides in part that:

... the transaction contemplated hereby constitutes an
operating lease from Lessor to [Petitioner] for purposes of
[Petitioner's] financial reporting, (ii) the transaction
contemplated hereby preserves ownership in the Sites,
including the Equipment, to [Petitioner] for purposes of
Federal and state income tax..., (iii) [Petitioner],
pursuant to the Lease, grants a security interest or lien,
as the case may be, in the Sites, including the Equipment,
and the other Collateral to the Lessor, (iv) for purposes
of Federal and state income tax and bankruptcy purposes,
among others, the payment by [Petitioner] of Basic Rent
shall be treated as payments of interest, and the payment
by [Petitioner] of any amounts in respect of the Property
Balance shall be treated as repayments of principal, and
(v) the Mortgage and Assignment of Leases and Rents create
a lien and security interest in the Sites subject to
certain limited exceptions....

These characterizations of the intention of the parties are also
replicated in Section 10 of the Lease Supplement.

Also, the characterization of the lease is that of a triple net
agreement. See Section 5(a) of the Master Lease Agreement and
Mortgage. This status obligates the Petitioner to pay, as
described in Section 5(a), all of the costs, expenses and
charges of every kind in the operation of the sites.

You argue that though characterized as an operating lease, the
transaction should be viewed as one which creates a financing
arrangement the consideration for which is not subject to sales
or use tax.

You also characterize the agreement as a synthetic lease.

Each of the Sites, after commencement of business, remains

titled in the Lessor. See, for example, the Special Warranty
Deed running between a Florida county and the Lessor.

As previously stated, a Lease Supplement is executed between
Lessee and Lessor as to each individual Site. As security for
the payment and the performance required of the Petitioner under
the Master Lease Agreement and Mortgage and the Lease
Supplement, and other documents, the Petitioner assigns,
mortgages, and grants a security interest to the Lessor, in all
the right, title and interest the Petitioner has in all of the
Sites. See Section 14(a) of the Master Lease Agreement and
Mortgage.

The period of the Lease is divided into the following terms as
defined in Section 3 of the Master Lease Agreement and Mortgage:

Interim Term (construction period); Basic Term, which is
the earlier of the third anniversary of the Site
acquisition and the Master Lease Termination Date; and the
Renewal Term, as further qualified in Section 3 of the
Master Lease Agreement and Mortgage.

The consideration paid by the Petitioner is described as
follows:

The amount of the Basic Rent, as required to be paid by
provisions of Section 3(c) of the Master Lease Agreement
and Mortgage, is equal to the computation of the yields on
the Equity Amounts advanced by the Owner/Participant as
computed in Section 4(a)(1) of the Participation Agreement,
and the interest due on the loans advanced by Lender
(Tranche A Lender Basic Rent and the Tranche B Basic Rent).

Supplemental Rent, as required to be paid by provisions of
Section 3(e) of the Master Lease Agreement and Mortgage is
defined in Appendix A to Participation Agreement, Master Lease
and Trust Agreement, page 33, as all amounts, liabilities and
obligations other than Basic Rent, Applicable Percentages, Site
Balances and Property Balance which the Lessee has agreed to
pay.

The amount of the rent is essentially that aggregate of the
yield or return to be paid to the Lessor associated with the
promissory notes issued to acquire, construct or renovate the
Sites, and the yield or return which is required to be paid to
the Owner/Participant on the Equity Amounts.

The payments made by the Petitioner, pursuant to the lease, are
recorded for financial purposes as rental expenses. For
financial purposes there is to be no asset or liability entered
in the balance sheet.

For Federal tax purposes, the payments made by the Petitioner
will be recorded as interest expenses or repayments of
principal. Also, because the Petitioner is deemed for Federal
tax purposes to be the owner of the Sites, the Petitioner will
record depreciation expense.

The Petitioner has the right, as granted in Section 6 of the
Master Lease Agreement and Mortgage, (but only with the consent
of the Owner/Participant and the Lessor, which may be withheld
for any reason) to exercise an option to renew the lease for the
term of a renewal period described in Section 6(a). At the
expiration of the lease, the Petitioner may also purchase all of
the Sites as provided in Section 6(b) of the Master Lease. In
such an event the Petitioner, if it chooses to purchase the
Sites, must pay off the Loan Balance owed to the Lender, and the
Equity Balance owed to the Owner/Participant. Petitioner, in
Section 6(b), also has the right to assign its option to
purchase the Sites to a third party. The Petitioner may, as
well, pursuant to Section 6(e) of the Lease, purchase all of the
Sites at any time for an amount equal to the Loan Balance and
the Equity Balance.

If it does not choose to purchase the Sites, Petitioner may,
pursuant to Section 6(c) of the Master Lease Agreement and
Mortgage, sell all of the Sites to a purchaser not affiliated
with the Petitioner. In that event, the Lessor retains all of
the proceeds of the sale up to the Site Balance, with the
Petitioner to receive any excess. the Petitioner will be
obligated to pay Supplemental Rent, up to the Applicable
Percentage Amount, to ensure that the Lessor will receive the

Site Balance.

If the Petitioner elects the sale option as described in the
preceding paragraph, the Lessor, pursuant to Section 6(c) of the
Master Lease Agreement and Mortgage, has the right to require
instead that the Petitioner pay the Applicable Percentage Amount
and return the Sites to the Lessor. The Applicable Percentage
Amount will be an amount not less than 85 percent of the Site
Balance.

It is the understanding of the Department that it is more likely
that upon completion of construction or renovation of the Sites
and the commencement of operations with respect to any Property
Group, less expensive financing should be available. Such
financing would be obtained from a third party investor who
would purchase the Owner/Participant's beneficial interest in
such Property Group. The current financing documents, including
the Master Lease Agreement and Mortgage, would be replaced by a
true operating lease of the Property Group.

To secure the Loans, Lessor has granted mortgages to the Owner
Trustee. See Mortgage, Security Agreement and Fixture Filing.
Neither the Lender nor any holder may look to the Lessor but
instead shall satisfy any claims for payment, including those of
rent default, by recourse solely to the Sites, as described on
page 2 of the note.

Importantly, the Petitioner Lessee has executed a Guaranty
Agreement guaranteeing the payment of all Liabilities as that
term is defined in Section 1 of the Guaranty Agreement. The term
"Liabilities" essentially means all the Equity Amounts and the
required yields on such sums, and the Loan, both as to the
payment of the principal and interest, except that, if the
Petitioner has not elected to purchase the Sites, the amount
guaranteed will not exceed the amount payable pursuant to the
Master Lease Agreement and Mortgage.

All rights belonging to the Lessor arising from the Construction
Agency Agreement (an agreement between Lessor and Petitioner)
are assigned to the Lender as collateral for the Loan. Further,
the Lessor assigns all of its rights under the Master Lease

Agreement and Mortgage to the Lenders pursuant to Section 2 of
the Master Assignment of Lease and Rents.

As to the recordation of documents, you state on page 8 of your
letter that an assumption can be made that only the following
documents will be recorded in Florida:

All warranty deeds with respect to the Sites running from
the grantor to the Lessor. Lease Supplement and Short Form.
All mortgages, security agreements and fixture filings.
Specific assignment of leases and of rents. Uniform
Commercial Code form UCC-1 Financing Statements of
Petitioner, and Uniform Commercial Code form UCC-1
Financing Statements of Lessor.

As each Site, or a Property Group, is developed and in
operation, the expected sale, as indicated above, will occur of
the beneficial interest in such property(ies) held by the
Owner/Participant. The sale will be made to a successor
investor. At that time a new lease will be executed between
Lessor, on behalf of the successor investor, and Petitioner.

This lease is expected to be of a long term. It is this lease,
as understood by the Department, which will be a "true" lease
and subject to sales or use tax.

However, the ownership of the Sites will remain in the Lessor
for the term of the new lease. The Petitioner is expected to
continue as the lessee of the Sites.

As the beneficial interests in the Sites in a Property Group are
sold, and the Sites are released from the documentation provided
the Department, new Sites will be identified, acquired by the
Lessor for the Owner/Participant and made subject to the same
documentation in a revolving manner.

Florida Sales or Use Tax

Considering the facts as described above and the documents
provided the Department, you ask the following question as to
the possible imposition of Florida sales or use tax:

Whether the attached synthetic lease transaction is
sufficiently analogous to the one reviewed in [a previous
Technical Assistance Advisement] that no sales tax will be
imposed upon the lease payments made from the [Petitioner]
to the Lessor?

Department Response - Sales or Use Tax

Note is again made that the discussion of whether sales or use
tax is applicable to this transaction is solely related to the
acquisition, construction or the renovation of the Sites and the
payments made pursuant to the Loans and Equity Amounts which
arise therefrom and only extend to the period described as the
earlier of a three year Basic Term or by termination events as
provided in the Master Lease Agreement and Mortgage. See Section
3(a) of the Master Lease Agreement and Mortgage. The termination
events are set forth in Section 6 of the Master Lease Agreement
and Mortgage.

More pointedly, as agreed in a telephone conversation on May 10,
1999, the determination expressed herein is only relevant up to
the moment of sale of the beneficial interest of the
Owner/Participant to a third party. The sale of such interest,
as expressed previously, would be made to a long term purchaser
in accordance with what may be a taxable operating lease. The
taxability of any lease that may be executed after the sale of
the beneficial interest would be reviewed anew for a
determination whether the payments were taxable.

The sale of the beneficial interest in a Site or group of Sites
and the liquidation of the Loans relating thereto allows for the
new development of more Sites as a revolving source of financing
from the Owner/Participant and the Lender. The sale and
liquidation monies become the source of new financing of
additional Sites.

Section 212.031(1)(a), F.S., levies sales tax on the privilege
of engaging in the business of leasing or granting a license to
use or occupy real property. Rule 12A-1.070, F.A.C., interprets
the statute. Section 212.031(1)(c), F.S., imposes the tax on the

total rent or license fee that is charged for the real property
and includes base rents, percentages rents and similar charges.

Applying the statutes to the facts as provided to the
Department, a conclusion is reached that there is no
landlord/tenant relationship between Petitioner and Lessor.
Thus, there is no total rent or license fee paid, considering
the requirements of s. 212.031(1)(c), F.S.

The Lessor is not the landlord, because the transaction
represents a financing arrangement rather than the execution of
lease. This conclusion is based on the following factors:

The reason for the creation of the Lessor is solely to
serve as a single purpose financing entity. As a
consequence, the Lessor is not in the business of engaging
in the conveyance of a lease or the grant of a license to
use real property. Rather, the Lessor was created to serve
as an integral part of the entire financing arrangement.
The Lessor is not a landlord but serves more in a capacity
of the administrator of the transactions.

To accomplish this end, the Lessor holds bare legal title to the
Sites, not as a landlord but as an essential part of the
financing structure. Albeit the Lessor is expected to continue
existence as the owner of the Sites after the expiration of the
Basic lease term or by an earlier termination through an
expected sale of the Owner/Participant's beneficial interest, as
previously described, the Lessor does not serve as a landlord
during this transaction. The Lessor serves the same function as
the single purpose financing corporation described in
Firestone/Bridgestone, Inc. v. Department of Revenue, DOAH Case
Number 92-2483. In that case, as in the instant fact pattern,
the holder of title to the property was deemed to be solely
created for the purpose of facilitating the financing of the
transaction. A similar finding is made here. The Lessor is
created not as a landlord of the Sites but as an essential part
of the plan to borrow money.

The Lessor does not receive a rental or license fee in the
ordinary sense of the economic owner of property attempting to

maximize income from an investment by charging a rent or fee
determined by the market value of the improvements. Rather, the
Lessor receives from the Petitioner payments in an amount to pay
the interest on the Loans (from the Lender), and an agreed yield
to the Owner/Participant as a return of the Equity Amounts. The
Petitioner is not a tenant of the Lessor for the following
reasons:

Petitioner, as a requirement for the financing of the
acquisition, construction or renovation of the Sites,
guarantees the payment of all the Liabilities as that term
is defined in Section 1 of the Guaranty. The terms include
the Equity Amounts and the yield on such monies, as well as
the principal and interest on the Loans. Such a guarantee
by the Petitioner is not a usual pledge by a tenant.

The requisites of ownership and of risk is with the Petitioner.
The Petitioner has extended an absolute guarantee of the
Liability as provided in Section 1 of the Guaranty.

As rent, the Petitioner pays monies the sum of which are solely
determined by repayment schedules required under financing
documents, namely the Loan and the Equity Amounts. The rent is
not that which arises from a computation of expected economic
gain from the ownership of real property. The amount of the rent
is determined solely from the return required by, and the
amortization of, financial obligations.

The lease arrangement is fashioned to comport with off-balance
sheet financing, in that the arrangement is styled a lease for
accounting purposes. This allows, for financial purposes, the
recordation of lease payment expenses. In Bridgestone/Firestone
supra, it was stated "... a taxpayer can treat an item one way
for financial reporting purposes and another way for tax
purposes".

In the instant case, in finding a capital lease, none of the 4
elements in FASB 13 are present. Thus, for financial purposes it
is proper to record the transaction as an operating lease. In
sum, the transaction is one designed to accomplish the financing
of the Site purchase, construction and renovation, with the

Petitioner allowed the expenses of deprecation and interest and
burdened by the risks of ownership. A determination is made
based on the consideration of all the facts that the Master
Lease Agreement and Mortgage and the Supplemental Lease are in
the nature, not of an operating lease, but rather as a mortgage
substitute.

Thus, a conclusion is reached that the payments made by
Petitioner during the period until the three year expiration
date or an earlier termination date (which is expected to be the
sale by the Owner/Participant of its beneficial interest) are
not subject to sales or use tax. Such payments are not construed
to come within the meaning of the term, "total rent or license
feel' as required by s. 212.031(1), F.S.

Florida Documentary Stamp Tax

To supplement the facts described above, it is helpful to
present information with particular importance to a decision as
to the extent of the imposition of documentary stamp tax on any
element of the transaction.

As you indicate, a previous Technical Assistance Advisement
issued by the Department found the tax imposed on both the
recording of the mortgaged lease by the lessee to the lessor,
and the lessor's mortgage of its interest to the lender.

You state that, in recognition of the Technical Assistance
Advisement, in one instance in financing of the Sites,
documentary stamp tax of $XX was paid upon recording the Lease
Supplement and an additional stamp tax of $XX was paid upon the
recording of the Florida Mortgage. You do point out that the
Lessor of the mortgage in favor of the lenders imposed no tax on
the assignment.

Questions as to the possible imposition of Florida documentary
stamp tax:

(1) Whether, due to the enactment of s. 201.08(6), F.S., in
1997, the Department of Revenue will no longer require the
payment of documentary stamp tax on each Florida Mortgage

and each Florida Lease Supplement as reasoned in a previous
Technical Assistance Advisement that prohibits the
duplication of the tax on multiple documents related to the
same primary debt?

As a corollary to the question, you ask if a refund is
applicable. You base your request for a refund on the issuance
of the Technical Assistance Advisement, and on the amendment,
which became effective after the date of the Technical
Assistance Advisement, of s. 201.08(6), F.S.

Department Response - Florida Documentary Stamp Tax

In response, the Department takes the position that two separate
debts are involved in the transactions, and no refund would be
due the taxpayer. The first of such taxable transactions
consists of the Trust granting a mortgage to the Lender to
secure payment of the amounts advanced under the Loan Agreement
and Non-Recourse Note. Under s. 201.08(1), F.S., all mortgages
recorded in Florida are subject to the documentary stamp tax at
the rate of $.35 per $100 based on the amount of the
indebtedness. Therefore, the mortgage is subject to tax. The
second taxable transaction involves the Petitioner leasing the
property from the Trust. It has been determined that the
synthetic lease is not subject to sales tax, but is instead
treated as a mortgage. Therefore, the synthetic lease is also
subject to documentary stamp tax under s. 201.08(1), F.S.

(2) Whether the use of a Delaware Business Trust to hold
title to the property affects the amount of the documentary
stamp tax due under the transaction?

Department Response - Florida Documentary Stamp Tax

There is no provision in the statutes which would bar a Delaware
Business Trust from holding title to property in Florida. As
stated in your correspondence, the transfer taxes under s.
201.02(1), F.S., have been paid on the transfer of the Florida
property into the Delaware Business Trust.

(3) Whether additional documentary stamp tax will be due

upon the release of Florida Mortgages and the recording of
new Florida Mortgages to secure the Non-Recourse Note if
the total lien amount, attributable to all Florida
Mortgages securing the Non-Recourse Note, does not increase
the proportion of the total collateral represented by the
Florida Mortgages?

Department Response - Florida Documentary Stamp Tax

No additional documentary stamp tax would be due upon the
release of Florida Mortgages and the recording of new Florida
Mortgages provided such Florida Mortgages were not satisfied. A
substitution of collateral is not subject to Florida documentary
stamp tax under s. 201.08(1), F.S., as long as no new obligor(s)
is added to the note, and the note is not renewed for an amount
greater than the unpaid balance.

Florida Intangible Tax

You cite a previous Technical Assistance Advisement, which
determined that the non-recurring intangible tax was not due on
the recording of a lease supplement. You agree that the tax is
not applicable to a lease supplement. You assert that the tax
may not be imposed on the Lease Supplement, because a leasehold
interest in real property is considered personal property for
Florida intangible tax purposes. Thus, you conclude that,
because it only creates a mortgage on [Petitioner's] interest
pursuant to the Master Lease and Florida Lease supplement, this
obligation (the lease supplement) is not subject to the nonrecurring intangible tax imposed under s. 199.133, F.S.

You also state that, by reference to a previous Technical
Assistance Advisement, no intangible tax will be due on the
documents presented under the synthetic lease arrangement. You
assert that the tax is not applicable to these documents because
of the lack of tax nexus to Florida. You state that neither the
Lessor nor the Owner Trustee has an office, employees or other
agents residing in Florida. You cite in support of your argument
a previous Technical Assistance Advisement, and s.
199.175(1)(a), F.S., which speaks to a business trust organized
or created under Florida law.

Questions as to the possible imposition of Florida intangible
tax:

(1) Whether each Florida Lease Supplement will be subject
to the intangible tax on mortgages?

Department Response - Florida Intangible Tax

Chapter 199, F.S., imposes an intangible tax on all intangible
property having a taxable situs in this state. Obligations for
the payment of money that are secured by a lien on real property
are subject a non-recurring intangible tax under the provisions
of s. 199.133, F.S. Obligations that are secured by personal
property or that are unsecured are subject to the annual tax
imposed by s. 199.032, F.S. Applying these statutes to the
mortgage given by Petitioner (as mortgagor) to Trust (as
mortgagee), no non-recurring intangible tax would be due on the
obligation secured by the leasehold mortgage.

(2) Whether the use of a Delaware Business Trust to hold
title to the property affects the amount of intangible tax
due under the transaction?

Department Response - Florida Intangible Tax

Under s. 199.052, F.S., every person owning, managing or control
intangible personal property having a taxable situs in this
state is required to file an intangible tax return. Section
199.175, F.S., states that intangible property has a taxable
situs in this state when it is owned by a person legally or
commercially domiciled in this state or it arises out of
business transacted by employees, agents or representatives of
any kind with customers, at locations within this state.
Applying these statutory provisions to the situation as set out
above, none of the parties to the transaction will be required
to file an annual intangible tax return as result of this
transaction.

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,

Robert G. Parsons
Tax Law Specialist
Technical Assistance and Dispute Resolution
Sales Tax

J.V. Parramore, Jr.
Tax Law Specialist
Technical Assistance and Dispute Resolution
Intangible Tax

Joy B. Eldred, C.P.A.
Tax Law Specialist
Technical Assistance and Dispute Resolution
Documentary Stamp Tax

RGP/JVP/JBE
Ctrl. No. 37124