Florida Documentary Stamp Taxes


Under proposed regulations issued by the Florida Department of Revenue, Florida documentary stamp taxes will NOT be payable on true leases OR direct finance leases ($1-Out leases) under which equipment is delivered to a Florida lessee WHETHER OR NOT the lessor and/or lessee execute the documents in Florida IF the lease is conditional on the delivery and acceptance of the equipment AND the acceptance certificate is neither (1) a physical part of the lease or (2) incorporated into the lease by an express reference.

What all of this means is that, for the traditional true or direct finance lease, there will be no Florida documentary stamp taxes.

On the other hand, if the acceptance certificate is part of the lease document (which is the case in several leasing company forms) or if the lease contains language along the lines of: "The Acceptance Certificate is hereby incorporated into this Lease and made a part hereof", the taxes will be payable.

The reasoning of the legislation adopted by the Florida legislature earlier this year, as effected by the Department of Revenue's proposed regulations, is that the lease transaction is not a "written obligation to pay money" similar to a promissory note. The reason for this has nothing to do with whether the lease is a true lease or not, or whether the document has a Florida situs. Those two tests were applied under the prior law for many years.

Instead, the taxing authority's scrutiny will focus on whether the hell or high water clause in a traditional lease, under which the lessee is obligated to pay rent in any event, renders the document an unconditional promise to pay. In most cases, the lease does not become truly unconditional until the equipment is accepted by the lessee, giving the lessee the opportunity to cancel the transaction if the equipment is non-conforming.

Despite all of the good efforts of the equipment leasing association, the Florida Association of Equipment Lessors and Mark Holcomb of the Holland & Knight firm in Tallahassee, some issues do and will probably always remain unsettled. Language in a lease requiring the lessee to execute the acceptance certificate, lease language making it certain that the lease term will commence on a certain date irrespective of delivery of the equipment, language indicating that the shipping of the equipment itself triggers the shipping of the equipment itself triggers the commencement of the lease and other issues might be taken into account in future cases. For this reason, while we recommend that lessors no longer collect documentary stamp taxes where the acceptance certificate is separately signed by the lessee and the lease contains only the standard language regarding the acceptance certificate ("the term commences upon execution of an acceptance certificate"), we do NOT recommend that the lessor (1) represent to the lessee that documentary stamp taxes are not to be payable or (2) make any changes in the standard indemnification provision in most equipment leases under which lessees are obligated to pay any taxes, penalties or interest which are assessed by a taxing authority.