Having recently celebrated the 4th of July, you may find it interesting to know that Florida has its very own Stamp Act – sort of. Florida’s documentary stamp tax is imposed under Chapter 201, Florida Statutes, entitled “Excise Tax on Documents.”
Section 201.01, Fla. Stat., broadly identifies on which documents this tax is levied:
“There shall be levied, collected, and paid the taxes specified in this chapter, for and in respect to the several documents, bonds, debentures or certificates of stock and indebtedness, and other documents, instruments, matters, writings, and things described in the following sections, or for or in respect of the vellum, parchment, paper, or any other medium whether tangible, electronic, or otherwise, upon which such document, instrument, matter, writing, or thing, or any of them, is written, printed, or created electronically or otherwise, by any person who makes, signs, executes, issues, sells, removes, consigns, assigns, records, or ships the same, or for whose benefit or use the same are made, signed, executed, issued, sold, removed, consigned, assigned, recorded, or shipped in the state.”
This confusing sentence includes more types of documents than I have seen in my career – though I look forward to receiving something written on vellum or parchment one day. While this tax clearly can apply to a range of documents, some of the most common are promissory notes. Section 201.08, Fla. Stat., specifically addresses how documentary stamp tax is applied to promissory notes.
But first, what is a promissory note? A promissory note is a written promise to pay someone a certain amount of money either on demand or at a specified date in the future. In order to be a taxable promissory note, it need only have three things:
- An unconditional written promise to pay
- A sum certain in money
- The signature of the borrower (written or electronic)
Out-of-state residents are most often blindsided by this tax or may believe the tax does not apply when the loan originated outside of Florida. However, when a promissory note is signed by its maker in another state and sent to the payee in Florida, after which it is examined, approved and accepted and a loan in the principal amount of the note is made to the maker, the promissory note is subject to tax.
Some of the most common types of taxable promissory notes include automobile loans, personal loans, business loans, and retail installment sale contracts (regardless of an interest charge). This means the increasingly popular “Buy Now, Pay Later” payment options available from major online retailers could qualify.
While there is a $2,450 limit documentary stamp tax on promissory notes, this limit does not apply to mortgages, security agreements, or other liens filed or recorded in Florida.
Outside of the big three in state and local tax (property, sales and use, and income), documentary stamp tax is easy to overlook. Unfortunately, with its broad base, it can affect a wide range of taxpayers doing business in Florida.
