vs. ) CASE NO. 76-940
Respondent. )
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, K. N. Ayers, Held a public hearing in the above case on October 1, 1976 at Tampa, Florida.
For Petitioner: A. P. Gibbs, Esquire
At the commencement of the hearing the parties submitted Stipulation of Facts which are incorporated in the findings below. Exhibits attached to the Stipulation are treated as if presented at the hearing. Thereafter one witness was called by the Petitioner.
The instant proceeding arises over the application of the Florida documentary stamp tax law, Chapter 201 of the Florida Statutes, to transactions in which customers bought lots from Sandy Development Company and homes from Shubert Construction Company. Documentary stamp taxes and surtaxes have been paid on these transactions reflecting only the price of the lot. The Petitioners assert that the amounts already paid are the proper amounts due. The Respondent, Department of Revenue, asserts that the taxes and surtaxes are due upon the price of the home and lot together. The Department has issued a proposed notice of assessment against the Petitioners which reflects the amount due for additional taxes and surtaxes if the Department's position is upheld, plus an amount levied as a tax penalty, which amounts total $2,449.70. This Proposed Notice of Assessment and the schedule by which it was computed are
included as Exhibit "A" to this stipulation. The mathematical computations underlying this assessment are not in dispute.
The Petitioner Jerome Parker is the sole stockholder and sole employee of the Petitioner Sandy Development Company (hereinafter "Sandy"). Sandy is engaged in the business of buying vacant land and selling parcels of that land to individuals to use as home building sites. This land is located in Pasco County, Florida. Sandy has been engaged in this business since its incorporation in 1973, and has engaged in no other type of business.
The Shubert Construction Company (hereinafter "Shubert") employs the Petitioner Jerome Parker as its Assistant Secretary and Branch Manager. Parker runs the Shubert branch office in Pasco County, with the help of one secretarial employee. Parker is Shubert's authorized agent for soliciting customers, negotiating and signing construction contracts, and arranging for financing for prospective home buyers. All of Shubert's construction business in Pasco County is conducted through Parker's office. Shubert maintains one other office, located outside Pasco County.
Customers wishing to purchase a home and lot have come to Parker's office, which is located at the Shubert Construction Company, 1520 1st Street, Zephyrhills, Florida. Some of these customers already have lots selected, and Parker makes no attempt to sell lots to those customers. Customers who do not already have lots selected are solicited by Parker to consider purchasing a lot from listings maintained by him. Parker keeps at his office listings and maps of lots which are available for sale to home buyers by Sandy, Shubert, and certain third parties. If the customer expresses an interest in a lot or subdivision owned by Sandy or Shubert, Parker proceeds with the initial steps in selling that customer a lot (i.e., a credit check). If the customer expresses interest in a lot or subdivision owned by a third party, Parker refers the customer to that third party. All of the sales by Sandy, with a few exceptions, originated in this manner at Parker's office.
Customers buying lots from Sandy return to Parker's office at the Shubert Construction Company after the credit check is completed. The purpose of this second visit is to have the customer sign a loan application to finance both the home and the land, and an option and acceptance of option for the land, conditioned upon the lender's extension of credit. These papers, copies of which appear as Exhibit "B" to this stipulation, are then routinely forwarded to the lender by Parker, acting as agent for both Shubert and Sandy. The Exhibit reflects that the loan application is for a single sum covering home and lot. The customers sign one note and one mortgage for both home and lot and make lump sum installment payments to the lender without dividing those payments into separate accounts for home and lot. It is the practice of the lender, however, to issue separate checks to Sandy and Shubert for the lot and home, respectively.
Although persons buying lots from Sandy are not legally obligated to buy a home from Shubert, they have nevertheless done so in every case. Some 38 individual customers have purchased lots from Sandy, and all have contracted for the purchase of a home from Shubert built upon the land purchased from Sandy.
In the course of selling a lot belonging to Sandy along with a home from Shubert, Jerome Parker normally identified Sandy as the seller of the lot, but this information was not emphasized to the customer. The enclosed affidavits from customers of Parker's indicate whether they sought to purchase a
home, a lot, or both, and whether they believed the seller to be a single enterprise or two enterprises.
Upon learning of a customer who wished to purchase both a lot and a home, Jerome Parker formed the intent to sell, through his two agency capacities, both a lot and a home to that customer.
Shubert owns no interest in Sandy, and Sandy owns no interest in Shubert. The only link between the companies is through their mutual agent and employee Jerome Parker. Parker owns no interest in Shubert Construction Company.
This Stipulation includes Exhibits "A" and "B" referred to above, and in addition Exhibit "C" consisting of affidavits relating to the intentions and beliefs of Sandy's customers, and Exhibit "D" consisting of copies of notes and mortgages signed by Sandy's customers, and/or affidavits relating to the handling of the notes and mortgages by the Farmers Home Administration. The parties do not waive objections on the grounds of relevancy or materiality to the materials included in the Exhibits.
The only question remaining to be resolved is whether the transactions described above are taxable under Florida Statutes, sections 201.02 and 201.021 based on the price of the lot alone, or upon the price of the lot and the home.
Petitioner and Respondent reserve the right to introduce testimony not inconsistent with the foregoing.
All documents used in the transactions here under consideration are prepared on forms provided by Farmers Home Administration (FHA) of the Department of Agriculture. These include the Option to Purchase, Construction Contract, and all notes and mortgages. The Option to Purchase provides it is given to enable buyer to obtain an FHA loan and such offer is void if buyer is unable to obtain a loan from FHA.
At the time of closing purchaser executes a note for the full amount of the loan for home and lot secured by a mortgage on the lot. At this time the construction of the home has not commenced although the buyer has in effect borrowed funds to purchase the lot and pay for the construction of his home. Construction funds are disbursed to the builder by FHA in draws as the construction of the home progresses. Upon completion of the home the final draw is paid to the builder and buyer presumably takes possession. No evidence was presented regarding the payment to the seller for the price of the lot, which is separately stated on documents forwarded to FHA, however nothing was presented to indicate the seller was not paid at the time of closing, which would be the normal procedure. From the testimony that after closing Sandy Development had no claim to the lot, it would be presumed that Sandy had been paid for the lot.
CONCLUSIONS OF LAW
Section 201.02(1), Florida Statutes, which imposes a documentary stamp tax upon written transactions in which interest in realty are conveyed, provides:
"On deeds, instruments, or writings whereby any lands, tenament, or other realty, or any interest therein, shall be granted,
assigned, transferred, or otherwise conveyed
to, or vested in, the purchase, or any other person by his direction, on each $100 of the consideration there for the tax shall be thirty cents. When the full amount of the considera- tion for the execution, assignment, transfer, or conveyance is not shown in the face of
such deed, instrument, document, or writing, the tax shall be at the rate of thirty cents for each $100 or fractional part thereof of the consideration therefor."
Section 201.021 F.S. contains similar provisions imposing a surtax on documents relating to land.
These statutory provisions have been interpreted by the courts to require the payment of the documentary stamp tax upon the value of the lot and home where buyer acquires lot and home in one "package" where acquisition of neither home nor lot is independent of the other. Dreher v. Florida Revenue Commission, Case No. 1727 (Fla. 6th Cir. 1970) involved a factual situation somewhat analogous to the instant case where the buyer selected a lot and house with separate values being assigned to each in the contracts. However, the deed was not delivered until the home was completed and the total purchase price paid. The court held that "regardless of the assignment of an arbitrary land value to the lots involved, what is really present is an overall agreement for purchase of a lot and a home constructed on that lot", and cited Raccoon Development, Inc. v. The United States and Brookside Sales v. The United States, reported as U.S. Court of Claims, Nos 45-64, 46-64 (3/15/68). Raccoon involved the recording of a contract for deed to purchase the lot with deed not delivered until the completion of the house. In Raccoon, supra, the court said:
"It is not disputed that the documentary stamp tax due is measured by the net consi- deration paid for the realty conveyed where that consideration is definite in amount."
The instant case differs from Dreher and Raccoon in one important aspect viz, that here the deed was delivered before construction of the home began. The price of the lot was quoted as a definite amount and was not tied to the construction of a residence by the contract between the buyer and seller. The fact that the lender-mortgagee required the document be presented as a "package" and the fact that such a deal was referred to in the trade as a "package" transaction does not confer upon such a transaction legal attributes not otherwise present.
Package deals subject to the documentary stamp tax are definite in Rule 12A-4.13(22) F.A.C. as follows:
"Joint Venture Contracts, Package Deals: where corporations engaged in business of land development for residential purposes conduct their operations in conjunction with
sister corporation (or even same corporations) engaged in building homes, and one individual is controlling shareholder and principal office of all corporations, tax is required
on the deeds based upon the total price that home purchaser pays for house and lot and not
limited to portion of consideration attribu- table to the lot. The tax attaches at the time the deed or other instrument of convey- ance is delivered, irrespective of the time the sale is made or the instrument is re- corded. The critical factor is the intention of the parties."
Here there were two separate and distinctive entities engaged in selling the land and building the homes without any common shareholders or directors. Furthermore it is clear that Petitioner intended two separate transactions as he obtained compensation on each. Presumably he made a profit on the lots when he sold them plus his commission from the builder when the buyer paid for the construction of his home. The buyer here was not "tied" to the package involving this particular builder although all deeds here in consideration did involve the same builder who was one approved by Farmers Home Administration.
Furthermore the buyer received his deed at the closing when the seller was paid for the lot. The regulation above quoted provides that the tax attaches at the time the deed is delivered. The statutes provide that the tax owed shall be computed based upon the consideration paid for the deed. At this time the value of the land was $3500, the price determined in an arms length transaction.
Respondent cites First Development Corp. of America v. Florida Department of Revenue, Case No. 70-1974 (Fla. 12th Cir. 1972) in support of its position. While the factual situation is not readily apparent from that decision the court there found that the contractual agreement [between buyer and seller] involved the sale of the unit site, common element and home as one transaction and therefore the documentary stamp tax was properly computed on the total price of the contract. Although it appears from the decision that the deed to the lot may have been delivered before the home was erected, it remained tied or controlled by provisions of the construction contract and the buyer was not free to have his home erected by anyone other than the seller. This transaction would also appear to be controlled by Rule 12A-4.13(22) F.A.C. Respondent also cites two cases before the Division of Administrative Hearings in support of its position. In Silver Springs Shores, v. Department of Revenue, Case No. 75-1222 the developer and builder were sister corporations and the hearing officer found that the transactions there involved were for the purchase of a lot with a completed residence dwelling. In that case both the Hearing Officer and the Deartment of Revenue recognized the total cost was not taxable where the buyer purchased a lot and his residence was constructed by a different contractor. Thomas v. Department of Revenue, Case No. 75-1710, involved a petitioner who sold the land and built a home thereon with the transaction financed by Farmers Home Administration. Thomas sold the land and built the home for the buyer. Despite the fact that the buyer was not required by the option to purchase to place a home on the lot, he did contract with Thomas, a general contractor, for this construction in the "package" deal arranged by Thomas. Since the owner of the land and the builder were one and the same that transaction was covered by Rule 12A-4.13(22) F.S.A. above quoted and documentary tax stamps were required on the value of the lot and home. As noted above the Rule excludes the instant transaction from documentary tax stamps on the home to be built subsequent to the delivery of the deed.
From the foregoing it is concluded that as the tax attached at the time the deed was delivered, and the net consideration paid for the typical lot conveyed
was $3500. The documentary stamp taxes paid by petitioner on these deeds was based upon the consideration paid for the realty and was therefore proper. It is therefore,
$2,449.70 be rescinded.
DONE and ENTERED this 8th day of November, 1976 in Tallahassee, Florida.
K. N. AYERS Hearing Officer
Division of Administrative Hearings Room 530 Carlton Building Tallahassee, Florida 32304
