vs. ) CASE NO. 75-2156
Respondent. )
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, G. Steven Pfeiffer, held a public hearing in this case on March 18, 1976, in Miami, Florida.
For Petitioner: Charles H. Johnson and James Farrell
For Respondent: Caroline C. Mueller
On December 31, 1975, W. A. R. O. Investments Corporation, a Florida corporation ("Petitioner" hereafter), filed a petition requesting a formal proceeding for the purpose of reviewing the validity of a proposed documentary stamp tax assessment, documentary surtax assessment and penalties issued by the Florida Department of Revenue ("Respondent" hereafter) on October 23, 1975. The Respondent filed its answer to the petition on January 12, 1976. The final hearing was scheduled in accordance with a notice dated January 29, 1976. No witnesses were called at the hearing. Petitioner's Exhibits 1 - 7, and Respondent's Exhibit 1 were offered into evidence and were received. The parties have submitted Legal Memoranda.
On or about July 7, 1967, Raymond M. Tonks leased certain property located in Dade County, Florida, from E. L. Phillips, Jr. and Ruth P. Phillips. A copy of the lease executed by the Phillipses as Lessors, and Tonks as Lessee, was received in evidence at the hearing as Petitioner's Exhibit 2. The property is described in the lease. The term of the lease was a period of five years, commencing from the date, of execution. The Lease Agreement contained an option to purchase which could be exercised by the Lessee at any time during the term of the lease.
On or about July 25, 1972, the Phillipses and Tonks entered into a Lease Extension Agreement, which extended the terms of the previous lease agreement through July 9, 1975. A copy of this agreement was received in evidence as Petitioner's Exhibit 3. The Lease Extension Agreement explicitly included the option to purchase.
On or about May 6, 1975, Tonks and the Petitioner entered into an agreement which they styled "Assignment of Lease". A copy of this agreement was received in evidence as Petitioner's Exhibit 1. Through the Assignment of Lease, Tonks assigned all of his interest in the earlier lease and Lease Extension Agreements to the Petitioner. Tonks explicitly warranted in the agreement that the option to purchase could be exercised by the Petitioner. The term of the lease in the Lease Extension had approximately two months to run at the time that Tonks and Petitioner entered into the agreement. Petitioner paid
$275,000 for the interests that it received from Tonks. See: Petitioner's Exhibit 4. Tonks took a promissory note for a substantial portion of the purchase price. See: Petitioner's Exhibit 5. Petitioner placed no documentary stamp tax or documentary surtax stamps on the Assignment of Lease. Petitioner executed the option to purchase shortly after it received the Assignment of Lease from Tonks. The sale transaction between the Petitioner and the Philipses was closed on August 8, 1975. See Petitioner's Exhibit 6 and 7.
The Respondent took the position that the documentary stamp tax and surtax stamps should have been placed on the "Assignment of Lease" so, as to reflect a $275,000 consideration. Accordingly the Respondent issued a Proposed Notice of Assessment of Tax and Penalty to the Petitioner on October 23, 1975. The proposed assessment included a penalty in the amount of the total taxes which Respondent contended were due. By letter dated December 11, 1975 from a representative of the Respondent to counsel for the Petitioner, the Respondent stated that the assessment was made against the assignment of lease and not against the option to purchase contained within the lease. Petitioner filed this action in order to contest the validity of the assessment. Petitioner contends that the consideration paid to Tonks was for the option to purchase, rather than for the assignment of lease. Respondent contends that the largest possible consideration that could be attributed to the assignment of lease is the amount of rent that would have been due under the lease for the unexpired term of the lease.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter of this case and over the parties.
The documentary stamp tax and surtax are imposed on the document itself, and the form and face of the document govern the taxability. Choctawatchee Electric Cooperative, Inc. v. Green 132 So.2d 556 (Fla. 1961); State Department of Revenue v. McCoy Motel, Inc. 302 So.2d 440 (1 DCA Fla. 1974). In the McCoy Motel case, the court stated: (at page 442)
"The taxes imposed by the documentary stamp tax statute on promissory notes and written obligations to pay (Ch. 201, Florida Statutes) are excise taxes on the documents themselves - and not upon the transaction contemplated by - the documents. . . The liability to pay the documentary stamp tax, as well as the amount
of the tax, is to be solely determined by the form and face of the instrument and not by proof of extrinsic facts." (Citations omitted).
The agreement which is the subject matter of this case appears on its face to be an assignment of lease in title, form and substance. The fact that the original lease agreement expired by its terms within two months of the time that the assignment of lease was executed supports the Petitioner's contention that the consideration paid by the Petitioner was for the option to purchase, not for the remaining period of the lease. As noted above, however, this extrensic evidence cannot serve to vary what is evident from the face of the document itself.
The documentary stamp tax and surtax statutes impose taxes on documents through which an interest in land is conveyed. Fla. Stat. Sections 201.02,
201.021. A leasehold interest is an interest in land as contemplated in the statutes. DeVore v. Guy, 39 So.2d 796 (Fla. 1949); DeVore v. Lee, 158 Fla. 608,
30 So.2d 924 (1947); Dundee Corporation v. Lee, 156 Fla. 699, 24 So.2d 234 (1945). An assignment of lease is also such a transaction, and documentary stamp taxes and surtaxes are' due on lease assignments. Op. Atty. Gen. 074.350 (Nov. 13, 1974).
The proposed assessment issued by the Respondent to the Petitioner on October 23, 1975, is correct and accurate, and should be affirmed and assessed against the Petitioner.
