Question: Is the transfer of a vehicle from an llc to an individual in Florida exempt from Florida sales tax?



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SUMMARY
QUESTION: Is the transfer of a vehicle from an LLC to an individual in Florida exempt from Florida sales tax?
ANSWER: The transfer of a vehicle from an LLC to an individual in Florida is subject to Florida sales tax.

December 28, 2007


XXX
XXX
XXX

Re: Technical Assistance Advisement 07A-047

Sales and Use Tax – Vehicle title transfer

Section 212.06, Florida Statutes [F.S.]

Section 608.471, F.S.

Section 608.4227, F.S.

Section 608.4228, F.S.

Section 608.4229, F.S.

Rule 12A-1.007, Florida Administrative Code [F.A.C.]

XXX [the taxpayer]


XXX [the LLC]
Dear :
This is a response to your email of December 11, 2007, requesting a Technical Assistance Advisement (TAA) regarding the above-referenced matter. This response to your request constitutes a TAA under Chapter 12-11, Florida Administrative Code (F.A.C.), and is issued to you under the authority of Section 213.22, Florida Statutes (F.S.).

ISSUE

Whether the transfer of a vehicle from an LLC to an individual in Florida is exempt from Florida sales tax.


FACTS
The taxpayer is the sole owner of a limited liability company [the LLC] that is registered in Pennsylvania. The taxpayer wishes to transfer a motor vehicle owned by the LLC into the taxpayer’s personal name. The taxpayer will then register the vehicle in his name in Florida.

REQUESTED ADVISEMENT

The taxpayer requests that the Department issue a TAA stating that the transfer of a vehicle from an LLC to an individual in Florida is exempt from Florida sales tax.



TAXPAYER’S POSITION

The taxpayer states in his email of December 11, 2007:
… Florida does not specify anything in particular dealing with an LLC[,] only full corporations which an LLC is not. Tax filing for an LLC is done on one[‘]s own personal income tax form using a schedule C[,] and as such the Federal government recognizes any property owned by the LLC as property owned by myself personally. They are not two separate identities for tax purposes and as such should be the same within the State of Florida as it is within the Commonwealth of Pennsylvania.

APPLICABLE LAW

Section 212.06(10), F.S., provides, in part:


No title certificate may be issued on any … motor vehicle, or other vehicle, or, if no title is required by law, no license or registration may be issued for any … motor vehicle, or other vehicle, unless there is filed with such application for title certificate or license or registration certificate a receipt, issued by an authorized dealer or a designated agent of the Department of Revenue, evidencing the payment of the tax imposed by this chapter where the same is payable. A presumption of sales and use tax applicability is created if the motor vehicle is registered in this state…. All transfers of title to … motor vehicles, and other vehicles are taxable transactions, unless expressly exempt under this chapter. (emphasis supplied)
Rule 12A-1.007(25)(d), F.A.C., provides, in part:
When title to [a] … motor vehicle, or other vehicle of a class or type required to be registered, licensed, titled, or documented in this state or by the United States Government is transferred from an individual, who may or may not be a stockholder, to a corporation, or from a corporation to an individual who may or may not be a stockholder, or from one corporation to another, or from a partnership to a corporation, or from a corporation to a partnership, it is presumed that a consideration flows from the transferee to the transferor, and if no consideration is stated, then it shall be presumed to be the fair market value of the vehicle….
Section 608.471(3), F.S., provides, in part:
Single-member limited liability companies and other entities that are disregarded for federal income tax purposes must be treated as separate legal entities for all non-income-tax purposes….
Section 608.4227(1), F.S., provides:
Except as provided in this chapter, the members, managers, and managing members of a limited liability company are not liable, solely by reason of being a member or serving as a manager or managing member, under a judgment, decree, or order of a court, or in any other manner, for a debt, obligation, or liability of the limited liability company;
Section 608.4228(1), F.S., provides:
A manager or a managing member shall not be personally liable for monetary damages to the limited liability company, its members, or any other person for any statement, vote, decision, or failure to act regarding management or policy decisions by a manager or a managing member, unless:

(a)  The manager or managing member breached or failed to perform the duties as a manager or managing member; and

(b)  The manager's or managing member's breach of, or failure to perform, those duties constitutes any of the following:

1.  A violation of the criminal law, unless the manager or managing member had a reasonable cause to believe his or her conduct was lawful or had no reasonable cause to believe such conduct was unlawful. A judgment or other final adjudication against a manager or managing member in any criminal proceeding for a violation of the criminal law estops that manager or managing member from contesting the fact that such breach, or failure to perform, constitutes a violation of the criminal law, but does not estop the manager or managing member from establishing that he or she had reasonable cause to believe that his or her conduct was lawful or had no reasonable cause to believe that such conduct was unlawful.

2.  A transaction from which the manager or managing member derived an improper personal benefit, either directly or indirectly.

3.  A distribution in violation of s. 608.426.

4.  In a proceeding by or in the right of the limited liability company to procure a judgment in its favor or by or in the right of a member, conscious disregard of the best interest of the limited liability company, or willful misconduct.

5.  In a proceeding by or in the right of someone other than the limited liability company or a member, recklessness or an act or omission which was committed in bad faith or with malicious purpose or in a manner exhibiting wanton and willful disregard of human rights, safety, or property.


Section 608.4229(1), F.S., provides:
Subject to such standards and restrictions, if any, as are set forth in its articles of organization or operating agreement, a limited liability company may, and shall have the power to, but shall not be required to, indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever.

DISCUSSION AND RESPONSE

Section 212.06(10), F.S., provides that all transfers of title to motor vehicles in the state of Florida are taxable, unless specifically exempt under Chapter 212, F.S. Rule 12A-1.007(25)(d), F.A.C., provides that when title to a motor vehicle of a class or type required to be registered in Florida is transferred from a corporation to an individual, it is presumed that a consideration flows from the transferee to the transferor. If no consideration is stated in the transaction, then it is presumed that the consideration equals the fair market value of the vehicle.

A transfer from a corporation to an individual is taxable, because the corporation exists independently from its members and directors and protects these individuals from liability. See, for example, s. 607.0831(1), F.S. Accordingly, the transfer of a vehicle from a corporation to a director of the corporation is a transfer of property between two distinct persons. See s. 212.02(12), F.S.

The taxpayer attempts to distinguish between a transfer made by a corporation and a similar transfer made by an LLC by arguing that a single-member LLC and its owner “are not two separate identities for tax purposes and as such should be the same within the State of Florida as it is within the Commonwealth of Pennsylvania.” The taxpayer states that “[t]ax filing for an LLC is done on one[‘]s own personal income tax form using a schedule C[,] and as such the Federal government recognizes any property owned by the LLC as property owned by myself personally.” However, the taxpayer’s belief is misplaced. A single-member limited liability company that is disregarded as an entity separate from its owner for federal income tax purposes is treated as a separate legal entity for all non-income-tax purposes under Florida law. See s. 608.471(3), F.S. Moreover, a member or manager of an LLC receives the same protections under Chapter 608, F.S., that are afforded to a director of a corporation under Chapter 607, F.S.

For example, s. 608.4227(1), F.S., provides that the members, managers, and managing members of an LLC are not liable, solely by reason of being a member or serving as a manager or managing member, under a judgment, decree, or order of a court, or in any other manner, for a debt, obligation, or liability of the LLC. Section 608.4228(1), F.S., provides that a manager or managing member of an LLC is not personally liable for monetary damages to the LLC, its members, or any other person for any statement, vote, decision, or failure to act regarding management or policy decisions by a manager or a managing member, unless the manager or managing member breaches or fails to perform his or her duties as a manager or managing member, and the manager’s or managing member’s breach of, or failure to perform, those duties constitutes one of the violations listed in s. 607.4228(1)(b), F.S. Section 608.4229(1), F.S., provides that an LLC has the power to indemnify and hold harmless any member or manager from and against any and all claims and demands whatsoever.

Florida law considers the taxpayer to be a separate person from the LLC that he owns and manages. Consequently, when the taxpayer transfers a vehicle, owned by his LLC, into his personal name, the taxpayer must pay Florida sales tax when the vehicle is registered in Florida. See Rule 12A-1.007(25)(d), F.A.C., and s. 212.06(10), F.S.



CONCLUSION

The transfer of a vehicle from an LLC to an individual in Florida is subject to Florida sales tax.

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.

If you have any further questions with regard to this matter and wish to discuss them, you may contact me directly at (850) 488-8565.

Sincerely,


Matt Crockett

Senior Tax Specialist



Technical Assistance & Dispute Resolution

Record ID: 39089


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