Florida Documentary Stamp Tax on Unsecured Loans and Risks of Non-Payment of Tax.

Last updated April 22, 2025

The Florida documentary stamp tax is a tax imposed on written obligations in Florida. It most commonly applies to deeds transferring Florida real estate and Florida loan obligations. This article specifically does not address real estate deeds (or similar documents) or real estate secured transactions (like mortgages), and it is limited to the application of the documentary stamp tax to written obligations to pay money. This article is only a broad overview and is not a substitute for legal or accounting advice. The law is subject to revision and readers should consult a Florida attorney for advice specific to their situation.

Key Takeaways

• Unsecured loan agreements are generally taxable.

• Lenders pay doc stamp taxes on unsecured/non-real estate loan agreements directly to the Florida Department of Revenue, unlike taxes on mortgages or deeds, which are paid to county clerks when mortgages or deeds are recorded.

• Failing to pay doc stamp taxes results in penalties and interest being assessed against taxpayers.

• Failing to pay doc stamp taxes on unsecured loans results in the loans being unenforceable in much of the state of Florida, and having uncertain legal status in other parts of Florida. This can be cured by after the fact by ensuring that the doc stamp taxes are appropriately paid.

• Therefore lenders, particularly those who securitize or sell their unsecured Florida loans after origination, should be especially careful to comply with their Florida documentary stamp tax obligations, as failing to pay doc stamp tax obligations on Florida loans will create toxic, unenforceable loans until the doc stamp taxes are paid.

To be taxable, an obligation must be a 1) written 2) promise to pay money which is fixed and absolute at the time of execution and 3) must be signed by the obligor or maker. F.A.C. Rule 12B-4.053, 4.054. Accordingly, most ordinary promissory notes and traditional loan agreements are taxable. The tax technically applies to the written obligation, and the lender and borrower are equally liable for the tax, unless one or the other is exempt.

The documentary stamp tax is $0.35 per $100 of the total obligation, or 0.35%. For non-mortgages, it is capped at $2,450. The tax is generally assessed on the principal amount due, but not interest. That is because the amount of interest payable over the life of the loan is generally not known at the onset of a loan, as commonly the loan principal can be prepaid before the due date. However, the documentary stamp tax would apply to interest that is identified in the loan document, when interest cannot be avoided by prepaying principal.

The documentary stamp tax on loans not secured by mortgages is paid directly to the Florida Department of Revenue. There is no additional tax on promissory notes or loans when a mortgage has been recorded and the documentary stamp tax has already been paid on the mortgage. For mortgages, the normal practice is that the title office or law firm handling the mortgage closing will calculate the documentary stamp tax on the loan and ensure that the documentary stamp tax has been paid, which will be paid to the clerk of court where the mortgage is being recorded. The clerk will then transmit the documentary stamp taxes to the Department.

On all other transactions where a documentary stamp tax is otherwise due, it is up to one of the parties to ensure that the proper documentary stamp tax is paid to the Florida Department of Revenue. The typical practice is that the lender calculates the amount due, collects payment from the borrower, and makes payment to the Department. Common situations where the lender collects payment from the borrower and makes payment to the Florida Department of Revenue include installment loans (most commonly automobile loans), general consumer loans, and bank loans that are not secured by real estate.

Lenders without significant experience lending in Florida sometimes fail to pay the documentary stamp tax. In my experience, out of state lenders will comply with their obligations to pay the documentary stamp tax on mortgages, because the office handling the title closing (for mortgages) will ensure that the appropriate taxes are paid. Thus, the out of state lender who always pays the documentary stamp taxes on real estate loans without fail will often simultaneously fail to pay the documentary stamp tax on all other loans, since no title office is overseeing other loans. Likewise, out of state lenders (such as indirect auto lenders) are often compliant without issue on loans initially originated by experienced in-state lenders (like auto dealers) because in-state lenders are familiar with the documentary stamp tax and the need to pay it.

Since an agreement must be in writing to be taxable, oral agreements are not taxable; nor are agreements not signed by the obligated parties; nor are obligations which are not fixed and absolute. The amount of money due specifically must be fixed and absolute. Thus, a revolving line of credit agreement in of itself, which does not specify any particular amount due, is not taxable. (However, a mortgage securing a revolving line of credit would be separately taxable).

The following are handful of common strategies to structure a transaction to avoid incurring liability for the Florida documentary stamp tax, and risks associated with failing to pay the tax.

Execute out of state and do not bring into Florida for collection.

The Florida documentary stamp tax does not apply to promissory notes or loan documents that are executed out of state and also never brought into Florida for collection. Therefore a loan by an out of state lender with a Florida borrower will not be taxed if the Florida borrower executes out of state and the loan is never brought into Florida. To properly document out of state execution, under the Florida Administrative Code, the Department of Revenue will expect to see an affidavit identifying the place of execution. F.A.C. Rule 12B-4.053(34).

Please note that generally loans by Florida borrowers with out of state lenders are taxable under long standing Florida law. Plymouth Citrus Growers Ass'n v. Lee, 27 So. 2d 415, 416 (Fla. 1946) (note was taxable in Florida when “delivered to a bank in South Carolina” since it was made in Florida, the loan was used in Florida, and it was in all essential factors a Florida transaction).

Therefore out of state lenders that lend to Florida residents without charging or collecting the documentary stamp tax do so at considerable peril for reasons discussed below.

Do not include a definitive loan amount.

If the loan is structured as a revolving line of credit, then it is not taxable as there is no particular amount identified in the promise to pay. This strategy does not apply to any loan which will be secured through a filed or recorded written security agreement, such as a mortgage. The separate filed or written security agreement will be taxable regardless of the taxability of the revolving loan agreement.

Double check chapter 201 of the Florida Statutes

Florida Statute Chapter 201 has a number of exemptions or exceptions for very specific loan types, such as credit cards, certain kinds of student loans, obligations to the State of Florida or its subdivisions, SBA loans, and disaster loans. Determine if any of those exceptions apply.

Obtain an opinion from the Florida Department of Revenue

If you are not sure if your proposed documents will require payment of the documentary stamp tax, you may seek a written advisory opinion from the Florida Department of Revenue confirming whether the documentary stamp tax applies to your documents. A prior opinion may provide guidance.

Be very careful about non-payment of taxes.

If there is any doubt whatsoever whether your documents are taxable, as discussed above, strongly considering seeking an advisory opinion from the Florida Department of Revenue before proceeding with the belief that your documents are not taxable. This is particularly important if your documents are going to be used on a high volume of transactions as there are severe consequences associated with non-payment.

First, since the documentary stamp tax is imposed on the transaction and therefore is an obligation by all parties to the transaction, the Florida Department of Revenue can pursue a lender if the tax is not paid. In fact, lenders who engage in at least 5 transactions a month are required to register with the Department and file regular returns (how frequently will depend on the amount of taxes that will be typically paid - the obligation will be monthly, quarterly, or annually.)

By statute, the failure to pay timely taxes results in an up to 50 percent penalty on the entire unpaid principal amount of the tax. In addition, interest is imposed at a floating rate.

The industry standard is that lenders require borrowers pay the tax. Any lender who fails to charge the tax and is later audited by the Department will have a lot of explaining to do to its shareholders as to why it failed to properly collect a tax which will now have to be paid out of the lender's own assets (plus penalties and interest!), instead from borrowers, which is how all other lenders obtain funding to pay the tax. To make matters worse, if a lender was failing to file documentary stamp tax returns, the statute of limitations will effectively stretch back indefinitely, as the Florida tax statute of limitations will not begin running if a required return has not been filed. Fla. Stat. Section 95.091(3)(a).

Second, there are a number of Florida state cases that hold that a loan is not enforceable until the documentary stamp tax is paid. There are some cases that only a security interest (like a mortgage) is unenforceable until the documentary stamp tax is paid, but the issue is currently subject to a "split" among the Florida District Courts of Appeals, which hear appeals from trial courts, with the Third and Fifth Districts currently holding that unsecured notes are unenforceable until the tax is paid. WRJ Dev., Inc. v. N. Ring Ltd., 979 So.2d 1046 (Fla. 3rd DCA 2008); Somma v. Metra Elecs. Corp., 727 So.2d 302 (Fla. 5th DCA 1999). The Fourth District has held that only a mortgage (but not the note) would be unenforceable. Glenn Wright Homes (Delray) LLC v. Lowy, 10 So. 3d 693 (Fla. 4th DCA 2009).

The Third and Fifth District currently include some of Florida's largest cities and counties, such as Miami-Dade and Duval (Jacksonville), so any lender doing business in those jurisdictions without paying documentary stamp taxes is really in hot water as to loans it has failed to pay the documentary stamp taxes on. Loans anywhere else in the state, other than the Fourth District (which covers Broward and some neighboring counties), would have an uncertain status until the district court of appeal with appropriate jurisdiction makes a decision or the Florida Supreme Court resolves the current split.

While this is all bad news for any lender who has failed to ensure payment of documentary stamp taxes on taxable documents, it is even worse for lenders who have securitized or sold their loans, as there will be ripple effects. The lender would have sold worthless, unenforceable loans to others and given worthless collateral to its own secured lenders, essentially originating "toxic" loans. This likely violates loan covenants and securitization agreements, and quite possibly could result in violations of securities laws and banking laws and regulations. Failing to pay the tax would also expose the lender to liability under various consumer protection state and federal laws, as any borrower in the Third and Fifth District could plausibly argue that the lender has sought payment on an illegal, unenforceable loan.

The bottom line is that the collateral consequences of non-payment of the documentary stamp tax are so significant, so any lender that fails to pay the tax is acting recklessly, particularly given the relatively nominal expense of the tax relative to the size of the loan and the typical practice of having the borrower pay the tax.

If you are a lender who has found yourself in a situation where you have an outstanding loan where the documentary stamp tax went unpaid, the very good news is that a lender can cure non-payment and ensure enforceability by simply making sure the appropriate tax is paid. Somma, 727 So.2d at 305. Any lender who has learned that it has failed to make payment on past documentary stamp tax obligations should be sure to cure through prompt payment to ensure that its loans are enforceable, minimize liability exposure, and to get in compliance with Florida's tax laws.

Conclusion

While there are certain strategies that may be employed to avoid the imposition of the Florida documentary stamp tax, borrowers and lenders should take care to avoid violating the law due to the considerable risks associated with non-payment.