Florida Regulations 12C-1.011: Tax Imposed
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(1) The following activities, notwithstanding others within the meaning of taxable privileges described in Florida Statutes § 220.02, will be construed as conducting business, earning or receiving income in Florida, or constitute those activities of a resident or citizen of Florida for purposes of this tax, and corporations participating therein are subject to taxation unless exempted by the constitution or the laws of the United States or of Florida.
(a) Incorporation in Florida. A Florida corporation is required to file a Florida corporate income/franchise tax return even though it has no physical existence or activity that takes place in Florida and it does business exclusively in other states or countries.
(b) Maintaining an office or other place of business in Florida. If a salesman holds out his home as an office, the corporation will be deemed to maintain an office in Florida whether or not the salesman is reimbursed for “”office space.””
(c)1. Owning or leasing real or tangible personal property in this state.
2. Out-of-state leasing companies will become subject to the tax if tangible personal property that is leased to individuals or corporations, residing or existing outside the state, is transferred to a Florida location. A lessee company that routinely brings property into Florida will create a presumption that the leasing company’s property was brought into Florida. Unless the leasing company can show the property did not enter this state the leasing company will be subject to tax. Thus, leasing aircraft to commercial airlines that routinely fly aircraft into Florida will subject the leasing company to the tax. If the leasing company cannot determine whether the specific aircraft leased is flying into Florida, there will be a presumption that the aircraft has flown into the state if the airline that leased the aircraft routinely flies into Florida. However, if the leasing corporation can demonstrate that its aircraft are not flown into the state, the leasing companies will not be subject to Florida tax. Similarly, leasing railroad cars to shippers who, in turn, engage the services of railroad companies to haul the cars, which travel through Florida, will also subject the leasing company to tax within this state.
3. If a lease is treated as a conditional sales contract for federal tax purposes, the lessor shall not become subject to the Florida corporate income/franchise tax solely because of this paragraph. The making of a safe harbor election for federal tax purposes will not affect the determination for Florida tax purposes of whether the substance of the lease is a conditional sales contract.
(d) Maintaining within Florida a research facility for the exclusive use of a company.
(e) Maintaining in Florida an inventory or merchandise or material for sale, distribution, or manufacture, whether in public, owned, or rented warehouses.
(f) Maintaining in Florida an inventory of tangible personal property on consignment to dealers or agents for sale or display.
(g) Displaying the corporation’s merchandise in leased space on a prolonged or recurring basis.
(h) Assembling, installing, servicing, or repairing the taxpayer’s products in Florida by its agents or employees.
(i) Accepting orders in Florida by its employees.
(j) Selling goods through mobile stores (such as trucks with driver sales-persons).
(k) Making sales that are approved in the state by “”independent contractors”” who do not hold themselves out as engaged in selling, or soliciting orders for the sale of more than one principal; or making sales through the use of representatives in this state, when activities engaged in exceed those protected by P.L. 86-272 (15 U.S.C. ss. 381-384), which is incorporated by reference in Fl. Admin. Code R. 12C-1.0511
(l) Having employees that are present in Florida and that perform functions other than the solicitation of sales within Florida.
(m) Performing any service within Florida.
(n) Having corporate officers who have permanent or extended temporary residency (3 months in the aggregate of a 12 month period) within Florida who make management decisions while residing in Florida. If the only officer of the corporation or a key officer of the corporation is residing within Florida, management of the corporation is presumed to be occurring within Florida.
(o) Selling, managing, or providing consulting services in Florida for intangible assets. (Example, investment companies, trusts, brokers.) This does not include out-of-state corporations whose only activity is to manage out-of-state assets for Florida residents. For example, a New York investment company that continues to manage investments for a person who is now a Florida resident will not be subject to the tax for this limited connection with Florida.
(p)1. Selling or licensing the use of intangible property in Florida for taxable years beginning on or after January 1, 1994. For example, licensing the use of a trade name or trademark or patent to a business entity located in Florida will subject a corporation to the corporate income tax.
2. Corporations that during tax years beginning before January 1, 1994, not only licensed the use of a trade name or trademark to a business entity located in Florida, but also provided management services within Florida (including directing the purchases of supplies, on-site inspections, and training seminars within Florida) were subject to the Florida corporate income tax for all years these services were performed.
(q) Conducting seminars in Florida.
(r)1. Conducting management training courses for franchisees or affiliated corporations in Florida.
2. Regularly or systematically visiting franchisees or affiliated corporations in Florida in order to advise on business matters.
(s) Earning or receiving interest by a financial organization, as described in Florida Statutes § 220.15(6), from loans secured by real or tangible property located in Florida irrespective of place of receipt.
(t) Operating professional sports teams which engage in professional sports activities in Florida. There are a number of factors which are indicative of whether out-of-state corporations which engage in professional sports activities in Florida are conducting business or deriving income within the meaning and intent of Florida Statutes § 220.11(1)
1. Prior to the regular playing season the team may provide training for its athletes (players) including coaches, staff, etc., at facilities located in Florida. In the regular course of training, the teams will engage in practice or exhibition games in Florida.
2. During the regular playing season the team will play Florida-based teams in Florida.
3. After the close of the regular playing season the team may participate in playoff or championship games in Florida.
4. The corporation may have owned or rented real and tangible property in Florida for the conduct of training or other activities.
5. The corporation shares in gate receipts from games its teams play in Florida.
6. The corporation shares in radio and television receipts from local stations and from networks pursuant to the league contract, some portion of which is attributable to games played in Florida.
(u) Transportation companies traveling in Florida. All corporate transportation companies are subject to the Florida corporate income tax and are required to file Florida corporate income tax returns whenever they have revenue miles in Florida, as the term “”revenue miles”” is defined in Florida Statutes § 220.151 Transportation companies that deliver or pick up goods in Florida, as well as corporations that do not have a point of origin or termination within Florida, are subject to the Florida Income Tax Code whenever they have revenue miles in Florida.
(v) Foreign (out-of-state) corporations not otherwise subject to the law but who are partners or members of Florida partnerships or joint ventures are subject to the law by virtue of their membership in such partnerships or joint ventures. Florida partnerships are partnerships doing business, deriving income, or existing in Florida. A partnership will be considered to be existing within Florida if an active partner who participates in management decisions has permanent or extended temporary residency (for 3 months in the aggregate of a 12 month period) within Florida. If an active partner is residing within Florida, management of the partnership is presumed to be occurring within Florida.
(w) Insurers.
1. The issuing of policies of insurance or contracts of annuity under a certificate of authority issued by the Florida Office of Insurance Regulation where the policies or contracts are to be performed in Florida or where the policies insure or cover persons, property, subjects or risks located or resident in Florida.
2. The collecting of premiums on policies of insurance or contracts of annuity on such persons, property, subjects, or risks as described in subparagraph 1. above, when such policies were initially issued by an insurer possessing a certificate of authority issued by the Florida Office of Insurance Regulation.
3. The issuing of policies of insurance or contracts of annuity or the collecting of premiums without possessing a certificate of authority issued by the Florida Office of Insurance Regulation, when the issuing or collecting insurer would have been required to obtain a certificate of authority to engage in those activities.
4. The entering into contracts of reinsurance when such contracts of reinsurance are placed with an approved reinsurer by a ceding insurer domiciled or commercially domiciled in Florida as defined in chapter 624, F.S., or by either an artificial entity domiciled or resident in Florida or a political subdivision of Florida where either the artificial entity or the political subdivision is engaged in self insurance.
5. Surplus lines insurers with an office or employees located in Florida.
(2) The following activities will not, in themselves, subject a foreign (non-Florida) corporation to the income/franchise tax. However, these exempted activities will not relieve a corporation from taxation if the corporation is otherwise subject to taxation.
(a) Maintaining an account in a Florida bank or savings association.
(b) Holding stock in a Florida corporation or a corporation that is subject to the Florida corporate income/franchise tax.
(c) Having an independent Florida accountant, attorney, or bookkeeper maintain accounting records, audit, or do tax preparation.
(d) Salesmen of the corporation soliciting sales of tangible personal property within Florida, provided none of the activities itemized in subsection (1), or any other activities which will subject the corporation to tax, are performed. The fact that the salesmen reside within Florida will not subject the corporation to the tax.
(e) Salesmen maintaining samples to demonstrate the product or give free samples to a customer. The samples may not be sold.
(f) Providing company cars to salesmen.
(3) Cross reference: Fl. Admin. Code R. 12C-1.022
(4) A taxpayer’s regular tax liability is equal to 5 1/2 percent of the taxpayer’s net income for the taxable year. However, Florida imposes a corporate alternative minimum tax (AMT). Corporations which pay federal AMT are required to compute Florida AMT. These corporations must compute both regular tax liability and AMT liability. The Florida tax due is the greater of these two amounts. Taxpayers use federal alternative minimum taxable income after the federal exemption allowed under s. 55(d)(2), I.R.C., which is incorporated by reference in Fl. Admin. Code R. 12C-1.0511, as the starting point in computing Florida AMT. The Florida additions, subtractions and $5,000 exemption are generally the same regardless of the starting point. However, the amounts for some additions or subtractions may differ. For example, there is an adjustment to the addition of interest that is exempt for federal tax purposes or the addback of the federal net operating loss. The Florida AMT rate is 3.3 percent of Florida AMT net income.
Cross reference: subsection 12C-1.013(18), F.A.C.
Rulemaking Authority 213.06(1), 220.51 FS. Law Implemented 220.11, 220.12, 220.15, 220.151, 220.22 FS. History-New 1-19-73, Amended 10-20-73, 8-23-76, 12-18-83, Formerly 12C-1.11, Amended 12-21-88, 1-30-90, 4-8-92, 5-17-94, 3-18-96, 3-13-00.
Terms Used In Florida Regulations 12C-1.011
- Annuity: A periodic (usually annual) payment of a fixed sum of money for either the life of the recipient or for a fixed number of years. A series of payments under a contract from an insurance company, a trust company, or an individual. Annuity payments are made at regular intervals over a period of more than one full year.
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Contract: A legal written agreement that becomes binding when signed.
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Intangible property: Property that has no intrinsic value, but is merely the evidence of value such as stock certificates, bonds, and promissory notes.
- Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent). Source: OCC
- Partnership: A voluntary contract between two or more persons to pool some or all of their assets into a business, with the agreement that there will be a proportional sharing of profits and losses.
- Personal property: All property that is not real property.
(b) Maintaining an office or other place of business in Florida. If a salesman holds out his home as an office, the corporation will be deemed to maintain an office in Florida whether or not the salesman is reimbursed for “”office space.””
(c)1. Owning or leasing real or tangible personal property in this state.
2. Out-of-state leasing companies will become subject to the tax if tangible personal property that is leased to individuals or corporations, residing or existing outside the state, is transferred to a Florida location. A lessee company that routinely brings property into Florida will create a presumption that the leasing company’s property was brought into Florida. Unless the leasing company can show the property did not enter this state the leasing company will be subject to tax. Thus, leasing aircraft to commercial airlines that routinely fly aircraft into Florida will subject the leasing company to the tax. If the leasing company cannot determine whether the specific aircraft leased is flying into Florida, there will be a presumption that the aircraft has flown into the state if the airline that leased the aircraft routinely flies into Florida. However, if the leasing corporation can demonstrate that its aircraft are not flown into the state, the leasing companies will not be subject to Florida tax. Similarly, leasing railroad cars to shippers who, in turn, engage the services of railroad companies to haul the cars, which travel through Florida, will also subject the leasing company to tax within this state.
3. If a lease is treated as a conditional sales contract for federal tax purposes, the lessor shall not become subject to the Florida corporate income/franchise tax solely because of this paragraph. The making of a safe harbor election for federal tax purposes will not affect the determination for Florida tax purposes of whether the substance of the lease is a conditional sales contract.
(d) Maintaining within Florida a research facility for the exclusive use of a company.
(e) Maintaining in Florida an inventory or merchandise or material for sale, distribution, or manufacture, whether in public, owned, or rented warehouses.
(f) Maintaining in Florida an inventory of tangible personal property on consignment to dealers or agents for sale or display.
(g) Displaying the corporation’s merchandise in leased space on a prolonged or recurring basis.
(h) Assembling, installing, servicing, or repairing the taxpayer’s products in Florida by its agents or employees.
(i) Accepting orders in Florida by its employees.
(j) Selling goods through mobile stores (such as trucks with driver sales-persons).
(k) Making sales that are approved in the state by “”independent contractors”” who do not hold themselves out as engaged in selling, or soliciting orders for the sale of more than one principal; or making sales through the use of representatives in this state, when activities engaged in exceed those protected by P.L. 86-272 (15 U.S.C. ss. 381-384), which is incorporated by reference in Fl. Admin. Code R. 12C-1.0511
(l) Having employees that are present in Florida and that perform functions other than the solicitation of sales within Florida.
(m) Performing any service within Florida.
(n) Having corporate officers who have permanent or extended temporary residency (3 months in the aggregate of a 12 month period) within Florida who make management decisions while residing in Florida. If the only officer of the corporation or a key officer of the corporation is residing within Florida, management of the corporation is presumed to be occurring within Florida.
(o) Selling, managing, or providing consulting services in Florida for intangible assets. (Example, investment companies, trusts, brokers.) This does not include out-of-state corporations whose only activity is to manage out-of-state assets for Florida residents. For example, a New York investment company that continues to manage investments for a person who is now a Florida resident will not be subject to the tax for this limited connection with Florida.
(p)1. Selling or licensing the use of intangible property in Florida for taxable years beginning on or after January 1, 1994. For example, licensing the use of a trade name or trademark or patent to a business entity located in Florida will subject a corporation to the corporate income tax.
2. Corporations that during tax years beginning before January 1, 1994, not only licensed the use of a trade name or trademark to a business entity located in Florida, but also provided management services within Florida (including directing the purchases of supplies, on-site inspections, and training seminars within Florida) were subject to the Florida corporate income tax for all years these services were performed.
(q) Conducting seminars in Florida.
(r)1. Conducting management training courses for franchisees or affiliated corporations in Florida.
2. Regularly or systematically visiting franchisees or affiliated corporations in Florida in order to advise on business matters.
(s) Earning or receiving interest by a financial organization, as described in Florida Statutes § 220.15(6), from loans secured by real or tangible property located in Florida irrespective of place of receipt.
(t) Operating professional sports teams which engage in professional sports activities in Florida. There are a number of factors which are indicative of whether out-of-state corporations which engage in professional sports activities in Florida are conducting business or deriving income within the meaning and intent of Florida Statutes § 220.11(1)
1. Prior to the regular playing season the team may provide training for its athletes (players) including coaches, staff, etc., at facilities located in Florida. In the regular course of training, the teams will engage in practice or exhibition games in Florida.
2. During the regular playing season the team will play Florida-based teams in Florida.
3. After the close of the regular playing season the team may participate in playoff or championship games in Florida.
4. The corporation may have owned or rented real and tangible property in Florida for the conduct of training or other activities.
5. The corporation shares in gate receipts from games its teams play in Florida.
6. The corporation shares in radio and television receipts from local stations and from networks pursuant to the league contract, some portion of which is attributable to games played in Florida.
(u) Transportation companies traveling in Florida. All corporate transportation companies are subject to the Florida corporate income tax and are required to file Florida corporate income tax returns whenever they have revenue miles in Florida, as the term “”revenue miles”” is defined in Florida Statutes § 220.151 Transportation companies that deliver or pick up goods in Florida, as well as corporations that do not have a point of origin or termination within Florida, are subject to the Florida Income Tax Code whenever they have revenue miles in Florida.
(v) Foreign (out-of-state) corporations not otherwise subject to the law but who are partners or members of Florida partnerships or joint ventures are subject to the law by virtue of their membership in such partnerships or joint ventures. Florida partnerships are partnerships doing business, deriving income, or existing in Florida. A partnership will be considered to be existing within Florida if an active partner who participates in management decisions has permanent or extended temporary residency (for 3 months in the aggregate of a 12 month period) within Florida. If an active partner is residing within Florida, management of the partnership is presumed to be occurring within Florida.
(w) Insurers.
1. The issuing of policies of insurance or contracts of annuity under a certificate of authority issued by the Florida Office of Insurance Regulation where the policies or contracts are to be performed in Florida or where the policies insure or cover persons, property, subjects or risks located or resident in Florida.
2. The collecting of premiums on policies of insurance or contracts of annuity on such persons, property, subjects, or risks as described in subparagraph 1. above, when such policies were initially issued by an insurer possessing a certificate of authority issued by the Florida Office of Insurance Regulation.
3. The issuing of policies of insurance or contracts of annuity or the collecting of premiums without possessing a certificate of authority issued by the Florida Office of Insurance Regulation, when the issuing or collecting insurer would have been required to obtain a certificate of authority to engage in those activities.
4. The entering into contracts of reinsurance when such contracts of reinsurance are placed with an approved reinsurer by a ceding insurer domiciled or commercially domiciled in Florida as defined in chapter 624, F.S., or by either an artificial entity domiciled or resident in Florida or a political subdivision of Florida where either the artificial entity or the political subdivision is engaged in self insurance.
5. Surplus lines insurers with an office or employees located in Florida.
(2) The following activities will not, in themselves, subject a foreign (non-Florida) corporation to the income/franchise tax. However, these exempted activities will not relieve a corporation from taxation if the corporation is otherwise subject to taxation.
(a) Maintaining an account in a Florida bank or savings association.
(b) Holding stock in a Florida corporation or a corporation that is subject to the Florida corporate income/franchise tax.
(c) Having an independent Florida accountant, attorney, or bookkeeper maintain accounting records, audit, or do tax preparation.
(d) Salesmen of the corporation soliciting sales of tangible personal property within Florida, provided none of the activities itemized in subsection (1), or any other activities which will subject the corporation to tax, are performed. The fact that the salesmen reside within Florida will not subject the corporation to the tax.
(e) Salesmen maintaining samples to demonstrate the product or give free samples to a customer. The samples may not be sold.
(f) Providing company cars to salesmen.
(3) Cross reference: Fl. Admin. Code R. 12C-1.022
(4) A taxpayer’s regular tax liability is equal to 5 1/2 percent of the taxpayer’s net income for the taxable year. However, Florida imposes a corporate alternative minimum tax (AMT). Corporations which pay federal AMT are required to compute Florida AMT. These corporations must compute both regular tax liability and AMT liability. The Florida tax due is the greater of these two amounts. Taxpayers use federal alternative minimum taxable income after the federal exemption allowed under s. 55(d)(2), I.R.C., which is incorporated by reference in Fl. Admin. Code R. 12C-1.0511, as the starting point in computing Florida AMT. The Florida additions, subtractions and $5,000 exemption are generally the same regardless of the starting point. However, the amounts for some additions or subtractions may differ. For example, there is an adjustment to the addition of interest that is exempt for federal tax purposes or the addback of the federal net operating loss. The Florida AMT rate is 3.3 percent of Florida AMT net income.
Cross reference: subsection 12C-1.013(18), F.A.C.
Rulemaking Authority 213.06(1), 220.51 FS. Law Implemented 220.11, 220.12, 220.15, 220.151, 220.22 FS. History-New 1-19-73, Amended 10-20-73, 8-23-76, 12-18-83, Formerly 12C-1.11, Amended 12-21-88, 1-30-90, 4-8-92, 5-17-94, 3-18-96, 3-13-00.