| Filed by | Set by the contract; the party who signs the note, usually the buyer, often pays |
|---|---|
| Agency | Florida Department of Revenue, which collects documentary stamp tax |
| Timing | Due on the note, normally paid around closing; ask your attorney about the date |
Watch for: Put in the purchase agreement who pays the tax on the note, and by when.
Why Sellers Finance Part of the Price
Many small and mid sized sales include a seller note. The buyer pays part of the price at closing, often with an SBA loan or savings, and agrees in writing to pay the rest to you over time.
Lenders often ask for it, since it shows you believe in the company's future. It also helps buyers who cannot borrow the full price.
What the Tax Is
Florida charges a documentary stamp tax on certain written documents. For a written promise to pay money, such as a promissory note, the Department of Revenue's guidance gives the rate as 35 cents for each $100 of the debt, or part of $100.
A $300,000 note works out to about $1,050 in tax. The amount grows in step with the note.
A Possible Maximum
The Department's guidance also describes a maximum tax for some notes. Whether it applies depends on the note and on what secures it. Ask your attorney or CPA to check the current rule against your documents.
Who Pays
The law does not decide who bears the cost in a private sale. Your contract does. Buyers often pay the tax on their own notes, but sellers sometimes agree to split it for a better price or terms.
Whatever you agree, write it down, with a date. Unpaid stamp tax can bring penalties, and the party named on the document may be the one the state contacts.
If the Note Has Collateral
Seller notes are often secured by the assets sold, a personal guarantee or a mortgage on real estate. A mortgage on Florida real estate can trigger a separate state tax, called the intangible tax, on top of documentary stamp tax.
That is an extra reason to settle early whether the note is secured by real estate or only by business assets.
Other Terms That Affect the Tax
- The face amount of the note, not the total price of the sale
- Whether a holdback or earnout is also in writing as a promise to pay
- Whether you assign or sell the note later to someone else
- Whether an old note is renewed or changed
Each of these can change what the Department considers taxable. A short call with your attorney is cheaper than a notice.
Standby Notes and SBA Loans
When an SBA loan is part of the deal, the lender may require your note to stay on standby, meaning you receive no payments for a period. That is a business term, not a tax rule, but it changes how long you wait for money and how the note is drafted.
Your Own Tax Planning
Receiving payments over time can spread your income tax over several years. Florida has no state income tax on individuals, but federal rules apply. Ask your CPA how installment treatment would work for you.
Keeping the Entity Alive
If you hold a note from the buyer, you may need to keep your company open while you are paid. See Sunbiz dissolution after an asset sale of a Florida business. For how offers are structured, read how Florida buyers price a business.
A Simple Example
Say a company sells for $900,000. The buyer pays $600,000 at closing with an SBA loan and savings, and signs a $300,000 note to you. The lender's loan has its own taxes. Your note, as a separate written promise, is where this page applies.
The stamp tax on that note comes to about $1,050 under the rate above. Splitting it would cost each side about $525. Small enough to ignore, but large enough to argue about if nobody wrote it down.
Also think about the sales tax receipt described in Florida sales tax successor liability when you sell a business, which can hold back part of your cash.
Why to Ask Early
A tax on a note is a small line in a big deal, which is exactly why it gets missed. Raise it when you first discuss terms, so it appears in the letter of intent instead of surprising anyone at closing.
Sources and a Caution
This page draws on the Florida Department of Revenue's documentary stamp tax guidance and on Florida real estate and business law firm summaries. It is general information, not tax or legal advice. Confirm the details with your CPA or attorney.
Want to see how a note fits an offer? Send the form or call (305) 555-0147 and ask a broker.