FL TAX ALERT – WALTON COUNTY LOCAL SALES TAX RISES TO 1.5%
While inflation may remain at almost zero for a historically long period of time, at least one county in Florida decided that it can raise prices on its citizens. Effective January 1, 2013, the Walton County Board of County Commissioners approved an increase in the Discretionary Sales Surtax, which will increase from 1% to 1.5%. That is a 50% increase in the local tax rate, for anyone that did not notice. The discretionary sales surtax is the local sales tax imposed on top of the state sales tax rate of 6% applicable in every Florida county. This puts Walton County on par with the highest sales tax rate counties in the state at 7.5%.
A tax increase during a recession might seem like the wrong move to many people. The typical tax increase discussions of late have focused on the rich paying their 'fair share,' ignoring the fact that the 'rich' (>$250,000 annual gross income) already pay in excess of 80% of the federal tax income revenue realized by our federal government. However, a tax increase on the common, every day, non-Rolls Royce driving citizen (who really drives a Rolls Royce anyway?) has not been on the table for at least 5 years (thank you Tea Party). In fact, it is rare for a tax increase on the general population not to be met with great resistance by the citizens. So why does Walton County's sales tax rate increase not set off a battle that makes the national news? To answer this question, one must understand the hidden logic behind Florida sales and use tax system.
I ask the reader to step back for a second and look to what Florida sales and use tax really applies. There are only a few essential items that the typical citizen buys that are subject to Florida sales tax. Stated a different way, Florida sales tax is designed to avoid taxing its citizens for almost anything that is really necessary. Let this concept sink in a moment…
Think about the last time you went to the grocery store. What did you buy that was actually subject to sales tax? Were any types of food or non-alcoholic beverages subject to sales tax? Generally speaking, the answer is no. Alcohol, tanning lotion (opps, it's referred to as Sun Block these days), and lipstick are subject to sales tax – and I'll pass on the debate about how essential these items really are. Florida's sales tax laws are designed to allow citizens to buy the necessary items in life free from sales tax. Residents go to the grocery store to buy essential food for the home. Tourists, on the other hand, go out to restaurants for their food – which is always subject to sales tax. Starting to get the drift here?
Clothes are subject to sales tax, yes, but there is a purely magical time every year when you can buy clothestax free in preparation for school (regardless of whether you have any school age children or you are buying a shirt big enough to fit a NFL linebacker). So if you are a resident and want to buy your essentially clothing sales tax free, then there is a means for doing so. How many tourists are going to plan their trip to visit the Magic Kingdom based on when they can buy Daniel Boone's (faux) raccoon skin hat free of Florida sales tax?
Boats, planes, and automobiles are the exception to this rule. Residents of Florida DO have to pay sales tax on their vehicles. But so do non-residents, subject to several exceptions. I suppose the hidden agenda behind our sales tax laws considers a car to be a luxury item? Perhaps. Or perhaps there is just too much revenue at stake to forgo taxing vehicles.
It is also curious to note that Florida based businesses are apparently not considered within this same favorable realm of Florida citizenry. Sales taxes on several types of services are clearly aimed at businesses located in Florida. For example, commercial cleaning service is taxable to the business, but residential cleaning services are not taxable to the resident. More on this in another article to come…
Finally, it is worth noting at how hard it is to see how each individual exemption amounts to a hidden scheme to exempt Florida residents from sales tax on essential/necessary items while subjecting tourists from out of state to the tax. There is a reason for this, which is a very long article in and of itself. Suffice it to say that discrimination against out of state tourists in favor of in state residents violates Article 1, Section 8, Clause 3 of the US Constitution, also known as the Commerce Clause. So a more overt approach to pass our sales tax burden on to tourists would likely raise legal challenges.
With Walton County's population of 40,601 and only three incorporated cities (DeFuniak Springs, Freeport, & Paxton) as of the census of 2000 and the 'hidden agenda' referred to above, the majority of the county's discretionary surtax revenue likely comes from tourists. So why would the local government not raise the surtax rates? Perhaps the Walton County Board of County Commissioners is on to something. Either way, if you own a business in Walton County, get ready to adjust your sales tax rates along with the new calendar come January 1, 2013.
ABOUT THE AUTHOR: MR. SUTTON IS A FLORIDA LICENSED CPA AND ATTORNEY AND A SHAREHOLDER IN THE LAW FIRM the Law Offices of Moffa, Sutton, & Donnini, P.A. MR. SUTTON IS IN CHARGE OF THE TAMPA OFFICE FOR THE FIRM AND HIS PRIMARY PRACTICE IS FLORIDA SALES AND USE TAX CONTROVERSY. MR. SUTTON WORKED FOR THE STATE AND LOCAL TAX DEPARTMENT OF A BIG FIVE ACCOUNTING FIRM FOR A NUMBER OF YEARS AND HAS BEEN AN ADJUNCT PROFESSOR OF LAW AT STETSON UNIVERSITY COLLEGE OF LAW SINCE 2002 TEACHING STATE AND LOCAL TAX, ACCOUNTING FOR LAWYERS, AND FEDERAL INCOME TAX I. YOU CAN READ MORE ABOUT MR. SUTTON IN HIS FIRM BIO.
ADDITIONAL RESOURCES
FL Department of Revenue Tax Information Publication – No. 12A01-18 (Nov. 19, 2012).
FL Form DR-15DSS - Discretionary Sales Surtax Rates for 2013
© 2012 All rights reserved - James H Sutton Jr