FL LEGISLATIVE ALERT - ALCHOHOL & TOBACCO RETAILERS BEWARE!
A little noticed new law went into effect on May 31, 2011 that requires manufacturers, wholesalers, and distributors who sell alcohol beverages or tobacco products to retailers to provide annual sales information to the Florida Department of Revenue. I originally reported this legislative change on the Florida Tax Matters group on Linkedin last summer. While the law specifically applies to wholesalers, it is the
Retailers of alcohol and tobacco who should be paying attention to the details of the new law.
UPDATE: 8/13/2012 - The Florida Department of Revenue has begun sending out a new Form DR-1216 to retailers of alcohol and tobacco. The DR-1216 is an assessment of tax based on the detailed sales records reported by the wholesalers and distributors of alcohol and tobacco to each retailer in the State of Florida. The Department of Revenue takes these records and estimates how much mark up the retailer (ofter a convenience store or liquior store) will make then compares this completely hypothetical result against what the retailer reports for alcohol or tobacco sales on their sales and use tax returns. Any descrepancy and the DR-1216 is issued to the retailer requesting proof the estimates are wrong or remit the estimated tax. We are seeing a high number of convenience stores with assessments of over $100,000. If this is happening to you, then call the number at the top of this screen for a free consultation on how to defend your business against purely hypothetical estimates of your sales. [updated article on the enforcement proceedures can be foundHERE]
The details of the new law, § 212.133, Florida Statutes ("F.S."), provide that wholesalers of alcoholic beverages or tobacco products are not only supposed to report "annual sales" to the Florida Department of Revenue ("FL DOR"), but also the following DETAILS ON EACH RETAILER:
- Retailer's name
- Retailer's beverage license or tobacco permit number
- Retailer's address
- General type (or types) of items sold to each retailer (e.g. cigarettes, cigars, beer, wine, etc)
- Net monthly sales total to each retailer
The report is due electronically on September 30th of each year for sales of the previous year ending June 30th. What does this mean to the retailers? This means that the Florida Department of Revenue already has detailed information on what each retailer of alcoholic beverages and tobacco purchased in the state of Florida from July 1, 2010 to June 30, 2011. If you or your clients are in the business of selling alcoholic beverages or tobacco in Florida, then you are well aware that the FL DOR receives details on retail sales of alcohol beverages and tobacco already with sales and use tax returns. Therefore, you can expect the FL DOR to use this information to compare reported retail sales with reported purchases from wholesalers –
creating, for the first time, very clear, easily generated reports of companies with discrepancies between purchases and sales. Depending on the discrepancy, the retailers are looking at either FL DOR audits or, before long, visits from the
criminal investigation department of the FL DOR.
If your company or a client's company is in the business of selling alcohol or tobacco, then you really need to review your company's records to see if there is a discrepancy. If there is a discrepancy, then you need to plan for it now. Restaurants, bars, liquor stores, grocery stores, tobacco shops, etc. all need to be aware of this impending scrutiny.
If your company or a client's company has already been contacted by the Florida Department of Revenue or Division of Alcohol Beverages & Tobacco, then I hope this article makes it clear that this is most likely not a normal audit. Take it very seriously. Discrepancies in sales taxes can lead to possible collected but not remitted taxes – that can easily turn into criminal felony charges under Florida law very, very quickly. Furthermore, both the Florida Department of Revenue and the Division of Alcohol Beverage & Tobacco also have the authority to request the Florida Department of Business & Professional Regulation to suspend or revoke a business or professional license as a means of pressuring a company to pay the tax – whether the tax is just or not. If this happens, then you need legal representation immediately to challenge the assessment (potentially putting a hold on the license suspension).
Retailers in this industry should also be aware that the Florida Department of Revenue / Division of Alcohol Beverage & Tobacco very recently lost a case very relevant to this subject. The details of the case, Mojco, Inc., are discussed in detail in an article that can be downloaded below.
If your company or your client's company is facing a Florida DOR Tax Audit or Criminal Tax investigation, then you need to bring in a law firm experienced in both Florida Sales and Use Tax and Florida Criminal Sales Tax Defense. At the Law Firm of Moffa, Gainor, & Sutton, P.A., our main focus is Florida Sales and Use Tax – both Civil and Criminal. Our firm also handles legal actions when a Florida agency initiates an action to suspend or revoke a business or professional license for Florida tax matters. If you or your client finds themselves in need of an attorney for any of these Florida tax matters, then call our offices today for a free initial consultation.
§ 212.133, Florida Statutes
OTHER RELEVANT CASES/ARTICLES
MICJO, INC. v. DEPARTMENT OF BUSINESS AND PROFESSIONAL REGULATION, DIVISION OF ALCOHOLIC BEVERAGES AND TABACCO, Case No. 2D11-254 (2d DCA, Feb. 1, 2012)
FL Tax Litigation Alert - FL 2nd DCA AB&T's Rules on Wholesale Sales Price Definition, by
www.FloridaSalesTax.com, Feb. 8, 2012. (discussing the Micjo, Inc. case)
About the author: Mr. Sutton is a Florida licensed CPA and Attorney and a shareholder in the law firm Moffa, Gainor, & Sutton, PA. Mr. Sutton's primary practice is Florida tax controversy. Mr. Sutton worked for in the State and Local Tax department of one of the Big Five accounting firms 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.
© 2012 James H Sutton, Jr., CPA, Esq.