People often talk about how complicated government regulation is getting these days and how it makes it very hard for businesses to operate in our great country. One would think that our government would support business by allowing companies to actually focus on their core business instead of being forced to put a substantial amount of their time, energy, and financial resources into complying with all the governmental regulations and oversight. However, the cost for a company who does not focus substantial resources into complying with the myriad of government regulations at the state and federal levels can be staggering, if not fatal to a company. Our very own Florida Sales and Use Tax is a perfect example of just how extreme the exposure can be for not complying with the law – and our FL legislators have gone out of their way to make it so.
Our firm receives calls every week from companies who are facing Florida sales and use tax assessments of tax, penalties, and interest exceeding their company's annual profit. The purpose of this article is to educate the reader on the various penalties at the Florida's Department of Revenue's disposal if your company or your client's company steps off the path of 100% compliance. The worst part is that many of these penalties can often be imposed for innocent, unintentional non-compliance with the law – and we all know how "simple" and "Florida Sales and Use Tax Law" do not belong in the same sentence. I warn you, this topic is not for the faint of heart.
Before we get into the specific statutory penalties, it is also worth noting that there is a penalty imposed on companies for mistakenly believing that specific products or services are not subject to Florida Sales and Use Tax. This "penalty," which is not technically a penalty, is equal to 100% of the taxes that should have been collected (plus various levels of actual penalties referred to below and interest). Essentially, the vendor becomes liable for the tax that the DOR claims should have been collected. What is really sad is that this "penalty" can be imposed even if the company relied on advice from their tax advisor. Worst of all, if the taxpayer is diligent enough to call or write the DOR for advice on how to handle a matter, the taxpayer cannot rely on that advice during an audit. Only a Technical Assistance Advisement will bind the DOR to their answer. We have numerous clients that have fallen into a false sense of security by relying on questionable advice from the DOR in an area that is gray under the law only to find out the an auditor will usually choose the more taxing side of the gray area. These well intended companies are left with the choice of either filing bankruptcy or hiring a tax professional to fight back.
Below is a chart listing the unbelievably numerous penalties, civil and criminal, that can be imposed on a company or multiple owners, officers, and employees of a company who have failed to comply with our "simple" Florida Sales and Use Tax Laws.
Offense |
Civil Penalty |
Interest Penalty |
Criminal Penalty |
Failure to Pay Amount Due on a Single Return |
>of 10% of unpaid tax or $50 [§212.12(2)(a)] |
Prime + 4% until paid (not to exceed 12%)[§212.12(3)] |
|
Failure to Timely File a Single Return |
>of 10% of unpaid tax or $50 [§212.12(2)(a)] |
||
Failure to File & Pay Timely |
10% penalty ($50 min) for each 30 day period (or part thereof) max of 50% tax due [§212.12(2)(a)] |
||
Knowingly Fail, Neglect, or Refuse to Collect Tax |
Misdemeanor/1st Degree [§212.07(3)] |
||
Advertising to Absorb or Refund the Tax |
Misdemeanor/1st or 2nd Degree [§212.07(4)] |
||
Inadvertent Registration Errors (reduced penalty) |
Pre-DOR Contact – Lesser of $1,000 or 10% of tax due Post-DOR Contact – Lesser of $5,000 or 10% of tax due [§§ 212.07(9), (9)(b)1, & (9)(b)2] |
||
Fraudulent Claim of Exemption |
200% of tax [§212.085] |
Felony / 3rd Degree [§212.085] |
|
Erroneous Refunded Tax |
10% of refunded tax [§213.255(09)] |
||
Fraudulent Refunded Tax |
100% of refunded tax [§213.255(9)] |
||
Fraudulent Claim of Enterprise Zone Jobs Credit |
100% of credit + the credit [§212.096(11)] |
Adjusted Prime rate + 4% (not to exceed 12%) until paid [§212.12(3)] |
Misdemeanor / 2nd Degree [§213.235] |
Fraudulent Claim Urban High-Crime Area Job Tax Credit |
100% of credit + the credit [§212.197(14)] |
Misdemeanor / 2nd Degree [§212.197(14)] |
|
Failure to Submit Documentation – Entitlement to a Credit |
25% of credit [§§212.11(5)(c), 212.12(3), & 213.235] |
Adjusted prime rate + 4% not > 12% for failure to pay amount due [§§212.11(5)(c), 212.12(3), & 213.235] |
|
Sale of Business - Failure to Make Final Return & Pay Tax |
Denial of the right to engage in business [§§212.10(2) & (5)] |
Misdemeanor / 1st Degree [§§212.10(2) & (5)] |
|
Leases, Licenses, & Rental Transactions – Failure to Keep Records |
Misdemeanor / 1st & 2nd Degree; Felony / 3rd Degree if subsequent offense involving intention destruction of records [§212.12(13)] |
||
Failure to Permit Examination of Records |
Misdemeanor / 1st Degree; Felony / 3rd Degree if subsequent offense involving intentional destruction of records [§212.13(1)] |
||
Failure to Keep Records |
Misdemeanor / 1st Degree failure to keep complete records 5 years [§212.13(2)] |
||
Willful Intent to Defraud |
< $300: Misdemeanor / 1st & 2nd degree up to Felony / 3rd degree for subsequent convictions; >$300 <$20k: Felony / 3rd Degree; >$20k <$100k: Felony / 2nd Degree >$100k Felony / 1st Degree [§212.15(2)] |
||
Occasional / Isolated Sale of Vehicle: sales price is less than 80% of the avg. loan price without signed affidavit from each party |
200% of the additional tax due + 10% penalty for each 30 day period (or part thereof) that tax is past due with max of 50% tax due (ie. 5 months' penalty) [§§212.05(1)(a)1.b., 212.12(2)(a), & 213.235] |
Adjusted prime rate + 4% not > 12% for failure to pay amount due [§§212.05(1)(a)1.b., 212.12(2)(a), & 213.235] |
Misdemeanor / 1st Degree [§§212.05(1)(a)1.b., 212.12(2)(a), & 213.235] |
Failure to Remove Boat or Aircraft within 10 days of purchase, 90 days for 'qualifying' purchase, 20 days after repair, or returned within 6 months. |
100% penalty if not removed within required days [§212.05(a)(a)2] |
||
Fraudulent Boat Decal Issuance or Removal |
200% penalty [§§1212.05(1)(a)1.f.(V) & (VI)] |
Misdemeanor / 1st Degree [§§1212.05(1)(a)1.f.(V) & (VI)] |
|
Coin-Operated Amusement Machine – Failure to Display Certificate |
$250 per machine [§§212.05(1)(h)3.c. & 2.c.] |
||
Filing Fraudulent Return with Willful Intent to Evade Payment |
100% penalty in additional to all other penalties [§212.12(2)(c)] |
< $300: Misdemeanor / 1st & 2nd degree up to Felony / 3rd degree for subsequent convictions; >$300 <$20k: Felony / 3rd Degree; >$20k <$100k: Felony / 2nd Degree >$100k Felony / 1st Degree [§212.12(2)(c)] |
|
Failure to File Six Consecutive Returns with Knowing and Willful Intent to Evade Tax |
Felony / 3rd Degree [§212.12(2)(b)] |
||
Failure to Pay Estimated Tax |
10% penalty equal to amount of any unpaid estimated tax on top of any other penalties. [§§212.12(2)(f), 212.12(3), & 213.235] |
Adjusted prime rate + 4% not > 12% for failure to pay amount due [§§212.12(2)(f), 212.12(3), & 213.235] |
|
Refusal to Make Return, Pay Taxes, or Sign Tax Return |
6% per annum [§212.14(3)] |
Misdemeanor / 1st degree [§212.14(3)] |
|
Incomplete Return |
Collection Allowance denied [§212.12(1)(a)] |
||
Failure to Register |
Registration fee increased to $100 [§212.18(3)(b)] |
Misdemeanor / 1st Degree [§212.18(3)(b)] |
|
Failure of any Person, Officer, or Director of Corporation to Collect and Pay Tax or Attempt to Evade or Defeat Tax |
200% of the tax evaded, imposed on each individual [§213.29] |
||
Entertainment Industry – Improper Use of Exemption Certificate |
Felony / 3rd Degree [§§288.1258(2)(e) & 212.12(2)(e)] |
While you are absorbing all these penalties, it is worth noting that the same penalties apply to the following Florida taxes:
- Convention Development Tax (§§212.0305(5)(c) & (3)(g))
- Local Option Tourist Development Tax (§§212.0104(3)(g) & (10)(c)]
- Tourist Impact Tax (§125.0108(2)(a))
- Discretionary Sales Surtax (with a few higher penalties) (§212.054(4)(a))
- Rental Car Surcharge (§212.0606(2)(c))
- Waste Tire Fee (§403.718(3)(a))
As one can see, Florida sales and use taxes are not only administratively burdensome from a compliance perspective, but even the smallest mistakes in timing, amount, taxability, or even proper paper work retention can result is penalties far exceeding the tax. If your company (or your client's company) is not already under audit, then now is the time to consider whether all the statutory and regulatory requirements have been met. Florida provides voluntary disclosure programs that can minimize, if not eliminate these penalties and can cut off the look back period to 3 years. If you are under audit, then we recommend the best defense against these penalties is a good offense – i.e. being represented by a law firm both knowledgeable in Florida sales and use tax and experienced in handling Florida DOR controversy work. In either case, please consider contacting the Law Offices of Moffa, Sutton, & Donnini, P.A. to help minimize the impact of the myriad of penalties at the Florida Department of Revenue's disposal. With more than 50 years of combined experience in defending taxpayers against the Florida Department of Revenue, you will be in good hands. Contact our offices today via the phone or email links at the top of this web page for a FREE INITIAL CONSULTATION.
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'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.
ADDITIONAL RESOURCES
FLORIDA COMMERICAL PROPERTY OWNERS GET BLINDSIDED BY SALES TAX, by James Sutton, CPA, Esq., Dec. 31, 2011
WHAT SERVICES ARE SUBJECT TO SALES TAX IN FLORIDA?, by James Sutton, CPA, Esq., May 1, 2012
GROUPON / ONLINE VOUCHERS – BIG SALES TAX & ESCHEAT RISKS, by Jerry Donnini, Esq., Jan. 4, 2012
FL TAX ALERT – ALCOHOL & TABACCO RETILERS BEWARE!, by James Sutton, CPA, Esq., Feb. 10, 2012
FL SALES TAX – GAS STATION INDUSTRY – PART 1, by Jerry Donnini, Esq., March 23, 2012
GAS STATION INDUSTRY – SALES & USE TAX ISSUES AND OPPORTUNITIES, by Jerry Donnini, Esq., Apr. 12, 2012
FLORIDA DEPT OF REV TARGETS LOW VOLTAGE INDUSTRY, by James Sutton, CPA, Esq., March 10, 2012
© 2012 All rights reserved - James H Sutton Jr