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2014 FICPA DOR LIAISON MEETING SUMMARY

2014 FICPA DOR LIAISON MEETING

For more than 30 years, the FICPA and the Florida Department of Revenue have meet once a year to discuss that state of affairs between our state's taxing authority and taxpayers. In fact, no one in the room this year was able to come up with just how long this meeting has been happening because it has been happening longer than anyone in the room actually worked for the DOR. Everything from legislation to controversy as well as audit results by industry, collection problems, and even simple matters as the most common taxpayer registration concerns. Want to know what industries the DOR will be focusing on next year – this is where you find out and why the DOR picked these industries. Oh, and let's not forget an in-depth discussion on the economic condition of our state. The meeting is an all-day affair and the room is always filled with the top echelon of the DOR from just about every division. The purpose of this article is to provide a summary of the meeting for all those that were not able to attend as well as to make available for download some of the materials that were provided at the meeting.

Please note – these are short hand meeting notes covering the highlights of what was discussed, with minor commentary added as this article was finalized. My sincerest apologies ahead of time if I have anyone's name wrong or misspelled (just let me know and I'll fix it). I would also like to thank Jennifer Pemble, CPA, CFE who is a SALT specialist with Warren Averett in Tampa for sharing her meeting notes with me as well to help make this as comprehensive as possible.

Intro by Deborah L. Curry, CPA, CEO/President of the FICPA

Intro by Andrea Moreland, Deputy Director of DOR

Economic update by Amy Baker – Florida is doing better than most of the country, at 18th in the nation for GDP growth and 13th in the nation for personal income growth. New people moving back into work force. Not quite where we were pre-2008. Adding about 4,200 people to the work force every month. 17 counties in Florida have improved implement above pre-2008 level. Interestingly, we are estimated to hit 20 million people living in Florida by 2016, which will make us the 3rd most populous state in the country (surpassing New York). We are adding around 300,000 people a year, which is similar to adding the city the size of Orlando or St. Petersburg every year. Construction of new family homes is increasing, but it now where near the 20 year average new home construction level, much level pre-2008 level construction. The state expect most areas of the state's economy to be back to historical averages by 2016/2017 except for construction.

Legislative update – Lynne Moeller & Justin Thames

Lynne - The state's legislative package passed this year, which does not happen every time. Penalty fix for fraudulent returns; zapper software passed, extension of RT tax protest period (to 20 days), bump RT rate if the employer does not provide requested records, ability to require financial security for new companies that have spotted DOR history, prepaid calling arrangements are subject to SUT not CST, exemptions for bike helmets, booster seats, NBA activities. E-911 calling arrangement fee coming through DOR now, rental car surcharge for car sharing arrangements set at $1. No legislative package for tax this year coming out of the legislative & cabinet services. 1/3 of doc stamp revenues will be dedicated to land and recreation conservation issues. Expect a potential increase in corporate income tax exemption from $50,000 to $75,000 as part of this year's legislative efforts.

Justin – discuss what the FICPA has been working on in the state tax front. The FICPA worked very hard over the last 3 years to enhance the certified sales tax audit program – specifically to allow the Certified Sales Tax Audit to be available after an audit notice has been issued. This agenda was met with skepticism this year by several legislator who worried this would mean more audits for their constituents. Don't expect this legislation to be heavily pushed this year, but 2016…

Rule making, TIPS, and Technical Advice – Tammy Miller

Rule adoption process – several rules up for adoption. Protest procedures, increase compromise authority (up from $250,000 to $500,000), admissions (professional sporting events NBA to match statute change and MLS), forms, therapeutic veterinary diets, electricity, wireless E911, sales for resale consumer's certificates of exemption (using new app to document exemption, removed signature of on exemption cert, taxpayer can get copy of their exemption certificate any time), Electronic payments (can be made ACH or Debit and electronic filing/paying does not require pre-registration).

Workshops planned – rental car sharing surcharge, scholarship funding credits (NOTE- the workshop process is the Department required way to promulgate a new rule or planned change to an existing rule. You should be paying attention to what rules are scheduled for potential workshops and how they might affect your clients. With or without industry input, rules can have a dramatic effect on how sales tax laws are interpreted and implemented. Use this process as a way to help you clients before the rule negatively affects them.)

Long time planned rules – 2nd hand metal recyclers; sampling; refunds; documentary stamp tax, corporate income tax, real property leases. Joseph Handy asked whether Rule 7 (boats, planes, automotive) – Tammy says they do have that on the slate to work on this one. Joe Moffa – is there a specific person assigned to each rule. Tammy – for some smaller rules the answer is yes, but Tammy is generally overseeing all the rules.

TIPS – guides for taxpayers due to changes in statutes and rates; For example, sales tax holidays. Examples of legislative changes – prepaid collect meal plans, tax on bail bond premiums and title insurance premiums as well as scholarship funding credits. Florida tax mobile app. Question was asked whether there could be an app to tell the sales tax rate by county. Tammy would suggest it. Another question was asked whether there could be a rule change setting standards for small tax amount filing frequency (e.g. $500 a year of tax having to be remitted on monthly returns instead of annual).

Technical Advice – 50 conferees split into groups, mostly devoted to sales and use tax. Joe Moffa asked if we could send in protests only by email. Tammy said yes. All documentation can be submitted electronically as well. They would prefer this as it would make saving the files easier. There are only two (yes two) people review protests when they come in the door. This is slowing down the protest process considerably.

controversy Update – Eric Peat, Tom Botcher, Laura Gaffney, and others. Discuss three or four interesting cases.

TML Logistics – class action for motor fuel refunds out of Polk County, would have cost $10+ million to the state. Plaintiff failed to get class action status and it was settled. Failed to be a class action because it was not a facial challenge.

National Auto Sales – DOAH south FL 14-3137 – criminally prosecuted car dealer for theft of state funds, reduced payment offered by state attorney's office, then state came after the dealer for the balance of taxes civilly. They hit him for 200% of tax penalty. The lesson of this case is to remember that a settlement with the state attorney's office in a criminal case does not mean the civil side of the tax is settled or compromised. Joe Moffa asked whether failure to offer a payment plan before criminally prosecuting a business owner violates the taxpayer bill of rights. Erik Peat responded that this sounds like a concern and hoped procedures were in place to prevent this from ever happening.

American business USA – docket number 4D131472 – sold prepaid calling cards out of the flower shop and sold flowers on-line. Taxpayer didn't even fulfill the Flower orders. Taxpayer lost in DOAH because DOAH can't hear constitutional issues. Taxpayer won on appeal based on commerce clause argument, but appeal rights to FL Sp Ct appeal rights is still open as of today. DOR may appeal.

Verizon Business Purchasing – docket number 1D143213 - the big issue is moving to the 1st DCA. Is the NOPA a final assessment? How does it alter SOL. Briefs due Dec 2014 and there will be oral arguments. (NOTE – The FL DOR amended procedures to correct the Verizon issue going forward by issuing the NOPA more than 60 days prior to the running of the SOL)

Joseph Handy asked whether the FL DOR was following the GM vs DOR case in similar industries. (GM case allowed post-warranty goodwill repairs to be made without use taxes due). Jospeh Handy explained that many boat dealers performed similar goodwill repairs. The DOR responded that it was looking into the matter.

DIRECTV/Dish vs DOR – waiting on an opinion from DCA now. (This is a very big case that has been going on for years regarding whether it is discriminatory to charge higher CST rates on satellite companies versus cable companies.)

Seminole case – renting tribal land to 3rd parties is subject to sales tax? DOR says yes. Tribe says no. Court agreed with tribe. DOR has appealed to 11th Cir.

Online Travel Company cases – controversy by counties (using contingency fee lawyers) – awaiting Sp Ct holding. The heart of this case is whether the local bed taxes should be based on the rent received by the hotel or the full amount received by the travel booking site (which includes the travel booking site's fee). The law is very much in favor of the Online Travel Companies and the FL DOR has stay out of this litigation entirely.

Erik Peat – warned about doc stamp taxes and RT-Tax cases that often get overlooked by taxpayers.

Sales and use tax update – Tammy Miller, Ann Rix, James Sutton, others…

Ann Rix - Biggest volume of protests by far deal with convenience stores. Discussed protest process with a recommendation to include documentation with original protest filing. Discussed shipping charges and the exemption from tax if the shipping is optional or risk of loss passes prior to shipping. Discussed the new manufacturing exemption vs the old new and expanding business. Discussed fabricated cost issues around use taxes being due on materials AND labor when TPP is fabricated and the installed into real property.

Communication Services Tax – Glenn Bedonie, Tammy Miller, others…

Quick overview of items subject to CST, Video services, music services, cable, pay-per-view. It was generally admitted that even the DOR does not like the CST and is not sure what is and what is not subject to the tax. Of course, the fact that is has a 14 page tax return due monthly is a slight indication of how the industries in our state might feel about the tax.

Corporate Income Tax – Kevin Herzberg, Ben Jablow, & others…

S-corporations are having a lot of bank freezes because they are not responding to inquiry letters. Just send the collection agent the federal s-return to get this fixed in the DOR's system. There are two bills in Florida legislature to increase CIT exemption to $75,000, which could go into effect 2016. Mentioned two TAA's denying alternative apportionment, which are allowed only very rarely. Discussed PL 86-272 and how losing 86-272 protection one year can be remedied the next year. Discussed market base vs cost of performance and the DOR team says it is a case by case basis until one or the other is decided by the legislature. Mentioned the Catalina Marketing case. Mention of the Peoples Trust case dealing with salaries tax credit in using an employee leasing company and the question of whether these employees are still your employees for purposes of the sales tax credit.

General Tax Administration – Maria Johnson

Enhanced auditor pay was approved this year, finally. DOR has done a lot of restricting and had a lot people retire. She provided a new contact list for the prime people in the DOR. Electronic payments are up considerably. She discussed concerns that were raised in the previous year's meeting and how they were addressed. For example, the DOR is working on a new training program specifically on the topic of the Florida Taxpayer Bill of Rights.

Demonstration of FL TAX MOBILE APP – David Young

This is the DOR's new mobile app that works on your iphone, android, or windows phone to allow a taxpayer could confirm a purchaser's resale certificate, then save the information to a file for the seller to use during and audit. Very handy software.

COMPLIANCE ENFORCEMENT PROJECTS - Rich Unen, Lynn McElroy, Dave Ansley, Andrea Hunter

Dave Ansley on refunds - Documentation questions are common, supporting documentation; sampling for refunds? Training auditors to sample on refunds.

Mentioned how DOR audits are trying to move as far as possible towards a paperless environment.

Lynn McElroy – ABT audits, continuing for the 3rd year. Used car dealers project just started. Some field audit, some desk audit, some investigation. 1st time to use DMV data to choose who to audit. Scoring taxpayers to identify who is the least compliant and ready for audit. Information collected from: Coast guard, dept. of agriculture, trucking companies, US customs, tangible property returns, exchanges from other states. Ramping up fuel tax retain numbers. 60% of audits on standard taxpayers, 20% is on middle market taxpayers, 20% are very large taxpayers.

Glen Bedonie asked about whether the audit program every looked at the materiality of an audit to decide whether it was even worth it to proceed, as they used to many years ago. The response was that materiality is a determined on a case by case basis, but the question of whether audits would simply be closed based on materiality was not answered.

Rich Unen – Time lines for audits should not be the pressure point but if the auditor is being too strict, the go up to the supervisor. If that doesn't work, call the Senior Tax Administrator for your region. Unen also mentioned that the DOR was heavily recruiting at colleges around the state.

COLLECTION ENFORCEMENT PROJECTS – Bill Cumbie, Deb Maddren, Laura Gaffney

Collection Electronic Warrants – automated warrant problems. We knew that we would be filing incorrect liens and clean up the process, according to Bill Cumbie. The turned off much of the automated switches and brought in human review. However, the automated switch will be turned back on soon.

Request by audience member to be able to check off a sales tax return as final without having to do a formal change of status. The collections depart says they would love it, but it is a programing issue.

Stipulated payment plans – they are doing thousands of them. The first offer is usually 25% down and 12 monthly payments. This can be negotiated and balloon payments at the end of the 12th month for more time or different payments. Complaints were mentioned by the audience that some offices only offering 6 months then requiring an additional 25% down. The DOR responded that they would look into it.

NEW DOR CONTACT LIST – The DOR was gracious enough to had out a DOR contact list with titles and positions for the local and regional audit and collection people. I can attest this can be very handy. You can download a copy of the list that was provided HERE.

This sums up the 2014 FICPA DOR liaison meeting. Wish all of you were there and you should strongly consider attending next year if you practice in this area. It is a great way to really get to know all the people you work with at the DOR. Below are summaries from previous year's liaison meetings for the FICPA as well as the Florida Bar. If you have any questions, then please don't hesitate to contact me.

Florida sales tax attorney; Florida sales tax audit; James Sutton attorney; James Sutton CPA, Tampa sales tax attorney; Tampa sales tax audit

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 AREA IS FLORIDA SALES AND USE TAX CONTROVERSY & CRIMINAL DEFENSE. 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, AND AT BOSTON UNIVERSITY COLLEGE OF LAW TEACHING SALES AND USE TAX SINCE 2014. YOU CAN READ MORE ABOUT MR. SUTTON IN HIS FIRM BIO.

ADDITIONAL RESOURSES

FICPA – FL DOR LIAISON MEETING 2013 SUMMARY, published November 27, 2013, by James Sutton, CPA, Esq.

FL BAR TAX SECTION / FL DOR LIAISON MEETING 2013, published October 28, 2013, by James Sutton, CPA, Esq.

FL DOR – THE MAGIC BEHIND THE CURTAIN, published November 10, 2014, by James Sutton, CPA, Esq.

FLORIDA SALES TAX AUDITS ON CAR DEALERS ON THE RISE, published November 14, 2014, by James Sutton, CPA, Esq.

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