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FL Tax - Verizon Business Purchasing Wins in 1st DCA

Verizon business

Way back in 2011, I co-authorized a piece entitled "When is an assessment an assessment" in the Florida CPA Magazine. In that article, we highlighted a potential flaw with Florida sales tax audits. We raised the question, is a Notice of "Proposed" Assessment, an assessment for statute of limitations purposes? In September 2011, Verizon fought this issue and initiated a law suit against the Florida Department of Revenue to challenge this very point. Verizon, lost at trial and appealed. However, the First District Court of Appeal announced on June 11, 2015, that a proposed assessment is not an assessment for statute of limitations purposes. As explained below, this was a monumental decision in that it opens the door for taxpayers for yet another potential challenge to tax assessments issued by the Florida Department of Revenue.

By way of brief background, under Florida law, the Florida Department of Revenue can go back three years and assess tax. In addition, when the formal audit notice (DR-840) is issued, the statute of limitations is tolled, or paused, for a year. From that point in time, the Florida Department of Revenue has one year to "assess" tax. Many times, the Florida Department of Revenue extends the statute of limitations period by agreement so years and years can go by from the start to the end of an audit. In addition, many times the Department does not issue a "proposed" assessment until with 60 days (often within a day or two) of the extension deadline. Being that the "proposed" assessment does not become a final assessment for 60 days, then if it is not an assessment, the FL DOR may have blown the audit by not timely issuing an assessment.

While it may sound a bit ambiguous in a vacuum, Verizon serves a great example as to how this might play out. In Verizon, the taxpayer was issued an audit notice (DR-840) in January 2007 from the FL DOR that it would be audited for the last three years, or January 2004 through December 2006. Therefore, under normal conditions the Florida Department had until January 2008 (January 2004 + 3 years = January 2007 plus 1 year of statute tolling, or pausing, to do the audit = January 2008) to assess tax for the period of January 2004. Through a series of DR-872, statute of limitations extensions, Verizon and the Florida Department of Revenue agreed to extend the deadline until March 2011 for the Department to issue an assessment. The Department issued a notice of "proposed" assessment in February 2011, which would not become final for 60 days or April 2011. If the proposed assessment is an assessment then the Florida Department of Revenue complied with the law. If, however, a proposed assessment is not an assessment, then the entire audit, which totaled $3,169,168.74 plus interest, would be time barred by the statute of limitations.

Identical to the argument in our article, Verizon challenged this issue in court In September 2011. Verizon took the position that a "proposed assessment" is not an assessment for statute of limitations purposes. After losing at summary judgment, Verizon appealed the trial court's decision.

As stated above on June 11, 2015, the First District Court of Appeal issued its unanimous decision. The court started out by announcing an important tenant of statutory construction that requires taxing statutes to be construed narrowly against the government and in favor of the taxpayer. From there, the court reviewed the Department's argument that the Legislature contemplated both final and non-final assessments. As such, the Department argued a notice of proposed assessment, whether final or nonfinal, is an assessment as satisfies the statute of limitations requirements. However, the court shot down this argument, the Department's argument did not settle the crux of the case as to whether a proposed assessment was an assessment for statute of limitations purposes.

The court dug into the Department's other classic argument in Florida Export Tobacco v. Department of Revenue. The Department's reading of that case leads to the conclusion that the term assessment means some legal obligation or demand for payment. However, the court found a distinction between a "demand for payment" under Florida Export Tobacco and a "proposed assessment" in the instant case. In doing so, the court acknowledged that at the time of proposed assessment, the taxpayer is under no obligation to pay the taxes that may be due. The Department also argued that Verizon's argument would somehow impede taxpayer's appeal rights and that the Department must be given deference, the court quickly unraveled this argument as well.

The balance of the opinion focused on the court's interpretation of other statutory language that had to lead to the conclusion that a proposed assessment did not satisfy the statute of limitations requirement of an assessment. Specifically, the court determined that section 213.21(1) (b), Florida Statutes, provides a tolling of the statute of limitations during the pendency of a protest until a FINAL assessment is issued. Being that the legislature decided to qualify an assessment with the word "final" the legislature must have meant final assessment in the statute of limitations provisions.

State tax cases usually are very seldom in the appellate courts announcement list. It is not uncommon to have only one or two appellate court decisions dealing with state tax cases in an entire year. However, this instant case was immediately followed by two other appellate cases on the same day: DirecTV (1st DCA involving a communication services tax challenge to alleged discriminatory taxes), and Expedia (Fla. Sp. Ct.whether online travel companies should charge tax on their mark-up). Better yet, all three came down in the taxpayers' favor. This case will have an enormous impact on audits statewide. Our firm alone has dozens of cases that were awaiting the outcome of this case. It is critical to review your audit or your client's audits to determine if any deadlines may have been missed, especially if DR-872, statute extensions, are involved. Hats off to Michael Bowen, Peter Larsen, Katherine Giddings, and Kristen Fiore at Akerman LLP for a job well done!

the Law Offices of Moffa, Sutton, & Donnini, P.A. is a Florida law firm with a primary practice area on Florida sales and use tax controversy. With offices in Fort Lauderdale, Tampa, & Tallahassee, we defend taxpayers in sales tax matters ranging from audit defense, administrative protest, litigation, collections, revocations, licensing denials, and criminal defense. If you have any question about whether there are problems with the way the Florida Department of Revenue has handled your Florida sales and use tax matter, then please take advantage of our free initial consultation to better understand your rights.


Verizon Business Purchasing, LLC v. State of Florida, Department of Revenue, Fla. 1st DCA, Case No. 1D14-3213 (Decided June 11, 2015).


PLETHORA OF SALES TAX LITIGATION IN FLORIDA, published June 8, 2015, by James Sutton, CPA, Esq.

FL 1ST DCA: VERIZON APPEALS PROPOSED ASSESSMENT NOT FINAL, published May 25, 2015, by James Sutton, CPA, Esq.


BURDEN OF PROOF & PERSUASION IN FL TAX CASES, published May 31, 2015, by James McAuley, Esq.