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FL DOR – Prosecuting Criminally Based on IRS 1099 Data


Business owners and managers are required to collect and remit sales tax for transactions subject to sales tax in Florida. We routinely hear from business owners who are behind in sales tax. This happens when the business had a bad month or two in which the owner was forced to choose what bills to pay. If the rent or the staff are not paid, the business will be forced to close. If the sales tax is not paid, the business owner likely will not hear from the State for a few months. No one explains that this Sophie’s choice can result in eventual arrest of the business owner. $301 of tax collected but not remitted is a 3rd degree felony, punishable by up to five years in jail.

Recently, the Department of Revenue has focused criminal investigations on business that are regulated by other state agencies. For example: the Department of Highway Safety and Motor Vehicles tracks sales of cars in the state. These sales records are then provided to the Florida Department of Revenue to compare against the DR-15 Sales and use Tax returns filed by the dealers. The difference between the tax shown on the DHSMV and the Sales and Use Tax Returns is considered Theft of State Funds. The Department of Revenue has also gone after the liquor store and convenience store industries using the wholesale data of alcohol and tobacco purchases.

Department of Revenue has now taken this one step further. Rather than focus on regulated industries such as auto dealers or sellers of alcoholic beverages and tobacco, the Department of Revenue has requested Form 1099-K from the Internal Revenue Service. This is the form filed with IRS by payment processing entities to track payments by card transaction. More simply put: The Florida Department of Revenue knows the total sales made by credit cards for any business in Florida. The sales from the 1099-K are compared to reported sales on the sales and use tax returns filed for the same period. If there is a difference, the amount is automatically presumed to be under reported sales and sales tax. Up until this point, this has largely been a tactic used during civil audits. Recently, that has changed, and the Department of Revenue is now turning these cases over to the State Attorney for criminal prosecution.

Section 212.15, Florida Statutes, dictates that sales taxes collected are state funds at the moment of collection. Any person, with the intent to unlawfully deprive or defraud the state of the money, fails to remit that tax, is guilty of a felony. Failure to remit $300 to $20,000, will be charged as a third degree felony with up to five years in jail. Failure to remit $20,000 to $100,000, is charged as a second degree felony with up to 15 years in jail. When tax collected and not remitted is in excess of $100,000 the resulting charge is a first degree felony with up to a staggering 30 years in jail. When the business has failed to file DR-15 Sales and Use Tax returns, each unfiled return represents an additional misdemeanor charge. Fail to file six sales tax returns in a row and you have another 3rd degree felony with up to five years in jail. This is all in addition to repayment of the tax due.

What is really crazy about this strategy is the lack of understanding of the criminal justice system. The FL DOR is used to having broad estimating powers, pushing the burden on taxpayers to prove the DOR wrong. However, the criminal justice system requires a much higher burden of evidence to put someone in jail than a civil tax audit. Simply saying someone received a 1099 is a long way from proving that the business actually collected sales tax on those amounts. Would any state attorney push a criminal case to trial based on evidence that has zero proof that sales tax was actually collected and not remitted?

The businesses we anticipate will be hit hardest are hotels and restaurants. Revenue generated by hotels for room charges, food, and retail are close to 100% taxable. Moreover, most of the payments made in hotels are by credit card, and therefore reported on the 1099-K. This makes hotels a low hanging fruit for these types of investigations. Once the Department has found a discrepancy, the investigator will give the business a brief opportunity to provide documentation and send the file to the State Attorney for prosecution. Hotel owners who think they may have some risk have an opportunity to get out ahead of this.

The Florida Department of Revenue Voluntary Disclosure Program allows taxpayers in Florida to disclose the prior three years of liabilities to the Department of Revenue. In exchange for voluntarily disclosing this liability, the Department of Revenue agreed to waive penalties, unless there is a finding of tax collected not remitted. In the instance that tax was collected, and the taxpayer failed to remit, the penalty is 5%. This is still a significant savings compared to a 50% penalty at audit, or the costs of prosecution if the case becomes a criminal proceeding. Best of all, if a business can file a voluntary disclosure before a criminal investigation starts, then there is a statutory presumption that the business owner did not have criminal intent to steal the tax. In other words, a voluntary disclosure has the effect of stopping a criminal investigation before it starts!

Florida state and local tax attorney; Florida sales tax attorney; sales tax attorney; Florida sales tax audit; Florida sales tax audit defense; Florida sales tax criminal attorney; Florida sales tax protestAbout the author: Amanda is an associate attorney who joined The Law Offices of Moffa, Sutton, & Donnini, P.A. in 2013. Ms. Levine joined the firm as a clerk during law school. Ms. Levine received a bachelor's degree in Accounting from University of Central Florida. She spent several years working in public accounting before attending Nova Southeastern University Law School. She received her J.D. in 2014. During her time at Nova Law, Ms. Levine was the Executive Justice of Academics for the Moot Court Honor Society, as well as the Finance Chair. She was awarded by the National Order of the Barrister, a national honor society which acknowledges excellence in oral advocacy and brief writing skills.

About the law firm: At the Law Office of Moffa, Sutton, & Donnini, PA, our primary practice area is Florida taxes, with a very heavy emphasis in Florida sales and use tax. We have defended Florida businesses against the Florida Department of Revenue since 1991 and have over 100 years of cumulative sales tax experience within our firm. Our partners are both CPAs/Accountants and Attorneys, so we understand both the accounting side of the situation as well as the legal side. We represent taxpayers and business owners from the entire state of Florida. Call our offices today for a FREE INITIAL CONSULTATION to confidentially discuss how we can help put this nightmare behind you.

Additional Resources

Florida Sales Tax – Voluntary Disclosure Program, published April 9, 2018, by Jeanette Moffa, Esq.

Florida Sales Tax – Theft of State Funds, published March 16, 2017, by Amanda Levine, Esq.

Florida Sales Tax Criminal Investigation published December 16, 2016, by Amanda Levine, Esq.

Go To Jail Tor Not Paying Florida Sales Tax published November 3, 2013, by James Sutton, CPA, Esq.