As many businesses are forced to close while others are forced to scale back hours or types of operations (e.g. take out only for restaurants), many business owners are worried about how to pay their bills. Even if your business is allowed to stay open, many customers are simply staying home while prudently practicing social distancing. Do businesses keep paying their employees or lay off many as the hotel industry did last week? This is very scary and uncertain times for everyone, especially business owners. A few wrong decisions can lead to bankruptcy of the business and loss of an entire life’s savings. Whether to pay sales tax is one of those hard decisions to make. That is the topic of this article.
Thus far, this is the only word we have from Florida’s government on business’s tax obligations:
Florida’s Department of Revenue will offer flexibility on the deadlines of taxes due, including corporate income taxes and sales taxes, to help businesses adversely affected by the new coronavirus response efforts, Gov. Ron DeSantis announced. Some corporate income tax payments can be deferred until the end of the fiscal year, the Republican governor said 3/16/20 at a news conference.
Within five minutes of posting the first version of this article, the Department of Revenue put out a little more (non)helpful guidance:
The Department of Revenue is closely monitoring developments pertaining to the novel coronavirus (COVID-19). We realize the great uncertainty this may place on you and are committed to help you meet your tax obligations during this difficult time. While filing and payment extensions have not been granted at this time, please refer to the Department’s website as additional information becomes available. In the interim, if you are unable to meet the upcoming due dates, we will be flexible in waiving penalties and working with you to resolve your outstanding tax liability.
"Flexibility on deadlines" is not much detail and really doesn’t provide businesses a lot of comfort. I also generally don’t suggest that getting advice from the FL DOR is a good idea because their responses over the phone are not binding and are often wrong. However, what I really want to caution you about, as a business owner or advisor to a business, is that there is a real chance that many, many businesses will need bankruptcy protection after this is over. Sales tax is one of the very, very few things that can not be discharged in bankruptcy. Your rent can be reduced or discharged. Your payments due to your vendors can be reduced or discharged. But your sales tax not only survives bankruptcy, but it can also land you in jail. It only takes $301 of collected but not remitted Florida sales tax to be a 3rd degree felony with up to five years in jail. In other words, if there is even a remote chance this economic turn down could cause your business to close and you not have the funds to remit sales tax down the road, then pay your sales tax obligations now. Don’t take the chance that you have to hire someone like me to defend you against criminal charges for sales tax fraud. The state will have expected you to set aside the sales tax trust funds as they do with every other economic hard times in the past. The best way to survive this with the least pain in the long run is to be smart and pay what really needs to be paid.
If your company really doesn't have the funds to pay the sales tax due, then at least file the return. I will expect the FL DOR to give some for a leniency in penalties as long as you pay the taxes back. But don't expect the state to forgive taxes that were collected but not remitted. If you have ever dealt with the IRS, then you know the IRS compromised a lot of taxes in hard times. The FL Department of Revenue is not known for doing this, mainly because the taxes you collect was never your funds to begin with. The business is holding the taxes in trust for the state. Spend the taxes and the FL DOR employees are trained to think of this like theft. We are still fighting unreasonable assessments imposed on the panhandle businesses wiped out by the last hurricane. If a business being reduced to ruble for because of a hurricane is not enough of an excuse for the FL DOR to be reasonable, then I don't expect a virus to cause much more sympathy.
What if you are fighting an audit assessment?
We have another segment of business owners that are in a state of limbo with sales tax at the moment. If you company went through a sales tax audit and you have exhausted your administrative remedies with a protest and petition for reconsideration, then you have deadlines looming for continuing your challenge in court. The only problem is that you are required to pay 100% of what the FL DOR says you owe to go to circuit court or 100% of what you reasonably believe you owe in a chapter 120 hearing. What if all your funds have dried up because the government forced your business to close during the coronavirus? It is possible to require a waiver for the payment to gain entry to court, but it is purely discretionary and historically has only been granted to the largest of companies that pose no financial risk. We are about to start our first requests for a waiver of pay in amounts for litigation in our firm. For some companies with really unreasonable sales tax audit liabilities, this is going to be your only option if you don’t want to pay the full assessment.
Any other available resources?
While we are waiting for our federal congress to stop in-fighting and get federal legislation to help with this situation, there are loans available for business owners directly in response to the coronavirus. The SBA has expedited loans specifically for businesses affected by the coronavirus that can be found HERE. Florida has also enacted special interest loans up to $50,000 interest free for one year for businesses impacted by the coronavirus that can be found HERE.
When our federal congress finally gets their act together, it is expected that businesses will be able to give their employees some paid vacation time fully reimbursable by the federal government. Until that time, we are here for you if you have any sales and use tax questions. Stay safe and healthy!
NEW ON MARCH 26TH - FLORIDA OFFERS LATE PAYMENT FORGIVENESS - READ MORE!
About the author: James Sutton is a Florida licensed CPA and attorney as well as a partner in Moffa, Sutton, & Donnini, PA. Mr. Sutton is charge of the Tampa office of the firm and practices almost exclusively in the area of Florida Sales & Use Tax Controversy. Mr. Sutton handles audits, protest, litigation, criminal cases, revocations, collections, and consulting engagements all in the area of sales tax. Mr. Sutton is an active member in the FICPA, AICPA, AAA-CPA, and FIADA. Mr. Sutton is also the State and Local Tax Chairman for the AAA-CPA and president of the Florida AA-CPA. If you are interested in learning more about Florida sales tax from Mr. Sutton, you can find his speaking engagements around the state HERE. Otherwise, you can learn more about Mr. Sutton in his firm bio HERE.
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
RESTAURANT FLORIDA SALES TAX HANDBOOK, published January 4, 2018, by David Brennan, Esq and James Sutton, CPA, Esq.
GO TO JAIL FOR NOT PAYING FLORIDA SALES TAX?, published November 3, 2013, by James Sutton, CPA, Esq.
FLORIDA SALES TAX GUIDE FOR BAKERIES, published March 2, 2020, by David Brennan, CPA
Florida Sales Tax Informal Written Protest, published November 17, 2018, by James Sutton, CPA, Esq.
Protest a FL Sales and Use Tax Audit, published August 8, 2019, by Matthew Parker, Esq.