On November 14, 2014, [name omitted] was arrested for sales tax fraud. [Name omitted] was the owner of TNS Auto Sales, Inc. a used car dealership located at 9171 103rd Street, Jacksonville, Florida. The Florida Department of Revenue criminal investigation department performed a full investigation into the business and found that the owner had collect more than $22,000 of sales tax from customers during the period between November 2009 and March 2012, but failed to remit the tax to the state. If convicted, the owner could be facing up to 15 years in prison and $10,000 in fines as well as repayment of stolen tax, interest, penalties, and investigation costs.
Under state law, sales tax is the property of the state at the moment a business collects the tax. The business is merely holding the money in trust for the state until the amounts are due with that month's sales tax return. Failure to remit the sales tax timely, even without the specific intent to convert the funds to personal use, is a crime in Florida. It only takes $301 of sales tax collected but not remitted to become a 3rd degree felony punishable by up to 5 years in jail and $5,000 in fines. Many business owners do not realize just how serious this type of problem can become. However, we've seen people arrested for as little as $1,500 of sales tax collected but not remitted. Take this very seriously.
For a car dealer, the chance of getting caught for sales tax fraud is extremely high. Car sales are reported to the titling agency, along with the amount of sales tax collected from each and every car sold. Does it really surprise anyone that the Florida Department of Revenue might compare sales tax returns to DMV data to see if there is any apparent underreporting? In fact, that is exactly what the Florida Department of Revenue started doing during the summer of 2014 – on a statewide basis. If you can pardon the holiday pun, the FL DOR has a list, there are checking it twice, and they know exactly who has been naughty and nice.
If you or anyone you know has been underreporting sales tax in the car dealer industry, then it is not a case of IF the FL Department of Revenue will come knocking. It is merely a case of WHEN. Quite often, the investigator will start investigating your business without saying anything directly to you. The investigator will send letters to ALL your customers that you sold cars to over the last 3 to 4 years asking them about the sale, whether they paid tax, and informing that trusted customer that you are under criminal investigation for sales tax fraud. There goes your loyal client referral customer base. Many investigators will even contact your landlord, which can jeopardize your ability to renew your lease. Then the investigator will start contacting your employees, quite often at home. How many of your employees will continue to work for a company when that job has criminal investigators harassing them at their home. Finally – the investigator will show up at your business with no warning whatsoever. The investigator will introduce themselves, hand out a business card, then start asking questions designed to have someone arrests for sales tax fraud. Some investigators play it nice like there are just there to help get your tax matters resolved. Some investigators play the intimidation game. Either way, their goal is still the same. They are not there to help you determine what you owe. They are not there to help you pay back the tax. They are there with one purpose – to collect enough evidence to have one or more people charged, arrested, and convicted of sales tax fraud. My advice – do not talk to them. Be nice, but tell the investigator that you want an attorney present for any conversations. It takes very little to incriminate yourself for sales tax fraud, so don't speak.
If the FL DOR has not contacted a car dealer with reporting problems, then there is something the car dealer can do. The state of Florida has something called the Voluntary Disclosure program that allows a business owner to come forward and report their tax problems in a non-confrontational way. The state will limit the look back to three years, in most cases, and will forgive most if not all the penalties associated with the problem. Best of all, the statutes that allow for a voluntary disclosure of tax problems creates a statutory presumption that you had no criminal intent. If that was not good enough, if you can get into the Voluntary Disclosure program before the state officially opens a file on you, then the state will stop any and all criminal investigation proceedings.
At the law firm of the Law Offices of Moffa, Sutton, & Donnini, P.A., the vast majority of our practice is spent fighting the Florida Department of Revenue for Florida sales and use tax controversy. From audits, protests, and controversy to collections, revocations, and criminal defense – this is simply what we do. If you have problems with Florida sales and use tax, then please take advantage of our firm's free initial consultation policy. Learn what the FL DOR is not telling you and how to defend yourself. If the matter has potential criminal implications, then please be very careful who you talk to. If you talk to anyone but an attorney, then that person can be subpoenaed to testify against you. We are here to help.
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 RESOURCE
TAXPAYER FORCED TO SIGN AWAY RIGHTS TO REMIT TAX?, published September 2, 2013, by James Sutton, CPA, Esq.
FLORIDA SALES TAX AUDITS OF CAR DEALERS ON THE RISE, published November 14, 2014, by James Sutton, CPA, Esq.
FL SALES TAX – RESALE TO OUT OF STATE CAR DEALERS, published September 19, 2014, by James Sutton, CPA, Esq.
FL SALES TAX FRAUD – 12 USED CAR DEALERS ARRESTED, published July 12, 2014, by James Sutton, CPA, Esq.
FL CAR DEALER: WHEN I SA SALE TAX EXEMPT?, published March 17, 2013, by James Sutton, CPA, Esq.
FL TAX – VOLUNTARY DISCLOSURE CAN BE THE PERFECT SOLUTION, published October 5, 2012, by Jerry Donnini, Esq.