The purpose of this article is to discuss one of the most beneficial areas of Florida sales tax law – The Florida Voluntary Disclosure Program. Florida’s sales tax laws are endlessly complicated. While well-intentioned business owners likely already know that they need to register and file sales tax returns, it takes a real expert in sales and use tax to understand and properly execute Florida’s sales tax laws and the many unique and often counter-intuitive ways in which they apply to a particular business. The owner of a bakery/eatery may not understand that baked goods sold for consumption within the restaurant are taxable while those same baked goods purchased in bulk for takeaway, are often not. The owner of a convenience store may not realize that (s)he owes sales tax on his commercial rental. It may come as a surprise to someone in the construction industry that fabrication labor is taxable. An out-of-state company may realize that they should have been paying tax to Florida for sales within the state all along. And, on occasion, a business realizes that their invoicing system has been collecting tax, but the company was never registered to remit sales tax. And finally, there is that business owner who ran into hard times and sales tax returns may not have been reported properly. All of these situations are everyday problems for businesses that our firm sees regularly. We are always happy to report that there is a solution.
In many cases, the day of reckoning for business owners comes with the start of an audit. “How was I supposed to know I owed sales tax for paying the mortgage on the building I own in a separate company?” A client will often say in despair upon receiving their audit workpapers and an assessment for 36 months of delinquency for tax they never collected in the first place. But the realization that a sales tax mistake has been made doesn’t always come by a knock on the door from the Florida Department of Revenue. Whether a customer points out an error on a receipt or a particular law spreads by word-of-mouth in the industry, it is not uncommon for Taxpayers to happen upon errors years, even decades, into their business.
You’ve realized you haven’t been collecting sales tax correctly for years. Now, what do you do? You could start doing things correctly going forward. However, a sudden change in your sales tax returns could raise an eyebrow at the Department of Revenue. If the Department does initiate an audit, they can go back three years if you are already registered to pay sales tax with the state. If you’re not already registered to pay sales tax in Florida, the Department of Revenue can assess you all the way back to the very beginning of your business. That means the Department can go back and assess you for potentially twenty years or more! If you’d like to sleep easy and resolve the issue permanently, the answer for you may be a voluntary disclosure.
A voluntary disclosure with the Florida Department of Revenue is a way of admitting you made an error to the Department and limiting your exposure to tax, penalties, and interest. Specifically, the Florida Department of Revenue agrees to limit the look back period to three years in exchange for the Taxpayer agreeing to pay the tax and interest only for those three years. This can be a huge financial savings for someone that has a sales tax problem exceeding three years. The Florida Voluntary Disclosure Program is only available for those who have not been contacted by the Department of Revenue. You can’t be audited and then try to limit liability by applying through the program. Consequently, it’s vital for taxpayers to act quickly when they’ve discovered an error.
For those that qualify, the program is open to those who never collected tax in the first place as well as those who collected the tax but failed to remit it. The latter may especially benefit from the program, as they are putting themselves at risk not only for an audit, but also a criminal investigation by the state. While the Department’s position in cases of tax collected not remitted is that the voluntary disclosure does not limit the taxpayer’s liability to three years, we have been successful working with the Department to limit the liability to the three years available to others in the program. Fortunately, the penalty through the Florida Voluntary Disclosure Program is only 5%, as opposed to the 50% penalty. For those that intentionally collected but did not remit the sales tax, the Voluntary Disclosure Program creates a statutory presumption that you had no criminal intent. This can be a life saver for someone that ran into hard times but now wants avoid audit and possible jail time.
The program procedures include providing the Florida Department of Revenue with a detailed explanation of the error along with monthly sales and collections reports, if any exist, for the three years prior to the date of filing. The total tax due does not need to be determined at the time of filing; upon request the Department will grant additional time to calculate the exact amount due. Finally, if not currently registered, a requirement of the program is that the taxpayer register with the Department.
Maybe you’ve recently read an article on Amazon or the other online retail giants and just discovered that you may owe tax in Florida even if you don’t have any physical retail locations there. Perhaps you didn’t realize when opening an inventory location within Florida that it subjected you to the taxing jurisdiction of the state. Or maybe you simply discovered that after years of working together, your partner hasn’t remitted tax the way you believed he did. However, the reason you discovered a potential Florida tax exposure, the option of entering the Florida Voluntary Disclosure program should not be disregarded. Entering the program and admitting error to the Department of Revenue is certainly scary, but an experienced attorney can guide you through and work towards limiting your liability to the smallest amount possible.
About the Firm: Formed in 1991, the Law Offices of Moffa, Sutton, & Donnini, P.A. is a law firm with a primary practice area of Florida tax controversy. With offices in Fort Lauderdale, Tampa, and Tallahassee, the firm defends business owners against the Florida Department of Revenue from the initial audit notice through administrative protest and litigation as well as collections, revocations, voluntary disclosures, and criminal investigations. For a free initial consultation CONTACT US.
AUTHORITY
Sec. 213.21(7), F.S. (Voluntary Disclosure of Tax)
ADDITIONAL RESOURCES
FL SALES TAX BIOMETRIC FINGERPRINT - VOLUNTARY DISCLOSURE AVAILABLE, published March 6, 2016, by James H. Sutton, Esq.
FL NEXUS QUESTIONNAIRE - VOLUNTARY DISCLOSURE LIMITS LOOK BACK!!!, published March 7, 2013, by James H. Sutton, Esq.
FL TAX - VOLUNTARY DISCLOSURE CAN BE THE PERFECT SOLUTION, published October 5, 2012, by Gerald J. Donnini, Esq.
IS RENT SUBJECT TO FLORIDA SALES TAX?, published January 26, 2015, by Jerry Donnini, Esq.
SALES TAX NEXUS – FULFILLMENT BY AMAZON FBA, published August 10, 2017, by Moffa, Sutton, & Donnini, PA.
FL DOR ABUSES CONVENIENCE STORE INDUSTRY, published October 4, 2015, by James Sutton, CPA, Esq.
© Copyright Moffa, Sutton, & Donnini, PA. All Rights Reserved.