FL DOR Forms: Planes, Boats, & Autos for Florida Sales Tax
Clicking around on the Florida Department of Revenue's ("FL DOR") website reminds me of the John Candy and Steve Martin movie in the late 80's entitled Planes, Trains & Automobiles. Instead of showing the struggle of a man's journey home for the holidays, the FL DOR's website outlines the struggles of plane, boat, or auto dealers to keep up with the endless rules and dozens of forms. If an auto, boat, or plane dealer is ever audited and the proper forms are not maintained, then the unassuming taxpayer risks huge liabilities. As a general rule, all 3 items are subject to Florida sales tax because they are tangible personal property. Further, for the unsuspecting dealer, the potential for not thoroughly understanding the business can create a high problem because of the high selling price of the item and the ability for the state to track the sales.
The most common type of audit we see on a regular basis is an auto dealer. Auto dealers are disadvantaged because the FL DOR has readily accessible records from the DMV. The FL DOR knows the amount of sales a car dealer makes and if the records do not match and audit notice is issued. It is also very common for an auto dealer to make tax exempt out of state sales or partially tax exempt sales to residents of other states. Further, due to the large number of transactions per car dealer, high volume of car dealers around, and the tedious amount of record keeping that must be done, car dealers are easy prey for the FL DOR.
The two most common problems faced by auto dealers are sales to customers and dealers who reside in another state. Time and time again, the auto dealer confuses the forms needed and their correct use. This makes for an unpleasant situation on audit, and the auditor will hold the auto dealer liable for the uncollected tax just for having incomplete or incorrect forms on file.
The first problem arises when sales are made to dealers in other states. Because a Florida resale certificate issued by a buyer who is a Florida dealer exempts a sale from tax, many dealers believe another state's resale certificate also exempts the sale. However, if a Florida dealer sells to another dealer in another state the correct document to have executed is a non-resident dealer form.
The more common problem arises in dealings with a non-Florida buyer who is not a dealer. If the sale is shipped outside of Florida then it is not a Florida sale and Florida sales tax does not apply. The correct way to document this transaction is for the dealer to maintain a bill of lading that clearly identifies the item sold and shipped out of state. Even if the customer arranges for delivery, the auto dealer must maintain a copy of the shipping records to legitimately treat the transaction as tax exempt. The more confusing issue is when a buyer from another state purchases a car here in Florida. In that example, a Form DR-123, Affidavit for Partial Exemption of a Motor Vehicle for Licensing in Another State, should be executed and stored. In this scenario, the buyer must pay his/her state's sales tax, not to exceed the applicable Florida tax rate. A listing of the various states sales tax can be found at the end of this article in a previous blog written by James Sutton. The dealer then collects and remits the foreign state sales tax to Florida. Although, it sounds strange it is the proper way to document the transaction. It is unfortunate that the state dings a dealer for having the incorrect form for a transaction that is truly exempt.
Perhaps the most "simplistic" of the three items and affecting the smallest number of taxpayers, are the aircraft dealers. As a general proposition, an aircraft sold in Florida is subject to 6% sales tax plus any applicable surtax (capped at $5,000) unless an exemption applies. The major exemption that applies is to a non-resident buyer who removes an aircraft shortly after the sale. Specifically, if a non-resident buyer supplies the state with a copy of the invoice for the aircraft, its bill of sale, and/or closing statement, and a signed removal affidavit the aircraft is exempt from tax. In addition, the buyer must remove the aircraft from Florida within 10 days from sale, or within 20 days from the completion of a repair at a registered repair facility. Other exemptions apply if there is a sale or lease of a fixed wing aircraft with a certified takeoff weight of more than 15,000 points and are used as a "common carrier." Effective January 1, 2013, the sales tax exemption for replacement engines, parts, equipment, and labor used in or for the maintenance or repair of fixed wing aircraft will be expanded to include aircraft that exceed 2,000 pounds in maximum certified takeoff weight. Previously, the exemption was limited to fixed wing aircraft that exceed 15,000 pounds in maximum certified takeoff weight. Dealers who make tax-exempt charges for replacement engines, parts, equipment, and labor used in or for the maintenance or repair of fixed wing aircraft over 2,000 pounds, or eligible rotary wing aircraft, are required to document the Federal Aviation Administration registration number ("N-number") and the maximum certified takeoff weight of the eligible aircraft on the bill of sale, invoice, or other tangible evidence of sale.
The majority of the airplane sales and use tax issues we encounter in our practice is the ever-looming use tax on aircrafts. A use tax applies if an aircraft is purchased in another state and then brought, stored, or hangered in Florida. As a general rule if no tax is paid in another state, then Florida will assess use tax for aircraft used in Florida. In order to escape the tax an aircraft cannot remain in Florida for more than 20 days during the 6 month period after purchase. If an aircraft is bought in another state and comes into Florida after the 6 month period, then it is generally exempt. There are also special rules that apply for flight training and repair purposes and if tax is paid elsewhere partial exemptions apply. Due to information sharing with other agencies, the FL DOR has a fairly good grasp on the aircrafts in the state at a given time and if you brought a plane into Florida without paying tax disclosing it through a Voluntary Disclosure may be a good way to save on interest and penalties before the FL DOR catches you. Another effective tool to be aware of is the inadvertent registration provisions. The inadvertent registration provisions allow a taxpayer that should have been registered, register after the fact and be subject to a maximum tax of $1,000 or $5,000 depending on the scenario. A tax publication that may be helpful to aircraft dealers and purchasers and issued by the FL DOR can be found at the end of this article.
It is no secret that the boating industry is a large portion of the economy here in Florida. Moreover, it should come as no surprise that the FL DOR has sought to strain as much tax revenue as possible from the industry. Many of the concepts that apply to planes also apply to boats. For years many boat purchases engaged in offshore transactions to save on sales tax. The game was to purchase the boat in a tax haven to save the 6% on lucrative yachts. However, effective July 1, 2010, the sales tax on boats has been capped at $18,000 so astronomical tax liability days are over. Boats are nearly identical to aircraft from the FL DOR's perspective and almost all of the rules are the same. A tax publication issued by the FL DOR can be found at the end of this article.
About the author: Mr. Donnini is a Florida Attorney and an associate in the law firm the Law Offices of Moffa, Sutton, & Donnini, P.A., in Fort Lauderdale, Florida. Mr. Donnini's primary practice is Florida sales tax and state corporate income tax controversy. Mr. Donnini also does extensive work in the petroleum industry, both at the wholesale and retail levels. Mr. Donnini also handles matters in the areas of motor fuel tax, tobacco tax, and tourist development tax. If you are interested in any of these topics on a multi-state level please visit his blog or his multi-state nexus blogs. Mr. Donnini worked as an accountant for a public REIT prior going to law school and is currently pursuing his LL.M. in Taxation at NYU. If you have any questions please do not hesitate to contact the firm by phone or email, which are available in his firm bio HERE.
AUTHORITY
Sec. 212.08(7)(ee) & (rr), Florida Statutes
ADDITIONAL RESOURCES
FLORIDA MOTOR VEHICLE SALES TAX RATES BY STATE – TIP 13A01-02, March 1, 2013, by James H Sutton, Jr., CPA, Esq.
BROWARD COUNTRY USED CAR DEALER ARRESTED FOR SALES TAX THEFT, April 24, 2013, by Jerry Donnini, Esq.
FL CAR DEALER: WHEN IS A SALE TAX EXEMPT?,March 17, 2013, by James H Sutton, CPA, Esq.
FL Form GT-800005: Florida Sales Tax for Boat Dealers
FL Form GT-800008: Florida Sales Tax for Air Plane Dealers
Florida Form DR-123: Affidavit for Partial Exemption of a Motor Vehicle for Licensing in Another State