FL DOR FORCING TAXPAYER TO SIGN AWAY RIGHTS TO REMIT TAX?
Our Draconian1 Comrades in Tallahassee are at it yet again. Actually, this time it is their comrades in the local Department of Revenue (DOR) offices who are crossing the line by attempting to force taxpayers to sign incriminating statements just to remit taxes.2 I've heard about it several times lately, with the latest offense coming from the Miami office of the DOR. The Florida Department of Revenue has absolutely no authority to force taxpayers to sign additional, un-promulgated documentation simply to remit sales taxes due, and I'm here to tell you that you can simply say NO.
Here's the typical fact pattern. A business is late filling or paying taxes several times such that they get the attention of the collection department of the FL DOR – the division of the DOR tasked with reminding taxpayers that they are potentially behind in filling or paying taxes and coaxing the business into being compliant. The lapse in the business's judgment could be due to a variety of reasons, such as slow business months, illness in the family, employee theft, change in personnel or accounting firms, or simply an oversight. Whatever the reason, the business owner comes down to the local Department of Revenue office to pay the taxes. The collections officer tells the taxpayer they will not accept the payment of tax without the taxpayer signing a statement saying that he is the responsible party for the business's sales tax processes and that he failed to file and/or remit sales tax on time. The sworn statement also provides that he is aware of all the civil and criminal penalties that can be imposed on him if this happens again.
If the taxpayer is educated and bold enough to refuse, the DOR collections agent will escort the taxpayer to a room, much like an interrogation room. I'm sure you've seen enough police movies to imagine a room with no windows, only one door, and an old government issued table with three or four old chairs around the table. The arms of the chair look worn and you might even see scuff marks that make you wonder whether they have been made by handcuffs attached to the arms of the chair. In other words, a very intimidating setting. If this wasn't enough, the collection agent leaves you alone in the room for a while to wonder what you have gotten yourself into. Then the collection agent and their supervisor comes back into the room. They tell you that you have to sign the agreement, that you have no choice. They remind you of all the potential civil and criminal penalties that can be imposed on you for failure to remit the tax or file returns timely. All of this you already know, but they are saying it like you just robbed the local convenience store owner at gun point. They emphatically tell you that you have to sign the agreement.
The situation probably falls short of having a bright light shining into the taxpayer's face, but we are talking about the city where most of us (born before 1980) watched Crockett and Tubbs interrogate enough would-be criminals in Miami Vice – and the thought uncontrollably comes to mind. All humor aside, most people under this amount of duress would likely sign the document just to make this kind of mental torture stop. This is effectively making the taxpayer give up his 5th amendment right to not testify against himself. It is also a violation of the taxpayer's rights because what the DOR is telling the taxpayer is not clear, accurate information of his rights, specifically that the taxpayer does not have to sign the form. The only form that has to be signed is the sales tax return itself, which the taxpayer already signed. There is no statute or rule in Florida that gives the FL DOR's collection agents the authority to create their own forms and force taxpayer's to sign them.
Luckily, the taxpayer in our Miami incident worked with their CPA to inquire with our firm whether the taxpayer had to sign the forms before he went to the Miami DOR office. After a few quick emails, the taxpayer was educated enough to know that the collections agents were exceeding their authority and, using more polite words than we suggested, repeatedly refused to sign any additional documentation. The DOR agents eventually let the taxpayer leave and accepted the payment. At this point, I'm even considering whether false imprisonment allegations are warranted in this situation.
There are a lot of things wrong with what happened in this situation. First, our Florida Department of Revenue is a governmental body created by statute to administer the majority of our state's taxes and even a few of the local taxes. The legislative and executive branches of our state government provided by statute that the FL DOR is mandated to create administrative rules to administer and enforce the taxing statutes. These rules may not exceed or conflict with the statutory language for which the rule is designed to implement. These Administrative Rules must adhere to a formal process that includes public hearings and comment before rules may be finalized and imposed upon the public. When the local offices of the DOR simply start making up their own rules and enforcing these rules on taxpayers, this is known as an un-promulgated rule. As you can guess, un-promulgated rules are invalid and unenforceable. We do not live in a police state where local government officials can simply make up the law anytime they want and enforce it on the public.
My biggest concern, however, is not just that the local office made up this document for people to sign. My real concern is how often things like this happen and in such a wide variety of ways within the FL Department of Revenue. These situation clearly remind me of the IRS scandals in the news lately where certain groups within the IRS decided that they could simple target groups that they did not agree with, namely groups that wanted less taxes and less government overall (i.e. less IRS employees). When a government organization with as much power as the taxing authority starts going rouge and unchecked, it usually takes a serious scandal with many people losing their jobs before the organization can find their way back to the right path. The last time the FL DOR was really called to the mat was in 1992, when a ballot measure to create Amendment 5 to the Florida Constitution forcing the Florida Legislature to enact a taxpayer bill of rights was approved with over 90% of voters in favor of the measure. Note that this ballot measure happened right after another long, drawn out bad economic spell in this country when business owners became sick of our state tax authorities aggressive behavior. (See link at the end of this article to the full FL Taxpayer Bill of Rights) Below is the verbiage the voters where provided on the ballots in 1992:
Requiring the legislature to adopt a Taxpayers' Bill of Rights in clear and concise language that sets forth taxpayers' rights and responsibilities and government's responsibilities to deal fairly with taxpayers under the laws of this state. [Amendment 5 to Florida Constitution]
I really question whether DOR employees are ever trained in what the bill of rights says or whether the powers that be in Tallahassee have any people dedicated to reviewing DOR state and local office policies to see if they adhere to the rights granted to taxpayers and mandated on the DOR. I know that the FL DOR does review the administrative rules to see if they conflict with statutes, but I am not aware of any formal process to review procedures to see if they comply with taxpayer rights.
For example, the FL Taxpayer Bill of Rights provides the "right to fair and consistent application of the tax laws of this state by the Department of Revenue." Despite a statutory requirement for the laws to be applied consistently around the state, each collection office has its own standard for installment agreements. One office might only recommend agreements up to 6 months, while another office might recommend 18 months. These installment agreements are approved in Tallahassee, but it does not appear anyone in this approval process is concerned with whether the whole process is consistent throughout the state. This inconsistent application of the tax law violates the taxpayer bill of rights.
Another example of the of the DOR not paying attention to the taxpayer bill of rights is "the right to participate in free educational activities that help the taxpayer successfully comply with the revenue laws of this state." Our state revenue agency used to offer great, free training programs around the state, usually with an industry focus. So when a car dealer hired a new person to keep up with sales and use tax obligations, the dealer could send the employee to a training session put on by the local DOR office tailored to car dealerships. By statute in the Taxpayer Bill of Rights, the DOR is required to provide these seminars to taxpayers. However, when the state started having financial problems in 2008, along with the rest of the country, these free seminars were taken away in the 1st budget cuts implemented by the Department of Revenue. So for the past 6 years, businesses have been robbed of the free tax training that the legislature provided MUST be made available to the public. I have seen firsthand the effects of the lack of these seminars – particularly on the used car industry. Most used car dealers that have started in the last six years are woefully uneducated in how to handle the very complicated sales tax rules for the industry. Over the past year, the FL DOR started comparing sales tax returns of used car dealers to DMV records and realized that the used car dealer industry as a whole was not handling sales tax correctly. What do you think our comrades in Tallahassee did? One might logically think, with such a business friendly governor, the FL DOR would re-implement training seminars, as required by statute, to help the state's "business partners" in the used car industry get into compliance. That would be what a taxpayer friendly revenue department would do. However, in line with the overall draconian mentality we've been seeing, the FL DOR implemented a state wide audit task force, focused on the used car industry. Instead of educating car dealers with training programs, the state agency decided to educate the industry by auditing the majority of the used car dealers around the state. Now car dealers are facing huge assessments for taxes that should have been collected, along with penalties and interest. I can only imagine someone decided, "why spend state resources on free training programs when the state could make money while training used car dealers the hard way, via audit?" I always tell people that a Florida Sales and Use Tax Audit is merely an educational lesson in our state's taxing laws, albeit a very expensive lesson.
Anyone that has read a number of my articles knows that I'm pretty hard on the Florida Department of Revenue. In my practice, I deal with more separate divisions within the DOR than most tax professionals and even the vast majority of DOR employees. From initial registrations to refund claims and collections actions. From audits, protests, and controversy, to revocation hearings and criminal investigations. I deal with almost every level of the Florida Department of Revenue on a regular basis when it comes to sales and use tax. From this big picture perspective, I see firsthand the little lapses in how the FL DOR is handling matters. Small lines are crossed here and there. A law is ignored here and there. Employees are trained to think of things this way, when the law says it is that way. Collectively, it becomes an overall mindset that strays far off the path that the FL Department of Revenue is required to be on, and in some cases the result is rather draconian. Truth is, I have had the pleasure of getting to know hundreds of individuals in the Department of Revenue, and I have not met one that I do not personally like. From collections agents to service center managers and even investigators. These are all hardworking, underpaid people just like you or me that have a job to do. Each of these individuals are doing their job as they have been trained, and they are following the rules given to them by their trainers and supervisors.
The problem that I see happening is that these employees are being trained to do things that they should not be doing – such as trying to force taxpayers to sign documents that they have no right forcing the taxpayer to sign. The employees are merely doing what they have been told to do, but that does not make the actions right and often the employees know it. However, they have no choice if they want to keep their job. These "little" problems remind me of the old Chinese phrase "death by a thousand cuts"3 because each of these lapses in organizational judgment hurt both Florida's business economy and the Revenue Department organization as a whole. How many "cuts" is it going to take before it kills off an industry (driving it out of the state)? What is it going to take before a group of businesses or individuals take this matter to the press or legislature? The result is not going to be pretty.
However, perhaps the Florida Department of Revenue does not need some big, newsworthy scandal to correct its course back to an overall mindset to follow its statutory mandates and have a more business friendly focus. Our highest taxing authority has a new leader, Marshall Stanburg, the executive director who has the power and ability to right the ship and change course before the Department crashes into the dangerous shallow, reef ridden waters towards which the government body is heading now. With other strong executive leaders at his side, such as Maria Johnson, Executive Director of General Tax Administration, I honestly believe that the Florida Department of Revenue has a very real opportunity to turn this situation around and, at the same time, turn this state into the business friendly environment for which our state's executive leadership is striving. I ask anyone in the executive leadership of the DOR that reads this to simply stop, take a deep breath, and think how you might be able to help right your ship and bring the overall mentality of the Department into focus again at every level of the organization.
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 IS FLORIDA SALES AND USE TAX CONTROVERSY. 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, ACCOUNTING FOR LAWYERS, AND FEDERAL INCOME TAX I. YOU CAN READ MORE ABOUT MR. SUTTON IN HIS FIRM BIO.
ADDITIONAL RESOURCES
FLORIDA TAXPAYER BILL OF RIGHTS, posted July 8, 2012, by James Sutton, CPA, Esq.
FL TAX ALERT – USED CAR DEALERS TARGETED!!!!, posted January 19, 2013, by James Sutton, CPA, Esq.
FOOTNOTES
1 "Draconian" relates to Draco, a 7th-century B.C. Athenian statesman and lawmaker who implemented laws that prescribed extremely harsh punishment for almost every offense, quite often the death for even minor offenses.
2 The mentioning of an actual event occurring in the Miami Service Center was pre-approved by both the CPA and business owner prior to the partial facts being discussed herein.
2 The phrase "death by a thousand cuts" has its origins in lingchi, a highly unpleasant form of execution used in Imperial China, which involved the slicing of the convicted criminal's flesh until death ensued.
© Copyright 2013, all rights reserved, James H Sutton, Jr, CPA, Esq.