FLORIDA SALES TAX ON PRIVATE INVESTIGATORS

FLORIDA SALES TAX ON PRIVATE INVESTIGATORS

Many individuals and businesses are well aware of Florida’s sales tax. Most that are familiar with sales tax think of it as applying to sales of tangible personal property. However, in Florida, sales tax also applies to certain services, including investigation services. Specifically, if services are performed that are enumerated in NAICS codes 561611, 561612, 561613, and 561621 are subject to tax. In normal terms, if someone is providing services that are detective, burglar protection services, and other protection like services, then the sales tax alarm should go off. Not charging sales tax correctly can lead you or your company into trouble with our friends at the Florida Department of Revenue. Theses service related taxes often catch companies off guard.

The DOR takes the position that the following non-exhaustive list of services are subject to Florida sales tax:

Armored car service
Bodyguard services
Burglar or fire alarm services
Detective Services
Fingerprint services
Guard dogs and other dog related protective or investigation services
Guard, patrol, and parking services
Investigation services
Lie detector services
Missing person services
Passenger screening services
Skip tracing services

In addition to companies being on the hook for not charging tax, if a customer hires a company that provides one of investigtion services, then the customer is also on the hook for not paying tax on these services. Many times, a company is audited for their sales but it gets nailed on audit if they do not pay tax on purchases of the services above.

From an investigators standpoint, there is a myriad of issues within this industry. For example, if a private investigator provides a taxable service and separately states an exempt service, then the exempt service retains its exempt nature. Example of exempt services are credit reporting services, insurance investigation services, process serving services, courthouse records revival, repossession services, and public information reporting. In addition, if an investigator is an employee of company then no tax is due when a service is provide to the employer. Further, if a law enforcement provides the service then it is exempt only if the service is performed in the same area where the officer has arrest jurisdiction.

There are several issues that an investigator should be cognizant of when operating in this industry. For starters, an investigator is deemed to be the final consumers of everything they buy. In other words, an investigator or his company should be paying tax on their purchases of anything tangible. If the investigator or his company does not keep proper documentation of this then they run the risk of paying tax twice.

The DOR is not afraid to pursue investigators criminally either. If an investigator does not pay the tax it collects, then it is subject to criminal charges. It only takes $301 of tax collected but not remitted to result in felony charges being filed. In addition to the damaging effect this will have on your license for just over $300 of tax collected but not remitted, it can also land you a staggering 5 years in jail and up to $5,000 in fines. In 2013, the Florida Department of Revenue proudly published the arrest of two investigators – one in Tallahassee and the other in Key West. The Tallahassee business owner did not remit over $15,000 in collected tax and the Key West owner failed to remit just over $41,000 of tax he collected. The Kew West investigator faced 2^nd degree felony charges with up to 15 years in jail and $10,000 in fines.

At the Law Offices of the Law Offices of Moffa, Sutton, & Donnini, P.A., we focus on Florida Tax Controversy. As surprising as this may be, the vast majority of our firm’s time is spent defending businesses for alleged Florida sales and use tax problems. We handle sales tax audits, protests, petition for reconsideration, controversy, collections matters, revocations, investigations, and criminal defense. Our firm also handles other types of Florida taxes, but sales and use tax is by far the primary practice area of our firm. We also offer a FREE INITIAL CONSULTATION. So if you have a problem with potentially under reported or under remitted Florida sales tax, then why wouldn’t you want to at least talk to someone who practices almost exclusively in this area.

About the author: Mr. Donnini is a multi-state sales and use tax attorney and an associate in the law firm the Law Offices of Moffa, Sutton, & Donnini, P.A., based in Fort Lauderdale, Florida. Mr. Donnini's primary practice is multi-state sales and use tax as well as state corporate income tax controversy. Mr. Donnini also practices in the areas of federal tax controversy, federal estate planning, Florida probate, and all other state taxes including communication service tax, cigarette & tobacco tax, motor fuel tax, and Native American taxation. Mr. Donnini is currently pursuing his LL.M. in Taxation at NYU. You can read more about Mr. Donnini in his firm BIO HERE.

AUTHORITY

Sec. 212.05(1)(i), F.S. (Statute imposing tax on investigation services)

Rule 12A-1.0092, F.A.C. Detective, Burglar Protection, and Other Protective Services

ADDITIONAL RESOURCES

TALLAHASSEE SECURITY AGENCY OWNER JAILED FOR SALES TAX, published October 15, 2013, by James Sutton, CPA, Esq.

KEY WEST PRIVATE INVESTIGATOR JAILED FOR SALES TAX, published April 29, 2013, by James Sutton, CPA, Esq.

FL TAX – VOLUNTARY DISCLOSURE CAN BE THE PERFECT SOLUTION, published October 5, 2012, by Jerry Donnini, Esq.

WHAT SERVICES ARE SUBJECT TO SALES TAX IN FLORIDA?, published May 1, 2012, by James Sutton, CPA, Esq.