TAMPA'S HYDE PARK CAFÉ – SALES TAX REVOCATION
Outside the offices of a very few attorneys in Florida, most people do not know that the Florida Department of Revenue has the power to revoke a business's ability to sell anything that is subject to sales tax. For a business that primarily sells tangible personal property – such as a restaurant or bar, a revocation of their sales tax registration is effectively a death sentence for the business. One's of South Tampa's premier nightlife hot-spots recently found out just how serious the revocation process can be. On June 11, 2015, Tampa's Hyde Park Café had an administrative law judge issue a recommended order to revoke their sales tax Certificate of Registration for failure to pay sales tax collected, failure to file sales tax returns, and failure to file and pay reemployment tax returns. The sum total due as of recommended order was over $200,000 in sales tax and reemployment tax.
The problems for Hyde Park Café apparently started as far back as 2012 and a footnote in the recommended order suggested the owner of the business had been behind on sales tax for another business prior to this one. In other words, the Department of Revenue and the administrative law judge lost all patience with this business. While the taxpayer has the right to delay the revocation process by filing an appeal of the recommended order, the writing is most likely on the wall for this business if they can't come up with the funds to pay back all taxes before the order becomes final. After that time – the DOR will seek an injunction for the business to operate and will, most likely, have the sheriff shut the business down.
One of the things that is interesting to me, reading through the judge's recommended order, is that the final straw that brought the taxpayer to this point was so minor. I'm writing this article so that any business owners out there facing a potential revocation process will take everything very, very seriously. A revocation hearing is no laughing matter. By the time a business finds themselves getting certified mail from the Florida Department of Revenue with the word "REVOCATION" in the heading – the business owner needs to tread carefully as if they were in a mine field. Any misstep could easily cause the owner to lose everything he has worked so hard to build.
In the facts of this case, the business entered a "compliance agreement" after an informal revocation hearing. However, the business owner missed the part of the agreement that said he had to make the payments required by the compliance agreement with the local Department of Revenue service center.[i] Instead, the taxpayer mailed the checks to the Tallahassee office of the Department. This minor misunderstanding caused a processing delay of the payment, which violated the compliance agreement. The Department asked the taxpayer to bring a cashier's check to the local office, but then failed to make the next payment. In the taxpayer's mind, the 1st check mailed to Tallahassee should have been treated like the 2nd payment. However, the Department did not treat it this way and notified the taxpayer the Compliance Agreement had been terminated. This small misunderstanding was enough to cause the Florida Department of Revenue to force the taxpayer into a formal revocation hearing to permanently revoke the taxpayer's certificate of registration for sales tax.
If you think losing the business is the worst thing that could happen to the business owner, then I hate to tell you that this is probably only the beginning. As most of these unremitted taxes occurred since the beginning of 2012, the 5 year statute of limitations is still open for the business owner to be investigated and prosecuted for a 1st degree felony – theft of state funds – punishable by $10,000 in fines and up to 30 years in jail. It only takes $301 of collected but not remitted sales tax to cause someone to be charged and convicted with sales tax fraud with up to 5 years in jail. Cross the $100,000 mark, which this case apparently has, and the responsible party could be looking at 30 years. Now that is truly scary.
One thing I hear from a lot of business owners that get behind in remitting sales tax is that the state should be thanking them for collecting and remitting so much sales tax over the years and providing jobs to all their employees. They feel that the state would be a fool to put them out of business because the state would be losing all that tax revenue. This concept of their situation often causes business owners to not take the sales tax collectors seriously. I know from experience that the Department of Revenue has a different mentality. No, they don't "want" to put someone out of business. However, if a business owner can't run a business effectively enough to remit sales taxes collected from customers, then the state would rather see that business shut down so that another can take its place – with hopefully more sales tax compliance. They would also rather freeze bank accounts and start the revocation process before the sales tax liabilities get so large that it become something the business owner can't dig his/her way out of, such as what is potentially the case here.
At the Law Offices of the Law Offices of Moffa, Sutton, & Donnini, P.A., our primary practice area is Florida sales and use tax controversy. In other words, we defend business owners against the Florida Department of Revenue. Whether you just got an audit notice, need help fighting at the end of an audit, or you need to litigate an unfair sales tax assessment, we are here to help. If you are facing a collections mater, a revocation hearing, or even a criminal investigation, we are here to help. Florida sales tax defense is simply what we do. Take advantage of our free initial consultation to learn more how to begin to put your sales tax problems behind you.
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's primary practice is Florida tax controversy, with an almost exclusive focus on Florida sales and use tax. Mr. Sutton worked for the State and Local Tax Department of Arthur Andersen 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 since 2014 teaching Sales and Use Tax. Mr. Sutton is a frequent speaker on Florida sales and use taxes for the FICPA, Lorman Education, NBI, and the Florida Society of Accountants. Mr. Sutton is also co-author of CCH's Sales and Use Tax Treatise. You can contact Mr. Sutton at 813-775-2131 or JamesSutton@FloridaSalesTax.com or his firm bio.
AUTHORITY
Sec. 212.15, F.S. (requirement to file and remit collected sales tax & criminal punishment)
Sec. 212.18, F.S. (authorized FL DOR to revoke a dealer's certificate of registration)
Sec. 213.692, F.S. (gives taxpayer right to informal conference before formal revocation hearing)
Department of Revenue v Tampa Hyde Park Café, Div. of Admin. Hearings Case No. 14-4647 (decided June 11, 2015).
ADDITIONAL RESOURCES
CAN I GO TO JAIL FOR NOT PAYING FLORIDA SALES TAX?, published November 3, 2013, by James Sutton, CPA, Esq.
FL DOR'S GREATEST WEAPON – REVOCATION OF DEALER'S SALES TAX CERTIFICATE, published August 6, 2012, by Jerry Donnini, Esq.
WHAT SERVICES ARE SUBJECT TO SALES TAX IN FLORIDA?, published May 1, 2012, by James Sutton, CPA, Esq.
PLETHORA OF SALES TAX LITIGATION IN FLORIDA, published June 8, 2015, by James Sutton, CPA, Esq.
FLORIDA SALES TAX AUDIT HELP, published July 14, 2013, by James Sutton, CPA, Esq.
[i] Technically, the statute requires stipulated payment agreement and compliance agreement payments to be made electronically, but the Department does not have the system set up as of yet to accept electronic payments of this type. From reading the recommended order, I don't believe this was raised on the taxpayer's behalf.