STUART MARBLE & GRANITE OWNER ARRESTED FOR SALE TAX
On January 9, 2015, the Florida Department of Revenue ("FDOR") announced [name omitted], was arrested by the Martin County Sheriff's Office. The felony charges were that she allegedly collected $32,000 in sales tax from customers and failed to send to the state. The marble & granite company owner, a Jensen Beach resident, was charged with a felony count of theft of state funds and faces and faces up to 15 years in prison, up to $10,000 in fines, and potential penalty and investigative payment liabilities.
According the FL DOR's press release, [name omitted], owner of Grandeur Marble & Granite, Inc. collected tax from his customers at his Stuart Florida business. However, from November 2010 through December 2013, she failed to file tax returns and remit all the tax collected to the state. It is worth pointing out that collecting and not remitting over $20,000 is a second degree felony, and an amount over $100,000 is a first degree felony offense.
Florida law requires business owners that sell, repair, rent, or provide services to act as an agent to the state and they must remit all sales tax collected to state of Florida. Construction contractors are a significant source of sales and use tax revenue for the state of Florida and, as such, face close scrutiny from the Florida Department of Revenue. Construction contractors, from cabinet and counter top companies to low voltage and roofing companies throughout South Florida are at risk because the FL DOR has been targeting these industries for audits and higher overall scrutiny.
Further, Florida sales tax is required to be separately stated on the customers invoice and Florida law mandates that the taxes collected be the property of the state from the moment it is collected from the customer. Therefore, despite putting these amounts in their own checking accounts, business owners must segregate sales tax collect and remit it to the state in a timely fashion.
While I don't know the details behind this case, one very strange thing to note about this particular arrest is that counter top companies usually do not collect sales tax from their customers. Under Florida law, construction companies that fabricate and install tangible personal property into their customer's real property as not considered to be selling tangible personal property subject to sales tax at all. Instead, the construction company is considered to be performing a real property improvement, which is outside the scope of sales tax. The typical construction company, like a counter top or cabinet company, is considered to be the final consumer of such products and is require to pay sales tax or use tax on the "fabricated cost" of the tangible personal property installed into the real property of its customers. Under these circumstances, I would have expected a granite and counter top company to be paying sales tax on all its material purchases as well as use tax on any fabrication labor. If I had to guess – then I would say this particular company did not understand its sales tax / use tax obligations and was improperly collecting sales tax from its customers. If the company had properly understood the sales tax / use tax laws in Florida, then perhaps this whole criminal investigation and arrest could have been avoided.
The Florida Department of Revenue Executive Director was quoted saying:
It is an honor to serve the vast majority of Florida businesses who comply with State tax requirements. For those that don't, it is our job to enforce the law and ensure honest businesses are not placed at a competitive disadvantage by those who ignore the law or worse intentionally collect and steal taxpayer dollars
Collecting but not remitted Florida sales tax is a crime under Florida law and must be taken extremely seriously. It is shocking to many business owners to know that the Florida Department of Revenue is dramatically more likely to arrest a business owner for tax fraud than the Internal Revenue Service ("IRS"). While both the IRS and the FL DOR will put tax liens on the business property (called a "Tax Warrant" in Florida), the Florida Department of Revenue will also charge and put the business owner in jail if the taxes and all associated penalties, interest, fines, and costs are not remitted.
If you or someone you know has collected but not remitted Florida sales tax, then please contact an attorney experienced in Florida sales and use tax criminal defense for a confidential conversation to discuss his or her options. There are mechanisms in place that allow individuals or their attorney to negotiate with the state to enter into a payment plan. While the monetary sanctions can be harsh, it is better than losing one's freedom. Like any other crime, anything said by you is an admission and can be used against you at a criminal trial. Therefore, it is wise to have an attorney speak on your behalf.
At the Law Office of the Law Offices of Moffa, Sutton, & Donnini, P.A., our primary practice area is Florida taxes, with a very heavy emphasis in Florida sales and use tax. We have defended clients against criminal charges related to Florida sales and use taxes for more than 20 years. In fact, the only criminal cases we handle are related to Florida sales and use taxes. Our partners are both CPAs and Attorneys, so we understand both the accounting side of the situation as well as the legal side. We represent taxpayers and business owners from the entire state of Florida. Call our offices today for a FREE INITIAL CONSULTATION to confidentially discuss how we can help put this nightmare 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 in the State and Local Tax department of one of the Big Five accounting firms 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 read more about Mr. Sutton in his firm bio.
ADDITIONAL RESOURCES
FL COUNTER-TOP COMPANIES: FL SALES TAX PROBLEMS, published Oct 13, 2013, by James Sutton, CPA, Esq., and Jerry Donnini, Esq.
FL CABINET COMPANIES WITH SALES TAX PROBLEMS, published October 5, 2013, by James Sutton, CPA, Esq. & Jerry Donnini, Esq.
SHIPPING CHARGES vs FL SALES TAX, published June 8, 2014, by James Sutton, CPA, Esq.
FT. MYERS BUINESS OWNER ARRESTED FOR FAILING TO REMIT ONLY $8,000 IN SALES TAX COLLECTED, August 11, 2012, by James Sutton, CPA, Esq.
FL DOR'S GREATEST WEAPON – REVOCATION OF DEALER'S SALES TAX CERTIFICATE, August 6, 2012, by Jerry Donnini, Esq.
CLOSE BUSINESS TO AVOID LARGE FL SALES TAX ASSESSMENTS?, published July 7, 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, May 1, 2012, by James Sutton, CPA, Esq.
© 2015 – All Rights Reserved – James H Sutton, Jr.