FL SALES TAX CRIMINAL INVESTIGATION

THE AFTERSHOCK: THE UNFORSEEN EFFECTS OF A FLORIDA DEPARTMENT OF REVENUE CRIMINAL INVESTIGATION

When considering the risks of opening a business, the loss of freedom probably does not make people’s short list. Any yet, every month, our firm receives calls from business owners under criminal investigations, or who have been arrested, as a result of failure to pay sales tax to the Florida Department of Revenue. In 2016, there have been 38 arrests reported to date on Florida Department of Revenue’s site. That does not include numerous ongoing investigations, and warrants issued for which arrests have not been made. That is 38 people who have been arrested, held in a jail cell for processing and will potentially have a criminal felony on their record. While there are some business owners who think they can keep sales tax and get away with it, most people charged for this crime have a similar story. The business’ revenues were down. If the employees or rent were not paid, the business would close overnight. If the sales tax went unpaid, it would be a few months before Department of Revenue reached out. Business owners are often faced with tough decisions, and most have just hedged their sales tax on their optimism, assuming the business would turn around and they could get caught up.

The technical charge, theft of state funds, can be found in Section 212.15, Florida Statutes. This section dictates that sales tax collected is state funds at the moment of collection. Any person, with the intent to unlawfully deprive or defraud the state of the money, fails to remit that tax, is guilty of a felony. Failure to remit $300 to $20,000, will be charged as a third degree felony. Failure to remit $20,000 to $100,000, is charged as a second degree felony. When tax collected and not remitted is in excess of $100,000 the resulting charge is a first degree felony. When the business has failed to file DR-15 Sales and Use Tax returns, each unfiled return represents an additional misdemeanor charge. To break down what that really means, a third degree felony is punishable by up to 5 years in prison and $5,000 in fines. A second degree felony punishable by up to 15 years in prison, and $10,000 in fines. First degree is up to 30 years in prison, and $10,000 in fines. This is all in addition to repayment of the tax due. The prosecutor, equipped with a score sheet, recommends the charge. This sheet designates a number of points for a primary offense, additional points for additional offenses such as corresponding misdemeanors for unfiled returns, and then points based on any prior offenses committed by the Defendant.

There are two stages of criminal process prior to trial:

Investigation: This is the period for the Department of Revenue to collect data and calculate the amount under-paid. Unlike an audit, during criminal investigations, the State has the burden to prove that there was tax collected and not remitted. While the Department of Revenue investigators are generally well trained and fair, make no mistake, they are not your friends. The right to an attorney for any stage of the criminal process is so fundamental it is a constitutional right. When faced with charges for a crime, the first step should always be hiring representation, and a Department of Revenue investigation is no exception. This can be a lengthy, and invasive process. During an investigation, the business owner’s goal should always be to calculate a fair result, and get that amount paid as quickly as possible to forestall criminal charges from being filed. If at all possible, making full payment at this stage is the best case scenario.

Pre-Trial: Once the investigator has finished their review, they turn the case file to the State Attorney’s office. If the accused has no criminal history, oftentimes the prosecutor will agree to a diversion program, often called pretrial intervention or pretrial diversion. This is a program intended to give nonviolent offenders a chance to avoid having to plea to a charge, and frees up the judicial system by avoiding expenditure of resources for issues that don’t require judicial intervention. Once full payment of the balance due is made, the charge is dropped. In the alternative, if this is not the accused’s first offense, or the dollar values score too high based on the scoresheet discussed above, the charge will be filed, and there is now an open case to be defended. Most people at this point plead to the charge, meaning the Defendant enters a plea of nolo contender (no contest) or guilty, in exchange for reduced sentencing recommendations. Generally, this results in the defendant getting probation, meaning paying costs for supervision and having to check in with a PO, in addition to repaying the tax, fines and court costs. Being unable to full pay prior to charges being filed can be costlier long-term.

Another drawback to not stopping the investigation process prior to charges is it potentially put the business’ license in jeopardy. Entering a plea to a criminal charge can result in the loss of a business license. Many of the forms required for licenses issued by Department of Business and Professional Regulation ask a question along the lines of: Has the applicant ever plead to, or been convicted of a crime? So after the whole ordeal, the long term ramifications can be very serious. While any criminal attorney will know the legal side of the case, what most do not account for is the business itself. An attorney versed in both tax and criminal procedure, who understands your options and the process, is an invaluable resource.

Having an attorney involved at investigations, or once charges are filed, will streamline the process. Getting someone involved early is the best way to achieve a fair result out of an investigation, and gives the business owner the greatest likelihood of emerging from this ordeal unscathed. Writing a check for the tax due may seem like a large burden, however the alternative is far more expensive as it involves the potential for thousands of dollars in fines, court costs, the associated costs of probation supervision, the cost of an attorney to represent the accused in court and potential loss of the business license. If you have been contacted by the Florida Department of Revenue’s Investigations, or think they have reason to contact you, call for a free consultation. At the Law Office of Moffa, Sutton, & Donnini, PA, 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: Ms. Levine is an associate attorney with the Law Offices of Moffa, Sutton, & Donnini, P.A. Her primary practice area is Florida tax controversy, including criminal proceedings for state tax issues. Ms. Levine received a B.S. in Accounting from University of Central Florida. She spent several years working in public accounting before attending Nova Southeastern University Law School. She received her Juris Doctorate in 2014. During her time at Nova Law, Ms. Levine was the Executive Justice of Academics for the Moot Court Honor Society, as well as the Finance Chair. She was awarded by the National Order of the Barrister, a national honor society which encourages oral advocacy and brief writing skills. You may read more about her in her bio HERE.

Resources

Section 212.15 Florida Statutes – Theft of State Funds

Section 921.0024 Florida Statutes - Criminal Score Sheet

Additional Resources

WHEN A CLOSED BUSINESS ISN’T CLOSED TO FL DOR, September 26, 2014, by Matthew Parker, Esq.

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

FL DOR’S GREATEST WEAPON – REVOCATION OF DEALER’S SALES TAX CERTIFICATE, August 6, 2012, by Jerry Donnini, Esq.