In TIP 16A01-03, the Florida Department of Revenue (FDOR) announced the use of a new Application for a Consumer’s Certificate of Exemption (DR-5). The new form, which is currently available on the FDOR’s website if you have the latest version of Adobe, simplifies the process for establishing the entity qualifies for the exemption.
To clarify the applicability, nonprofit organizations and governmental entities are granted an exemption from Florida sales and use tax via sections 212.08(6) (Political Subdivisions), 212.08(7) (Miscellaneous Exemptions in paragraphs (a) through (xx)), and 213.12(2) (State-Chartered Financial Institutions). A qualifying entity must obtain a certificate from the FDOR (this does not apply to federal agencies). It should be noted that there are various administrative and procedural requirements in certain cases for the transaction to be exempt despite the apparent applicability of an exemption certificate (e.g. payment of transient rentals involving an exemption certificate have payment requirements to confirm the exempt nature).
As a general matter, exemption certificates (Form DR-14) are only valid for five years. Previously, holders would have to apply for a new certificate. Now, exemption certificate holders will not have to reapply for the exemption certificate as the FDOR will review each certificate approximately 60 days before expiration. Unilaterally, the FDOR will use available public information to determine whether the nonprofit or governmental entity located in Florida still qualifies for the exemption certificate. If the nonprofit or governmental entity still qualifies, it will be mailed a new exemption certificate. If additional information is needed, the FDOR will issue a letter requesting documentation. For nonprofit organizations and governmental entities located outside of Florida, the FDOR will issue a letter requesting whether that nonprofit or governmental entity wants to renew their certificate and the necessary documentation if renewal is sought.
Should the FDOR not be able to confirm the nonprofit or governmental entity qualifies for a renewal or if there is no response to a written request by the FDOR, a written denial notice will be sent to the nonprofit or governmental entity. The TIP does not indicate what kind of possible grievance procedures exist should a nonprofit or governmental entity wish to challenge the written denial notice. The logical assumption is that the written denial notice will include an explanation of procedures to challenge the FDOR’s determination – either informally or formally. But, my experience has shown that assumptions with the FDOR can be dangerous.
In any event, this process should benefit Florida nonprofit organizations and governmental entities. The now simplified process should remove time consuming burdens on taxpayers that previously existed if it hasn’t significantly changed its operations to jeopardize its exempt status. The only apparent concern, which can’t be quantified, relates to the process by which the FDOR will review public information and what threshold will be required to qualify for renewal. In many instances, I have seen the FDOR question nontaxability in cases which appear to clearly qualify under statutory requirements. Therefore, I hope this apparently good idea isn’t tarnished by involvement of too much FDOR “discretion”.
Should your nonprofit entity or governmental organization encounter any questions with the status of its exemption certificate, it is important to address the matter immediately to minimize or eliminate the risk that there will be taxable transactions due to the nonexistence of a valid exemption certificate.
ADDITIONAL RESOURCES
TIP 16A01-03 New, Simplified Process for Nonprofit Organizations to Obtain and Renew Sales Tax Exemption Certificates