If you or your client is a used car dealer, then you likely have been exposed to or at least worried about a sales tax audit by the Florida Department of Revenue. If that wasn’t bad enough, you now have to contend with examinations by the Florida Office of Financial Regulation (FOFR).
Chapter 520, Florida Statutes (F.S.), addresses retail installment sales. Part I specifically applies to motor vehicle sales finance. Rule 69V-50, Florida Administrative Code (F.A.C.) addresses motor vehicle sales finance. These statutes and rule provide the basis for the FOFR’s examination of car dealers. Like any FOFR examination, the results generally include significant proposed administrative fines and possible revocation of you or your client’s license. It is something you need to be prepared for.
While it appears to be a somewhat “new” industry for FOFR examinations, the FOFR is rapidly increasing the number of examinations by its staff. Upon receiving the notice of examination, the next step likely will involve an examiner or two taking several days to request and review records related to installment sales. You or your client need to expect this to be a fairly time-consuming experience.
With the FOFR examination, you can expect the examiner(s) to look at amounts listed on the sales and financing contracts. Generally, the FOFR is looking to see what amounts were charged to customers and what amounts were actually remitted. This not only involves taxes (sales and/or documentary stamp tax) but also registration fees and other charges. The other charges and include “handling” or “processing” fees as well as customer purchases of gap, service agreements/warranties, or any other amounts charged to the customer and included in the financing contract apart from the cash price of the vehicle.
Since the installment contracts are generally preprinted forms widely used in the industry, you can expect that the FOFR is going to identify violations for charges to consumers in excess of amounts allowed by law for any items disclosed in the financing documentation. The FOFR has been generally alleging violations for amounts charged to customers that exceed amounts paid to the providers of the purchased services (GAP or agreement/warranties, etc.). The FOFR is broadly reading its authority as set out in the statutes and rules. But, this should not come as any surprise to anyone who has previously dealt with the FOFR.
Even if you submit customers who need financing to third party lenders, the FOFR still considers that an installment sales contract. Many dealers who do not self-finance use this method to connect lenders to buyers so that they can receive full payment for the purchased vehicle. The FOFR often reads the printed installment sales information as involving you as the seller/financer for the deal. This pulls you or your client into the FOFR’s authority.
After the examination, don’t think that the silence from the OFR means you have survived the examination. It generally takes a period of months (or longer) for you to receive the administrative complaint that alleges violations. Be prepared for the administrative complaint to allege a fine, refund of overcharges, and license revocation. Any of these are serious enough alone. The license revocation clearly impacts your ability to operate as a business that utilizes any form of financing. But, the possible refunding of alleged overcharges will likely be a burdensome project to show that funds paid by customers were remitted for the stated purpose. This naturally becomes a bigger burden for the more deals that are applicable for the examination period.
Preparing for the examination can help address the possible violations the FOFR might allege. However, it is more important to be aware of the administrative complaint that you will receive. This sets forth the deadline to file a response and preserve your rights to contest the examination findings. If you fail to timely file a response, then the FOFR will enter a final order adopting the examination findings. Again, that likely will include license revocation which can be a business killer.
If you or your client receive a notice of examination, then feel free to follow up with us on the matter. Even the responses to the licensee questionnaire can allow the FOFR to incorrectly assert a basis for violations. With an administrative complaint, you will have twenty-one days from the date of receipt to provide a written response to preserve you or your client’s right to a hearing. We can help explain the examination or hearing process. The administrative complaint is going to allege serious consequences that must be addressed or else the FOFR can, and usually will, enter a final order adopting the proposed findings. The FOFR’s alleged findings may be wrong, but you have to affirmatively show that to protect you your client’s license and livelihood. We provide a free initial consultation to help in any way possible.
About the author: Mr. Parker is a Florida state and local tax attorney and an associate in the law firm the Law Offices of Moffa, Sutton, & Donnini, P.A., based in the firm's Tampa office. Mr. Parker's practice includes state tax audits and controversies involving sales and use tax and the Office of Financial Regulation and all other state taxes including communication service tax, cigarette & tobacco tax, motor fuel tax, and Native American taxation. Mr. Parker received his law degree and L.L.M. in Taxation from the University of Florida. You can reach Mr. Parker at MatthewParker@FloridaSalesTax.com, 813-775-2132. You can read more about Mr. Parker on his firm bio.
About the Firm: 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 Florida sales and use taxes for more than 25 years with over 100 years of cumulative experience working for our firm. Our partners are both CPAs/Accountants 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.
ADDITIONAL RESOURCES
FL Office of Financial Regulations Extorting Business Owners Money, published February 20, 2018, by Matthew Parker, Esq.
Florida Sales Tax – Hope Scholarship Credit, published October 10, 2018, by David Brennan, Esq.
FLORIDA SALES TAX INFORMAL WRITTEN PROTEST, published November 17, 2018, by James Sutton, CPA, Esq.
FL CAR DEALER: WHEN IS A SALE TAX EXEMPT?, published March 17, 2013, by James Sutton, CPA, Esq.
Post-Wayfair – Can You Afford to Wait to Register?, published August 8, 2018, by James Sutton, CPA, Esq.