Starting July 1, 2019, Florida changed the law so that taxpayers who purchase items exempt for resale no longer have to remit sales and use tax on those items when they are donated to a 501(c)(3) rather than resold. Prior to that, the Florida Department of Revenue oddly punished taxpayers for donating goods to charity by making the donors pay sales tax!
This odd result was the combination of two sales tax principals. First, Florida exempts from sales tax items that are purchased for resale. A taxpayer is required to provide their vendor with the aptly named Resale Certificate which states that the taxpayer can purchase items from the vendor exempt from sales tax because such items will in turn be resold and tax will later be collected on the final transaction to the end customer.
The second sales tax principle that comes into play is that anything a taxpayer uses in the course of its business is subject to tax. Use tax is typically owed on items such as paper towels and soap for the bathroom or umbrella bags offered at the front of the store. When a taxpayer purchases these items, they will not provide their Resale Certificate because they are not, in fact, reselling anything. Instead, the soap in the bathroom, paper towels, and umbrella bags are given away to customers free of charge…kind of like a donation.
While having soap and towels in the bathroom of your business is not the same as donating goods to a 501(c)(3), they share the similarities in so far as items are purchased, not resold, and used. As a result, donations and items used by a business were similarly lumped together for sales tax treatment purposes and the Florida Department of Revenue required the donor/purchaser to pay tax on the items.
Imagine getting audited and assessed tax for items you donated out of the goodness of your heart to a charity! This absurd result prompted Florida to change its law and the Florida Department of Revenue to issue a Tax Information Publication or TIP 19A01-08 which removed the sales tax requirement on items of tangible personal property purchased exempt for resale but subsequently donated to an exempt 501(c)(3). This should come as a huge relief to taxpayers who donate items intended for resale. Good deeds will no longer go punished by the Florida Department of Revenue, at least in this specific scenario.
Jeanette Moffa is an attorney who concentrates on state and local taxes at Moffa, Sutton, & Donnini, P.A. She is an executive council member of the American Bar Association Tax Section State and Local Tax Committee and the Florida Bar Tax Section. Ms. Moffa is an author of both the CCH’s Expert Treatise Library: Sales and Use Tax as well the ABA’s Sales and Use Tax Deskbook. In addition, her regular columns on state and local tax issues can be found in State Tax Notes and Actionline, a publication from the Florida Bar’s Real Property, Probate, and Trust Law Section. She also serves as assistant editor to the Sales and Use Tax Deskbook and Actionline. Ms. Moffa is a regular speaker at the American Bar Association Tax Section conferences, the Institute of Professionals in Taxation, the Florida Bar Tax Section, the Florida Bar Real Property, Probate, and Trust Law Section, and the FICPA. In her free time, she teaches as an adjunct professor at Broward College.
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 Florida businesses against the Florida Department of Revenue since 1991 and have over 100 years of cumulative sales tax experience within 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.
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AUTHORITY
TIP 19A01-08 - Florida Sales Tax Exemption for Donated Property
ADDITIONAL RESOURCES
Shipping: An Overlooked Florida Sales Tax Exemption?, Published September 12, 2019, by Jeanette Moffa, Esq.
Scholarship Donations in Lieu of FL Sales Tax on Rent?, Published April 15, 2018, by James Sutton, CPA, Esq.
FLORIDA TAX EXEMPT ENTITIES - SALES AND USE TAX HELP, Published April 13, 2014, by Jerry Donnini, Esq.
Florida Use Tax Audit Letter?, Published April 28, 2015, by James Sutton, CPA, Esq.