The coronavirus/COVID-19 pandemic has impacted everyone’s lives. Included in this, it has impacted Florida tax revenue and its businesses significantly. Tourism and the hospitality industry provide a lot of jobs and revenue to the Florida economy and tax revenue. They have been greatly impacted at this time. In dealing with the virus and trying to curtail its spread, businesses have been forced and have chosen to remain closed for periods of time. This necessarily creates the question about what needs to be done regarding sales tax returns during this period.
While closed, businesses have had to worry about ultimately reopening and the updated procedures and operations this will involve. Businesses and their owners have had to worry about paying and retaining employees or replacing them when operations resume. It is easy to let the Florida Department of Revenue to slip back in the list of priorities. This can pose a dangerous situation as the obligation to file returns has not changed due to the impact. A business must file returns even if it has closed and there are no operations/sales to report.
The Department has not be unaware of the economic difficulties businesses have and continue to face. It has been more inclined to waive/compromise penalty and interest during especially difficult months and in “extreme” or unique situations. However, the need to file returns has never changed. Not filing a return, even when no tax is due, results in a minimum penalty for that return period. While the Department has forgiven some penalties for this situation in earlier months, this “understanding” will not continue indefinitely. The Department’s system generates the penalty and then a business has to affirmatively seek a compromise of the associated penalty.
Forgetting to file or simply failing to file a return might be an actual “cause” of noncompliance. Nonetheless, the Department will likely view the noncompliance from its typically skeptical perspective. This could create a disincentive to compromise penalty and/or interest due.
So, a business that is closed should make sure to file the $0 return (or return reporting exempt or nontaxable sales) as early as possible to make sure it is taken care of. If it is discovered that some sales had been accidentally overlooked, the process to amend returns is fairly straightforward. The penalty that would then be incurred is the same as filing (or paying) late. However, the effort to file early provides for an argument that any noncompliance was based on reasonable cause and does not involve any willful negligence, willful neglect or fraud – a key issue for the compromise of penalty under section 213.21(3)(a), Florida Statutes.
Should any tax, penalty or interest be due and the Department declines to compromise all or a part of it, the Department has recently shown a willingness to cooperate with businesses in providing payment plans. While usually not the most pleasant of experiences, the Department has generally relaxed the level of financial information it is requiring to enter into these payment plans. Just note that the duration of payment plans likely will be on the shorter side (less than 12 months and more likely 6) since the Department, like everyone, is looking/hoping for an earlier end to the pandemic and a return to more “normal” operations that includes a better ability to pay off liabilities and get completely current on accounts with the Department. The Department’s flexibility in payment plans and getting current includes the associated down payment for any payment plan. Regardless, at some point, the Department will resume “normal” operations which will include bank freezes and other collection activity to address account delinquencies.
While this article addresses only temporary closures, many businesses have closed permanently or will have to close in the near future. The issues associated with that situation are beyond this topic. However, a prior article has addressed them. This article, by James Sutton, addresses businesses that have closed and are considering “walking away” from liability. These situations involve possible criminal ramifications and personal liability. Here is a link to that article Closed Business to Avoid Large FL Sales Tax Assessment?
I hope this article has helped clear up any questions about filing returns during any temporary closures during the recent and ongoing pandemic. Our firm is available to address any unanswered or different questions you or your client’s business faces. As it has been said, we are all going through this together and we are simply here to help. Please reach out if you think we can be of any assistance during these trying times.
About the author: Mr. Parker is an associate in the Law Offices of Moffa, Sutton, & Donnini, P.A., based in the firm's Tampa office. Mr. Parker's practice concentrates on sales and use tax and includes state tax audits and controversies proceeding from audit through administrative litigation involving sales and use tax and all other state taxes including reemployment tax, communication service tax, cigarette & tobacco tax, motor fuel tax, and Native American taxation. Mr. Parker received his accounting degree, law degree, and L.L.M. in Taxation from the University of Florida. You can learn more about Matthew in his firm bio.
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.
When a Closed Business Isn't Closed to FL DOR, published September 26, 2014, by Matthew Parker, Esq.
FL Sales Tax 10% Penalty for Late Filing, published December 19, 2018, by David Brennan, Esq.
FL DOR - The Magic Behind the Curtain, published November 10, 2014, by James Sutton, CPA, Esq.
FL Tax - Voluntary Disclosure Can Be the Perfect Solution, published October 5, 2012, by Jerry Donnini, Esq.