Florida car dealers have a powerful sales and use tax tool at their disposal to lure customers to Florida. Some dealers are unaware of this provision. Other dealers might misapply it. Car dealers need to carefully read this article not only to ensure they do not lose customers but also are not left being assessed sales or use tax by the Florida Department of Revenue.
If a nonresident (i.e., resident of another U.S. state, U.S. territory, or D.C.) purchases a motor vehicle in Florida and drives the car off the lot, the customer can be charged their home state sales or use tax up to the amount of sales or use tax normally charged in Florida. In most cases, the customer will be given credit for the sales or use tax paid in Florida and not be double-taxed. If the customer’s home state sales or use tax rate is greater than the Florida sales or use tax rate, then your customer may owe the difference to their home state.
The Florida Department of Revenue considers this provision to be an exemption from sales and use tax. This classification is very important for car dealers because it means if you cannot prove the sale was to a nonresident by jumping through the necessary hoops, then the Florida Department of Revenue will hold you liable for the full amount of sales or use tax due on the transaction. The Florida Department of Revenue may or may not give credit for the sales tax already collected on the transaction from what we have seen.
What must a car dealer do to ensure this sale is exempt? The customer must fill out Form DR-123, Affidavit for Partial Exemption of Motor Vehicle Sold to a Resident of Another State. For the Florida Department of Revenue to accept this form, it must be fully filled out at the time of purchase. If not, the Florida Department of Revenue will assess the dealer. For the dealer to determine the amount of sales or use tax to charge the nonresident purchaser, the dealer must know the sales or use tax rate in the nonresident’s home state. To aid dealers in accomplishing this task, the Florida Department of Revenue publishes a Tax Information Publication (called “TIP”) once a year but may update the TIP during the year for various states.
The most recent TIP the Florida Department of Revenue published is TIP 19A01-13. This TIP has a listing by state of the sales and use tax rates to charge in each state. Dealers must keep this TIP handy and frequently check to ensure no changes have been made to the sales and use tax rates in the TIP, as the dealer may charge an incorrect lower rate and be responsible for the difference. It is worth noting the TIP provides Arkansas, Mississippi, and West Virginia do not give credit for sales and use tax paid to Florida and that residents of these states will be double taxed – once by Florida and once by their home state. Of course, this list may change as well.
About the author: David Brennan is an associate attorney with Moffa, Sutton, & Donnini, P.A. His primary practice area is multistate tax controversy. David received a B.S. in Accounting and Finance, with a minor in Computer Science, from Florida State University. He worked as an accountant for a CPA firm before attending law school at Regent University. He received his Juris Doctorate in 2013 and was licensed to practice law in Florida in the same year. In 2015, David earned his Masters of Laws in Taxation from Boston University. As a former senior attorney for the Florida Department of Revenue, he handled informal protest appeals, among other things. You can read his BIO HERE.
AUTHORITY
Section 212.02, F.S., Definitions.
Section 212.05, F.S., Sales, storage, use tax.
Form DR-123, Affidavit for Partial Exemption of Motor Vehicle Sold to a Resident of Another State
TIP 19A01-13 – Nonresident car purchases
ADDITIONAL ARTICLES TO READ
FLORIDA SALES TAX - HOPE SCHOLARSHIP CREDIT, published October 10, 2018, by David J. Brennan, Jr., Esq.
2018 CAR DEALER FL SALES TAX RATES NONRESIDENT PURCHASERS, published January 16, 2018, by David J. Brennan, Jr., Esq.
FL AUTO DEALERS: DOR CHERRY-PICKS STATUTES TO OVER-ASSESS AUTO DEALERS, published April 27, 2017, by Jeanette Moffa, Esq.
FLORIDA SALES TAX AUDITS OF CAR DEALERS ON THE RISE, published November 14, 2014, by James Sutton, CPA, Esq.
FL SALES TAX - RESALE TO OUT OF STATE CAR DEALERS, published September 19, 2014, by James Sutton, CPA, Esq.
FL SALES TAX AUDITS ON USED CAR DEALERS - WHAT IS TAXABLE?, published July 22, 2014, by Matthew Parker, Esq.
FL CAR DEALER: WHEN IS A SALE TAX EXEMPT?, published March 17, 2013, by James Sutton, CPA, Esq.