Florida sales tax issues present an ever-changing landscape. Just when businesses think they have it figured out, the rug gets swept out from underneath them. Most notably, this occurs when the Florida Department of Revenue tells a business one thing only to have an auditor say something completely different when making a large assessment. This could not be truer for those selling alcoholic beverages. It is incredibly important to understand fully the issues present in the industry, or you could be staring down the barrel of a crippling assessment.
When making a sale of an alcoholic beverage, the seller has two options for collecting sales tax.
First Option – the seller may collect Florida sales tax above and beyond the sales price of the beverage. To do so, the seller must itemize the Florida sales tax on the receipt. The tax calculation must contemplate the bracket system. If you are selling alcoholic beverages and charge sales tax as a line item but have never heard of the bracket system, you may be in a world of trouble. Most businesses that have not heard of the bracket system simply round the amount of sales tax owed. However, the Florida Department of Revenue has published a specific bracket for certain sales prices and how much Florida sales tax should be charged. An article discussing the Florida bracket system as well as a copy of the bracket system are included at the end of this article.
Second Option – should it be impractical for the seller to itemize the Florida sales tax on the receipt, the seller of alcoholic beverages may use one of the following two alternative methods to calculate the Florida sales tax due on the sale of alcoholic beverages.
Alternative method number 1 – in cases where the public is not put on notice Florida sales tax is included in the total charge, you must multiply the total receipts from the sales of alcoholic beverage by the effective Florida sales tax rate for the county where the business is located. The rate is also dependent upon the type of alcoholic beverage sold. In instances where the Florida sales tax rate is 6% normally, the rate applied to the total receipt is 0.0635 when selling packaged goods and 0.0659 when mixed drinks or mixed drinks and packaged goods are sold. If the Florida sales tax rate is 8.5%, then the rate applied to the total receipt is 0.0868 when dealing with packaged goods and 0.0883 when mixed drinks or mixed drinks and packaged goods are sold. Of course, for the Florida sales tax rates in between, there are different rates involved as well.
Alternative method number 2 – if the public is placed on notice Florida sales tax is included in the total charge, you must use certain numbers provided by the Florida Department of Revenue to divide into your total receipts from charges to customers of alcoholic beverages. From there, you will have calculated your gross sales. At that point, you will subtract your gross sales from the total receipts. The resulting amount will be the amount of Florida sales tax that is owed. In instances where the Florida sales tax rate is 6%, the divisor is 1.0635 when selling packaged goods and 1.0659 when mixed drinks or mixed drinks and packaged goods. If the Florida sales tax rate is 8.5%, then the divisor is 1.0868 when dealing with packaged goods and 1.0883 when mixed drinks or mixed drinks and packaged goods are sold. Like with option number 1, there are different divisors for the different Florida sales tax rates in between.
A lot of times, restaurants and bars will be caught off-guard by these provisions. Specifically, a restaurant or bar will take the Florida sales tax rate for where it is located (e.g., 7.5% in Leon County) and use this number instead of one of the above-mentioned numbers. What happens is the Florida Department of Revenue discovers the small rate difference fairly easily from their algorithms. A dollar or so per transaction difference may not sound like a lot, but when considering this is done for each transaction of alcoholic beverages for three years, suddenly the number becomes astronomical. The Florida Department of Revenue does not care you did not collect the money. In their eyes, they want you to pay out of your bottom line!
In summary, if you sell alcoholic beverages you should immediately determine whether you are calculating correctly the Florida sales tax payable to the Florida Department of Revenue. If not, you need to take steps quickly to fix the issue, as your Florida sales tax liability might only be getting larger. Once the Florida Department of Revenue reaches out to begin auditing you, it may be too late.
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 may learn more about David via his BIO HERE.
At the Law Office of Moffa, Sutton, & Donnini, PA, our primary practice area is state and local 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.
AUTHORITY
Form DR-2X, Common Sales Tax Brackets
Form GT-800046, Sales and Use Tax on Alcoholic Beverages
ADDITIONAL ARTICLES TO READ
FLORIDA SALES TAX BRACKET SYSTEM, published April 30, 2020, by David Brennan, Esq.
FL DEPARTMENT OF REVENUE PETITION FOR ADMINISTRATIVE HEARING, published April 14, 2020, by Jeanette Moffa, Esq.
FLORIDA SALES TAX INFORMAL WRITTEN PROTEST, published November 17, 2018, by James Sutton, CPA, Esq.
FLORIDA SALES TAX - COUPONS V. DISCOUNTS, published October 30, 2018, by David Brennan, Esq.
FLORIDA SALES TAX - VOLUNTARY DISCLOSURE PROGRAM, published April 9, 2018, by Jeanette Moffa, Esq.
FLORIDA USE TAX AUDIT LETTER?, published June 14, 2015, by James Sutton, CPA, Esq. and Jerry Donnini, Esq.
GOING TO JAIL FOR NOT PAYING FLORIDA SALES TAX?, published November 3, 2013, by James Sutton, CPA, Esq.