FLORIDA SALES AND USE TAX PRESENTED IN SARASOTA, FL LORMAN EDUCATION ON FEBRUARY 20, 2013 LORMAN EDUCATION SERVICES FLORIDA SALES & USE TAX James H Sutton, Jr., CPA, Esq Moffa, Gainor, & Sutton, PA www.FloridaSalesTax.com Julie L Bynum, CPA, CFP, CFST, PFS Kerering, Barberio, & Company PA www.kbgrp.com LINKEDIN GROUP DEDICATED TO FLORIDA TAX MATTERS CURRENT FLORIDA TAX NEWS, LEGISLATION, AND CASES AGAINST THE FLORIDA DEPARTMENT OF REVENUE FLORIDA SALES AND USE TAX OVERVIEW OF FL SALES AND USE TAXES 8:30 – 11:25 AM Julie L Bynum, CPA, CFP, CFST, PFS www.kbgrp.com BY JAMES SUTTON, CPA, ESQ BY JULIE L BYNUM, CPA, CFP, CFST, PFS
FLORIDA SALES AND USE TAX PRESENTED IN SARASOTA, FL LORMAN EDUCATION ON FEBRUARY 20, 2013 FLORIDA SALES AND USE TAX NEXUS, INTERNET, AND OUT OF STATE TRANSACTIONS (pg. 34 of the handout materials) James Sutton, CPA, Esq. Moffa, Gainor, & Sutton, PA www.FloridaSalesTax.com 11:25 PM – 12:15 PM OVERVIEW OF MULTISTATE SALES AND USE TAX ISSUES • HOW OFTEN DO YOU AS A RESIDENT HEAR FROM THE FLORIDA DEPT. OF REVENUE? • THIS STORY IS ONE OF THE REASONS WHY… • DEPT. OF REVENUE ‐ > RAISE MORE REVENUE ON OUT OF STATE PURCHASES OPERATION FUR COAT • OHIO FURRIER – SALES AND USE TAX AUDIT • NEVER FILED A SALES TAX RETURN – SO… SOL • THREATENED WITH BIG ASSESSMENTS, UNLESS • LETTER FROM YOUR FRIENDS AT THE FL DOR • WHO OPENS THE MAIL? BY JAMES SUTTON, CPA, ESQ BY JULIE L BYNUM, CPA, CFP, CFST, PFS
FLORIDA SALES AND USE TAX PRESENTED IN SARASOTA, FL LORMAN EDUCATION ON FEBRUARY 20, 2013 A FUR COAT? BUT I DIDN’T GET A … BY JAMES SUTTON, CPA, ESQ BY JULIE L BYNUM, CPA, CFP, CFST, PFS
FLORIDA SALES AND USE TAX PRESENTED IN SARASOTA, FL LORMAN EDUCATION ON FEBRUARY 20, 2013 Dear Florida Dept. of Revenue, Thank you for auditing our Ohio facilities. Due to your hard work at collecting tax, we had our BEST YEAR EVER with sales to your state. PLEASE COME BACK SOON! Sincerely, xxxxx, CEO, ABC Fur Company OVERVIEW MULTISTATE SALES TAX ISSUES • FEDERAL / CONSTITUTIONAL LIMITATIONS • AMAZON / INTERNET SALES • DROP SHIPMENTS VS DIRECT MAIL • OTHER NEXUS / COLLECTION ISSUES • PROPOSED FEDERAL LEGISLATION WHAT IS NEXUS? Can’t I get vaccinated for Nexus? • “The Congress shall have Power *** to regulate Commerce with • foreign Nations, and among the several States, and with Indian Tribes” U.S. Const. Art. I, § 8, cl. 3 Historically – anything interstate commerce was exempt from state • taxation. Complete Auto Transit, Inc. v. Brady (US Sp Ct 1977) (4 Prong Test) • 1. Substantial Nexus (or sufficient nexus); 2. Fairly Apportioned; 3. Does not discriminate against interstate commerce; and 4. Fairly related to the services provided by the state. BY JAMES SUTTON, CPA, ESQ BY JULIE L BYNUM, CPA, CFP, CFST, PFS
FLORIDA SALES AND USE TAX PRESENTED IN SARASOTA, FL LORMAN EDUCATION ON FEBRUARY 20, 2013 WHAT IS NEXUS? • Quill Corp. v. North Dakota (US Sp Ct 1992) – North Dakota tried to force a mail order office supply company to collect use tax on sales of pens to customers in the state despite the fact that the taxpayer had neither outlets or employees in the state. – Only 0.5% of the company’s sales were in ND, but it was still the SIXTH LARGEST OFFICE SUPPLY VENDOR in the state. – New state statute claimed that a person who engaged in regular and systematic (“3 or more advertisements in 12 months”) solicitation of consumers in the state was required to collect sales/use tax. – ND Supreme Court found that the technology had advanced so for as to make prior law obsolete. – US Supreme Court applied the Complete Auto 4 Prong Test and specifically held that physical presence is required to be subject to imposed jurisdiction for sales and use tax purposes (no mention of other types of taxes). WHAT IS NEXUS? • Florida Dept. Rev. v. Share Int’l (FL Sp Ct 1995) – President and vice president of an out ‐ of ‐ state company attended a seminar in Florida – Not only displayed company products at the seminar, but also sold products – Collected and remitted FL sales tax on theses sales – 4.6% of the company’s annual sales resulted from products sold to customers at the Florida Seminars. – Florida Supreme Court held that the temporary presence of employees does not meet the substantial nexus requirement under these circumstances!!! • So, how many visits is enough? Good question. OTHER TYPES OF NEXUS • AGENCY NEXUS • AFFLIATED NEXUS (2011/2012 bill introduced in FL trying to make this law) • ECONOMIC NEXUS (aka Geoffrey’s Nexus) • CLICK THROUGH NEXUS (NY) (aka Amazon Nexus) • STATE’S WILL CONTINUE COME UP WITH NEW AND INNOVATIVE WAYS TO INCREASE THEIR JURISDICTION TO TAX…. BY JAMES SUTTON, CPA, ESQ BY JULIE L BYNUM, CPA, CFP, CFST, PFS
FLORIDA SALES AND USE TAX PRESENTED IN SARASOTA, FL LORMAN EDUCATION ON FEBRUARY 20, 2013 NEXUS THE TICKING TIME BOMB • WARNING ‐ THIS IS ONE OF THE AREAS THAT CAN COMPLETELY BLINDSIDE A COMPANY. • IF A COMPANY IS SELLING GOODS ACROSS STATES LINES WITHOUT COLLECTING SALES/USE TAX… WHAT HAPPENS IF/WHEN A STATE ASSERTS NEXUS? • THE COMPANY COULD BE HELD LIABLE FOR YEARS AND YEARS OF BACK TAXES, PLUS PENALTIES AND INTEREST. • COMPANIES LIKE AMAZON, EBAY, ETC TAKE THIS VERY SERIOUSLY. YOU SHOUD TOO! AMAZON / INTERNET SALES • Use tax normally applies to items purchased outside Florida, including another country, which are brought or delivered into this state and would have been taxed if purchased in Florida. – Examples: • Internet Purchases • Mail ‐ order Catalogues • Purchases made in another Country. • Furniture purchased from dealers in another state. AMAZON / INTERNET SALES • If an out ‐ of ‐ state seller fails to collect sales tax, it purchaser’s responsibility to comply with Florida law. • Purchaser must submit payment directly to the Florida Department of Revenue. • Individuals only get caught for specific items, but this is a prime focus during business audits. BY JAMES SUTTON, CPA, ESQ BY JULIE L BYNUM, CPA, CFP, CFST, PFS
FLORIDA SALES AND USE TAX PRESENTED IN SARASOTA, FL LORMAN EDUCATION ON FEBRUARY 20, 2013 HOW TO PAY FL USE TAX • Or you can file on ‐ line at the DOR’s web site (with the other 30 or so people a year that do). DROP SHIPMENTS • A “ drop shipment ” is when a retailer never takes title to the goods being sold to the customer. Instead, the retailer’s supplier ships the product directly to the customer and bills the retailer the wholesale price and the customer pays the retailer the retail price. • (1) Can the Supplier sell the goods to the Retailer without collecting tax? • (2) Can the Retailer sell the goods to the customer without collecting tax? DROP SHIPMENTS • Example 1 – Supplier and Retailer in FL, customer is outside of FL. • As long as the customer does not take title/possession of the product in Florida (committed to the export process), then FL sales tax is not due. • Customer has use tax obligations in the state to which the goods were shipped. • (Watch out for nexus with customer’s state) BY JAMES SUTTON, CPA, ESQ BY JULIE L BYNUM, CPA, CFP, CFST, PFS
FLORIDA SALES AND USE TAX PRESENTED IN SARASOTA, FL LORMAN EDUCATION ON FEBRUARY 20, 2013 DROP SHIPMENTS • Example 2 – Retailer is in Florida, Supplier is in state X and Customer is in state Y. • Retailer does not have to collect sales tax, Supplier does not have to collect tax, and customer has responsibility to remit use tax to state Y. • Presume – Retailer does not have nexus in state X or state Y. • Presume – Supplier does not have nexus with Florida or state Y. DROP SHIPMENTS • Example 3 – Retailer is in Florida, Supplier and Customer are in state X. Very tricky. • The Supplier is the tricky part because the state where the customer receives the goods has jurisdiction over the Supplier. The answer depends on the state… • 33 states allow Supplier to accept the Retailer’s exemption Certificate and the customer simply owes use tax. DROP SHIPMENTS (Example 3 Continued) • Example 3 – Retailer is in Florida, Supplier and Customer are in state X. • 13 States deem the Supplier a retailer and require the Supplier to collect sales tax. – 6 of these state’s require tax on the retail price to the customer (WI, CA, CT, HI, MA, RI) – 7 require tax on the wholesale price to the retailer. (DC, FL, LA, MD, NE, NV, TN) BY JAMES SUTTON, CPA, ESQ BY JULIE L BYNUM, CPA, CFP, CFST, PFS
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