From scenic beaches to the Miami nightlife, from Disney and Orlando theme park central, to the Everglades' most noted inhabitants, this is Florida. Occupying 65,755 square miles. But most of us associate our very first knowledge of Florida with one thing, and that isn’t ‘Disney World’ (sorry Joe). It is “Florida Orange Juice” which we all sucked from our baby bottles or sippy cups long before we could even say Florida.
While ranked 22nd by area, Florida is ranked 3rd in the US in terms of population with 19,893,297 residents. Even with all those taxpayers living in Florida, the good news for the state is that ‘tourism’ makes up the largest sector of the economy. (As if that is a surprise.) The hundreds of miles of beaches on the Gulf and Atlantic coasts, coupled with lots of sunshine and warm weather puts Florida near the top, if not 'the top', vacation destination every year. That could be no truer than at this time of the year when Spring Breakers from around the country are about to flood into the state, each bringing with them lots of ‘sales tax dollars’ soon to be collected by the Florida Department of Revenue.
The reality that tourism is such an attractive component of the state’s revenue can be seen in the first few words of their official sales tax guide, “Each sale, admission charge, rental or storage is taxable…” and goes on to say, “Sales tax is added to the price of taxable goods or services and collected from the purchaser…”.
That just pretty well sums it up, you want tickets to Disney World, expect to pay sales tax on the admission price. How about a fresh squeezed glass of Florida’s finest, yep there will be sales tax on that too. Thinking about renting a charter boat to go deep sea fishing, you will pay sales tax on both the boat rental and the skipper services. How about renting a beach house for ‘the season’, yep it’s subject to sales tax (unless your lease is longer than 6 months). And we are not even talking about how local jurisdictions ‘add on’ extra taxes as service charges or public safety surcharges or any number of other fees in addition to their own local sales taxes. The taxes mount up, and in most cases it is up to the merchant to know what and how to collect, and to whom to remit what and when it is due.
About Sales Taxes and this series:
Thanks to Avalara, the 'tax people', this article is one in a 50 part series covering sales tax issues associated with each and every state tax jurisdiction in the United States. We are publishing "Sales Tax Tuesday" each week over 2015. Even though this is designed to be ‘boring stuff’ it seems that a lot of our readers are really enjoying finding out ‘interesting stuff’ about the various states, in addition to the boring, but necessary tax information.
Sales tax provides critical revenue for states and clearly that is really true for Florida. “I bet they even tried to tax our Astronauts for taking a ride on the Space Shuttle.”
In reality other than property and income tax, sales tax is the largest source of tax revenue for the majority of the 46 states that collect it. From a government perspective, making sure every sales tax dollar is collected, through audits, fines, penalties rates and rules, is an exercise for income. (Who knows, that guy standing around at the docks is probably there to insure you pay sales tax on that fish you just caught from the pier…“Oh no, they already taxed you when you rented the fishing rod.”) It’s easy to be lured (like a fish) into a false sense of compliance when it comes to sales tax, this series is intended to insure that you are aware of the key sales tax facts for YOUR state.
Note: For sales tax definitions and essentials check out the opening article to this series.
Florida Sales Tax Facts1:
- Sales and Use tax managed by the Florida Department of Revenue.
- Florida is not a member of the SST.
- Florida has 56 different sales tax jurisdictions. The state rate is 6% and the total rate can range as high as 7.5% when including local jurisdictions. The average is 6.62% making it the 29th highest average sales tax rate.
- Local taxes can be imposed at the county level. This Discretionary Sales Surtax ranges between .5% and 1.5%. This tax has a limit or threshold of $5,000 for all tangible personal property (nor does it apply to rental of real property, transient rentals, or services). The state tax of 6% must be taxed for the full amount.
- Sales tax is sourced at the destination address.
- Some common nexus creating activities are: place of business, employees, sales solicitation (by an employee or contract sales force) delivery, inventory, and systematic advertisement.
- Florida exempts most software related products and digital goods, but will tax maintenance services on such products and services.
- Florida DOES tax repair services on tangible property, most types of rentals, admission charges, gym memberships and service warranty contracts.
- Resale certificates must be renewed annually. Exemption certificates issued by the Florida DOR for other reasons (i.e. government or non-profits) expire after five years.
- How frequently businesses must remit sales and use tax to the state is based on the total tax collected during the State fiscal year. It may be annual, semiannual, quarterly, or monthly, but businesses collecting more than $1,000 in tax must file monthly.
Sales tax - the good, the bad and the ugly
In reviewing Avalara's files2, I came across an article they wrote a few years back that was of very interesting. The story starts out that several people were arrested for tax fraud and racketeering. Avalara noted, "that itself is not newsworty, people have been trying to avoid paying taxes since Roman times..." The story goes on to say that "25 people were arrested across Florida for charges in connection to statewide racketeering involving sales tax fraud dating back 20 years." Even though the two principles had closed their business at least 2 years prior to charges being filed, it seems that the Florida DOR had been investigating them for more than 3 years prior. "Proof enough that you are never safe, even if you are a criminal living in the retirement state."
While this may seem to be an 'extreme example', the reality is that thousands of businesses each year are hit with penalties, and even criminal charges, even when they don't 'intentionally' withhold funds. Many such merchants simply don't understand all the specifics of sales tax requirements in their state when coupled with those of city, county and special district taxes, they make mistakes and then find them 'very costly'.
Manual sales and use tax management is prone to error and consumes staff time in pass-through rather than revenue-generating activities.
Avalara provides solutions for sales tax automation, including tax calculation, exemption certificate management, returns processing and 1099 filing and reporting. Automation via Avalara allows businesses to be fully sales tax compliant without sacrificing productivity.
Staying out of prison seems to be a pretty good reason, in my way of thinking, to outsource the responsibility of sales tax compliance via Avalara. Even if something should go wrong you can rely on their Audit Defense services which may make the difference in your 'going to the Florida beach' rather than 'watching your back' in jail.
1 - State by State Sales Tax - Florida, Patrick Neu, Avalara - March 2, 2015
2 - "Think you can get away with tax fraud? So did they..." - Yvonne Tomascak, Avalara - October 7, 2010.