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Florida Tax Update - Part 1

Contributor: Mike Ostafy, Senior Tax Manager - Tax & Business Services

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TAX AMNESTY
From July 1, 2010 through September 30, 2010, the Florida Department of Revenue will implement a tax amnesty program for taxpayers that are subject to various Florida state and local taxes. There are many taxes covered by this program, the more important ones being corporate income, sales and use, documentary stamp, severance, and motor fuel.

This is a one-time opportunity for taxpayers who are eligible to satisfy their outstanding liabilities, while avoiding criminal prosecution, penalties, and in certain circumstances, a portion of interest due. Florida offered a similar program some years ago that was very successful, and the Department of Revenue is hoping for similar success with this program as well.

In order to participate, proper forms must be completed and submitted to the Florida Department of Revenue, along with any other documentation specified. Taxpayers who may be under audit or have received an inquiry notice are eligible to participate, as are taxpayers under civil investigation. However, taxpayers who have entered into a settlement agreement prior to July 1, 2010 or are under criminal investigation are not eligible.

Taxpayers who might be eligible for the amnesty program and want to take advantage of its provisions should be reviewing their records now, as the program is short in duration, and all steps must be completed and submitted during the amnesty period. Stipulated installment payments may be made under the amnesty program, but they are also short in duration and strict compliance is required.

SALES TAX ON BOATS

Under a very taxpayer-favorable change, beginning July 1, 2010, the 6% Florida state sales tax imposed on the purchase of a boat will be capped at $18,000.

This limitation was intended to put Florida on parity with other states, to help Florida’s boating and marine industry, and to encourage boat owners to buy, register, and store their boats in Florida.

AIRCRAFT

Also beginning July 1, 2010, aircraft owned by non-residents of Florida will be exempt from Florida sales and use tax provided that the aircraft enters and remains in Florida for fewer than a total of 21 days during the six-month period after the date of purchase. Documentation that will support this exemption will include such things as invoices from out-of-state vendors for tie-down, fuel, and hangar charges that specifically identify the aircraft. Non-residents of Florida can also avoid the imposition of use tax when aircraft are brought into the state exclusively for flight training, repairs, alterations, etc. In these cases, the supporting documentation must be from in-state vendors or suppliers.

Also effective July 1, 2010 a provision regarding repairs made to aircraft is eliminated. The eliminated provision states that an aircraft purchased in Florida, as provided, may be returned to Florida for repairs within 6 months after the date of departure without incurring liability for the payment of tax on the purchase price of the aircraft if the aircraft is removed from Florida within 20 days after the completion of the repairs, and such removal can be demonstrated by invoices for fuel, tie-down, hangar charges issued by out-of-state vendors or suppliers, or similar documentation.

TRANSFERS OF TAX LIABILITIES

Florida is becoming tougher on its rules relating to final tax liabilities when a business transfers assets under most circumstances, including purchase, assignment, and most other voluntary transfers of assets and / or stocks of goods.

Taxpayers who are liable for any tax or fee that is administered by the Department of Revenue (other than corporate income tax), and who cease business operation must generally file final returns within 15 days after ending their operations. Taxpayers who fail to file final returns within the required 15 day period are precluded from engaging in any business in Florida until such final returns are filed and all taxes and charges paid.

And to put Florida on par with many other States’ rules on transferee tax liability, transferees of more than 50% of businesses as noted above will be liable for the tax, interest, and penalty owed by the transferor, unless the transferor provides to the transferee a receipt or certificate from the Department of Revenue which indicates that the transferor is not liable for any taxes, interest or penalties from the operations of the business transferred and the Department of Revenue determines that no such amounts are due from the transferor pursuant to an audit of the transferor’s books and records.

Potential buyers of Florida businesses must be very careful to follow these rules, and escrows of "hold back" funds may be necessary at closings to ensure compliance with these new rules. Because the maximum liability of a transferee can be the fair market value of the property transferred or the purchase price, whichever is greater, buyers of businesses will want to ensure that they obtain all clearances from the Department of Revenue prior to releasing all closing proceeds.

SALES TAX HOLIDAY

Florida is once again offering a "back-to-school" sales tax holiday. This year, the days available will be August 13-15. During this period, no sales tax will be collected on sales of books, many items of clothing and footwear, and certain accessories selling for $50 or less, or on school supplies selling for $10 or less. Sales made at theme parks, entertainment complexes, public lodging establishments, and airports will not qualify for the exemption.

Dealers who have customers that are eligible for the sales tax holiday will be required to maintain detailed records of applicable transactions.

 
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