Over the past year, we have been involved in more and more Florida Tobacco Tax Audits. With the volume of audits we deal with on a regular basis, we see trends within the state. We also have seen audit after audit in Florida in which the Department of Business and Professional Regulation does not play by the rules. Unlike the Department of Revenue, which has detailed rules and procedures, the Department of Business and Professional Regulation (“DBPR”) does not. As a Florida state and local tax attorney who also focuses on Florida alcoholic beverage, cigarette, and tobacco tax, this conundrum can be attributed to the insufficient rules that exist at DBPR and the lack of taxpayer challenges to the audits.
On its website, DBPR, Division of Alcoholic Beverages and Tobacco (“FL ABT”) proudly proclaims that there are about 75,000 ABT license holders, and the audit division generates over $1.9 billion in license fees, taxes, and fines in Florida. Despite the huge number of license holders in Florida, there are very few audit challenges with the Department of Professional Regulation and even less litigation. But, are the audits done correctly? Is FL DBPR just that good that it never makes a mistake?
This is the first of a series of articles that are designed to help alcoholic beverage, cigarette, and tobacco tax distributors in Florida navigate through the ABT audit. I strongly believe that there are many incorrect audits lingering throughout the state, and many distributors do not know who to turn to or what to do if their particular audit is wrong. Over the past few years, we have extensive experience throughout the state battling the taxing agencies, and we believe there are astronomical amounts of tax dollars being spent by companies in cases where far less tax is due. While this article is geared to Florida, many of the principles discussed are applicable to most jurisdictions.
As a starting place, manufacturers, distributors, and wholesalers are under constant supervision by FL DBPR and are subject to audits every 6 months by FL DBPR. Following the FL DBPR audit, the audit report is issued which spells out any exceptions or tax due for the audit period. However, we have found the FL DBPR is often assessing tax for periods that are outside the statute of limitations in Florida.
In Florida section 95.091, Florida Statutes (“F.S.”), states as follows:
With the exception of taxes levied under chapter 198 and tax adjustments made pursuant to ss. 220.23 and 624.50921, the Department of Revenue may determine and assess the amount of any tax, penalty, or interest due under any tax enumerated in s. 72.011 which it has authority to administer and the Department of Business and Professional Regulation may determine and assess the amount of any tax, penalty, or interest due under any tax enumerated in s. 72.011 which it has authority to administer:
Effective July 1, 2002, notwithstanding sub-subparagraph a., within 3 years after the date the tax is due, any return with respect to the tax is due, or such return is filed, whichever occurs later;
In regular English, the SOL statute in Florida provides that, if the DPBR has the authority to administer a tax under section 72.011, it has 3 years to assess the tax.
Despite section 95.091, F.S., we have seen several occasions in which DBPR, Division of ABT in Florida attempts to assess tax beyond the 3 year SOL. Therefore, it is imperative when you get your own or your client’s audit report, that you calculated the applicable SOL to determine if ABT properly assessed the tax. While it seems like a simple check, this step in audit report review is often overlooked by a professional that is not well versed in Florida ABT or transaction taxes.
We have seen dozens of cases in which this simple principle has been violated. We have inferred, as Florida state and local tax attorneys, that the reason for this violation is because many do not challenge their Florida alcohol, cigarette or tobacco tax assessment. It is not surprising as it is difficult to determine from the FL DBPR’s website as to how to even challenge an assessment. Consequently, it makes sense to a get a Florida alcoholic beverage, cigarette, and tobacco tax attorney involved from the start. If you believe this has occurred in your audit, please do not hesitate to contact me for a free consultation.
About the author: Jerry Donnini is a multi-state sales and use tax attorney and an associate in the law firm Moffa, Gainor, & Sutton, PA, based in Fort Lauderdale, Florida. Mr. Donnini’s primary practice is multi-state sales and use tax as well as state corporate income tax controversy. Mr. Donnini also practices in the areas of federal tax controversy, native American taxation, federal estate planning, and Florida probate. Mr. Donnini is currently pursuing his LL.M. in Taxation at NYU. If you have any questions please do not hesitate to contact him via email JerryDonnini@Floridasalestax.com or phone at 954-642-9390.