Multi-State Tax Law Blog
For the last three years, our firm has been relentless writing and warning any business that sells beer, liquor, and/or cigarettes, that the Florida Department of Revenue was coming. The onslaught of the industry all stemmed from a law change in 2011. With little support, a new law went into effect in Florida that required all wholesalers, manufacturers, and distributors of alcohol and tobacco to provide annual sales information the Florida DOR. Shockingly, some ABT retailers were purchasing multiples of gross sales of alcohol and tobacco alone. For example, the average Florida C-store purchased about $50,000 a month in ABT items alone but only reported gross sales of $20,000 for sales tax purposes. As predicted, we were told that approximately 200 audit notices were going out every three months (DR-846 – “desk audits” & DR-840 – “full audit notices”) and each of the state’s some 500 auditors was assigned at least 1 ABT case. That was exactly what happened.
Starting in 2012, our law firm has been inundated with calls from the alcohol and tobacco retail industries. The Florida DOR relied on a flawed formula to complete hundreds of sales and use tax audits assessing sales tax, penalties and interest greatly in excess of what the businesses owed. Since 2012, our firm has been defending these alcohol and tobacco retailers. Contrary to guidance from our friends in Tallahassee, the audits are often defendable to a degree. Specifically, the Florida DOR relies on industry averages and the reality is that each store has its unique story. In addition, the purchase information relied upon by the Department is often times inaccurate or incomplete.
It would be a severe understatement to say this ABT audit program has been profitable to the state. According to the program’s statistics the Florida DOR has assessed tax penalty and interest about $102,124,022 (about $74,000,000 in tax) as of March 2014. Assuming a 6% tax rate, this equates to $1.1 billion, with a “b,” of alleged unreported sales.
Such massive numbers should serve as a serious wake-up call to the industry as a whole. From c-stores, to liquor stores, to restaurants the Florida DOR has shed a shameful life on the ABT retail industry. This does not even point out the extreme criminal implications that have been uncovered by the program. In general, we have found that the FL DOR’s estimated assessments are anywhere from 20-70% too aggressive. It is also worth pointing out that pentalties and interest may be abated or reduced, if the case is handled properly. It is also imperative to know that if you or your client’s company receives a large assessment, it is worthwhile to fight in an attempt to bring the numbers down or at least strive for a reasonable payment plan.
It is rarely advisable to take on these types of cases without the help of an expert Florida sales tax attorney or other professional to navigate the process. I have personally handled over a hundred of these types of cases over the last few years and know what the FL DOR will and will not accept to reduce the assessment. Our lawyers also have strong backgrounds in accounting and are capable of handling criminal sales tax cases should the need arise. It is also worth pointing out that there is no accountant-client privilege, should the case turn criminal. If you or a client of yours is has been contacted (or you fear being contacted) by the Florida Department of Revenue, then please call or email our offices today for a free initial (and confidential) consultation about your matter.
Mr. 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, federal estate planning, Florida probate, and all other state taxes including communication service tax, cigarette & tobacco tax, motor fuel tax, and Native American taxation. Mr. Donnini received 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.