Multi-State Tax Law Blog

Published on: August 30, 2013

Shareholder is Responsible Party for Trust Fund

As Florida tax attorney’s we are often asked the question as to whether the IRS can come after an officer of a company personally for taxes. As a very general rule, the state or the IRS can only come after an officer personally if the taxes are trust fund taxes. This means taxes that an individually is holding on behalf of the state. The classic example is employment taxes held by the employer for the government. Another common scenario is a company collects sales tax on behalf of the state it is considered the state’s money held in trust by the company, and personal liability becomes an issue.

Whether one is dealing with the IRS or a state for trust fund taxes, the government can come after the “responsible party.” Generally, the government comes after the officers of a company or the person signing the checks to determine who the responsible party is. But what about a corporate shareholder? Can the government come after someone who is merely a shareholder in the company as a responsible party?

In late August 2013, the Tax Court heard a case involving this very issue is Hellman v. Comm’n, 106 T.C.M. 138 ( Aug. 21, 2013) In the case, the IRS determined the shareholder, Hellman, was the responsible party and went after Hellman’s assets personally. There was a pending court case to determine whether Hellman was in fact willfully failing to pay the taxes as required by section 6672, IRC. The Taxpayer challenged the refund and said this was unfair.

Published on: August 27, 2013

New York Will Take Your Driver’s License for Unpaid Tax

By Jerry Donnini, Esq.

As a Florida sales tax lawyer I thought I have seen it all when it comes to overzealous state agencies attacking its citizens for unpaid taxes. With a narrow corporate income tax and no personal income tax, Florida is notoriously aggressive. In August, 2013, I came across an article that shows how other states are attempting to flex their biceps when it comes to tax collection. Specifically, New York announced its war on taxes by suspending individuals’ driver’s licenses if they owe more than $10,000 in taxes.

No Driving.jpg The Empire State has grown tired of chasing tax delinquents and Governor Andrew M. Cuomo is leading the charge. Put into law as part of the executive budget, New York believes this initiative will increase collection by about $26 million this year. The Governor was quoted as saying:

Our message is simple: tax scofflaws who don’t abide by the same rules as everyone else are not entitled to the same privileges as everyone else . . . . These worst offenders are putting an unfair burden on the overwhelming majority of New Yorkers who are hardworking, law-abiding taxpayers. By enacting these additional consequences, we’re providing additional incentives for the state to receive the money it is owed and we’re keeping scofflaws off the very roads they refuse to pay their fair share to maintain.

Published on: August 21, 2013

Florida Moves Forward With Natural Gas Rebate Program

By Jerry Donnini, Esq.

In May 2013, a bill passed the Florida Legislature which developed rules for Florida’s natural gas vehicle rebate program. In June 2013, Governor Rick Scott signed HB 579, which indicates he was on board with the Legislature’s proposal. Specifically, the bill provides a rebate of $25,000 per commercial fleet vehicle for its conversion to natural gas.

The bill comes during a time which the country is trying to move away from its oil dependence and shift its consumption to a cleaner and more available fuel source. Supporters of the bill believe this step will result in the development of stations to carry the cleaner fuel line and make it more available. Companies such as Clean Energy are obviously ecstatic for the bills passing as it all but ensures greater revenue in Florida. The Natural Gas association released a comment showing its support and enthusiasm for the new legislation.

From my perspective, as a Florida sales and use tax and motor fuel tax attorney, the legislation has some tax benefits as well. Included in the bill is a provision for a state tax break on natural gas consumption that is set to begin in 2019. Further, the tax on natural gas is much lower than its diesel fuel competition from a federal tax perspective. It appears the bill will provide a rebate for fleets of three or more and placed in service after July 1.

Published on: August 19, 2013

Received Florida Sales and Use Tax Audit Notice – What Do I Do?

By Jerry Donnini, Esq.

Part 3: Audit Ends, What Do I Do?
A daunting reality sets in for many Florida taxpayers when the audit report is issued. To say the majority of Florida taxpayers under a Florida sales tax audit have a meltdown is an understatement. Many taxpayers and other Florida tax professionals believe that this is the end of the road for their journey to a sizeable tax bill. However, this is when our job as Florida tax attorneys really begins.

Upon the completion of a Florida tax audit, the Department of Revenue issues a notice of proposed assessment (a “NOPA”). The NOPA is an important document for two reasons. First, it signals that the Florida sales tax auditor is done with the file at the local office and has sent it to Tallahassee. More importantly, if the Taxpayer or the Florida state tax professional does not know what to do, the NOPA means the company better act fast.

Pursuant to Florida law and the NOPA itself, the assessment becomes final in 60 days if it is not contested. This means that the Taxpayer or its CPA or attorney has 2 months to file a protest with Tallahassee. For those of you more familiar with IRS controversy work, this is the equivalent to filing an appeal with the IRS. For the first time, the Taxpayer and its power of attorney is dealing with a different group of theoretically unbiased conferees that evaluate the case with judgment, rather than in black and white, like the auditors are trained to see the world. A well drafted protest can be an impressive presentation by the Taxpayer if done correctly, and it should contain factual and legal assertions to refute the audit assessment. We generally also elect to have a conference with the Department, at which point we very simply lay out the posture of the case and point them to what we believe to be important.
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Published on: August 13, 2013

Illinois Responds to Prior Tobacco Tax Court Ruling

By Jerry Donnini, Esq.

What is meant by a “cigarette” in Illinois? This question has been circulating through the tax community since December 2012. In August, 2013, it was reported that Illinois officially changed the definition of a “cigarette” and a “little cigar” for purposes of the Illinois tobacco tax regime. This is a major victory for tobacco products manufacturers and tobacco distributors in the state of Illinois.
As a starting point, Cigar Association of America v. Hamer, Cook County, 12 L 51033 was decided in December, 2012. That case was centered on a trade association arguing that Illinois’ definition of a cigarette was constitutionally invalid because it was too vague. In Illinois, a cigarette was defined as any roll containing tobacco that is suitable for smoking or if it met two of the following criteria:

(a) the product is sold in packs similar to cigarettes;
(b) the product is available for sale in cartons of ten packs;
(c) the product is sold in soft packs, hard packs, flip-top boxes, clam shells, or other cigarette-type boxes;
(d) the product is of a length and diameter similar to commercially manufactured cigarettes (e) the product has a cellulose acetate or other integrated filter;
(f) the product is marketed or advertised to consumers as a cigarette or cigarette substitute; or
(g) other evidence that the product fits within the definition of cigarette.

The association argued that this definition was too broad and successfully obtained an injunction.
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Published on: August 12, 2013

Why Do Baseball Players Take The Heat For Professional PED Use

By Jerry Donnini, Esq.

It is virtually impossible to turn on ESPN these days without hearing about some drama-filled story within the sports world. ESPN has done its best to morph itself into reality television by covering the real world story rather than the sports highlight. It is even more difficult to turn on ESPN or listen to any sports radio without hearing about the recent Alex Rodriguez blunder and the 12 other Biogenesis disciples that violated Major League Baseball’s substance abuse policy. But is baseball really where the problem lies?

After thinking long and hard about the matter, and after speaking to many of my informed colleagues about the substance abuse problem in sports, I began to formulate a theory that the problem was far beyond that of Major League Baseball. Further, being a Florida tax attorney by day and a sports fan by night, I decided to look into the numbers for myself to see if the problem was truly limited to baseball. As I suspected, the results of my limited inquiry were more shocking than even I expected.
Baseball PED.jpg
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Published on: August 1, 2013

REAL HOUSEWIVES IN REAL TROUBLE

By Jerry Donnini, Esq.

A recent story has emerged that reminds us how tax fraud also applies to the rich and famous. On July 30, 2013, it was reported that the celebrity couple, Giuseppe “Joe” Giudice and his wife Teresa Giudice were indicted by a federal grand jury. The stars of the “Real Housewives of New Jersey” face an extensive 39 counts of various fraud including wire fraud, bank fraud, and making false statements on loan applications.

In addition, Joe Giudice was charged with failure to file tax returns for 2004 through 2008 during a period where he earned an alleged $1 million. As a Florida tax attorney, I will be following the case. Of note, among the multiple counts of fraud, the wilful failure to file a tax return is a criminal offense as well. It is always astonishing to me the number of famous figures that go years on end without filing a return. Having relatively high income makes them easy prey for the IRS, and the money at issue and positive press makes it worthwhile to pursue. I have attached a copy of the indictment for nerdy tax lawyer types that are interested to read it.

At the heart of the issue, the couple falsely reported W2’s to show salaries for securing loans, when in fact they were not receiving such income. It is not clear from the indictment, but it would seem if they claim the W2’s are correct, then they would owe tax on those amounts. Conversely, if the W2’s are not correct then they falsified the W2’s. It is also claimed that the couple owed some $3.2 million in mortgages and $13,000 to Neiman Marcus and Nordstrom, which has been feeding the reality TV craze. If convicted, the couple faces up to 30 years in prison.

As for the rest of the world, I am sure the case will be followed for other reasons. For example, Robyn Dawson comments:

Excuse me, Teresa? Hello, earth to Teresa….The indictment, 39 counts were against Joe and YOURSELF! Are you sure you’re not blonde under that brown hair of yours? You and Joe are going down and it’s time. Karma has finally got you for all of the ugly you’ve done to your family. I can’t believe you released a statement about Joe but failed to mention, you were also charged and booked into jail as well..You idiot..Now I’m sure you didn’t truly write those fake cook books. You aren’t that smart. You don’t even know how to say the word, woman in a proper sentence. LMAO

The Giudice couple released the following statement:

Today is a most difficult day for our family. I support Joe and, as a wonderful husband and father, I know he wants only the best for our lovely daughters and me. I am committed to my family and intend to maintain our lives in the best way possible, which includes continuing my career. As a result, I am hopeful that we will resolve this matter with the Government as quickly as possible

It will be interesting to follow the case. For the moment each has been released on $500,000 bond.
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Published on: July 31, 2013

Received Florida Sales and Use Tax Audit Notice – What Do I Do?

By Jerry Donnini, Esq.

Part 2 Common Pitfalls

There are several issues that often surface during the audit. Many of the issues that surface are that the client does not have records, the client does not have a complete or updated QuickBooks or accounting software file, or the client has collected and remitted the incorrect amount of tax.

The most common issue we face is the situation in which the Florida taxpayer does not have adequate records to do a complete audit. Based on many of our clients, Florida is an extremely dangerous place to live. Until I became a Florida sales and use tax attorney, I was not aware of the high number of floods, fires, earthquakes, tsunamis and other natural disasters that destroy all of a business’s records. On a serious note, many taxpayers believe that not having any records is the best way to escape tax liability. However, generally the opposite is true. The more records that are available, generally, the more we can do to explain discrepancies that arise during the audit. Therefore, we recommend that a Taxpayer does its very best to salvage as many records as possible for review even if they are extremely damaged due to mother nature.

Published on: July 30, 2013

Aaron Hernandez Arrested – Sacrifices $40 Million

By Jerry Donnini, Esq.

Despite the buzz of fantasy football and the regular football season fast approaching, the talk of the league during this year’s offseason has been the troubles of the New England Patriot’s, Aaron Hernandez. While I practice in the area of Florida tax controversy, the coverage of the football star’s troubles has gained my attention both from a legal perspective and as a sports fan.

As most of the country, sports fan or attorney, is aware, Aaron Hernandez was charged with the killing of Odin Lloyd on June 28, 2013. ESPN reported that Hernandez was formally charged with first degree murder, carrying a firearm without a license, 2 counts of possession of large-capacity firearm and 2 counts of possession of a firearm without a firearms ID card.

The 23 year old Bristol native argued for bail because he was a homeowner and lives with a fiancé and an 8 month old baby, so therefore, he is unlikely to flee. Leading up to the arrest, Hernandez was allegedly with Lloyd, the boyfriend of Hernandez’s fiancé’s sister. On June 16, 2013, the prosecution believes that Hernandez texted two friends asking them to return to Massachusetts. In support of this assertion, the prosecution has surveillance footage showing Hernandez leaving his home with a gun. After picking up the victim at his home around 2:30 am, Lloyd texted his sister and stated, “Did you see who I am with? . . . NFL . . . just so you know.”

Published on: July 19, 2013

Received Florida Sales and Use Tax Audit Notice – What Do I Do?

By Jerry Donnini, Esq.

It’s a grim and nerve-racking day for many when they receive the infamous DR-840, Notice of Intent to Audit Books and Records, from our friends at the Florida Department of Revenue. Many Florida taxpayers often ask themselves, “Why me?” Or, “What did my company do wrong in order to receive this notice?” The answer to both of these questions is obtainable from the Florida sales and use tax auditor by simply asking them. In many situations, the company is audited because its exempt sales ratio is out of the average range for similar companies in its industry. Other companies are flagged for audit because the sales reported on their 12 monthly sales and use tax returns do not correspond to the gross sales reported on their federal income tax return. Many other companies are flagged purely at random.

While the reason may be for a variety of reasons, once the notice is received, the reason for its reception is virtually irrelevant. The more relevant inquiry should be, what should we do next? Ideally, it makes sense for many Florida businesses to hire a law firm or a CPA firm versed in Florida sales and use taxes. This is true even if the company has immaculate records and nothing to hide in connection with a Florida sales and use tax audit. Hiring a professional that is experienced in handling a Florida Sales and Use tax audit is an excellent way to walk you or your client through the audit process. In addition, having a Florida sales and use tax professional is invaluable in helping your company or your client’s company organize the information in a presentable manner that will help keep a sales tax assessment to a minimum.

Florida law and the verbiage on the DR-840 clearly states that the FL DOR cannot start the audit for 60 days and it must start the audit within 120 days. The 60 days is waive-able and the auditor will push for a waiver in order to get the audit moving. We generally recommend that the 60 days not be waived, but instead be used as a period in which to get all of your information organized for presentation. We call this the homework period in which the Taxpayer, if they elect to hire us, is given a checklist of homework to complete within the 60 day period.

The obvious next question is, what should I be organizing?
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