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May 15, 2002

Governor Signs Legislation to Lighten Burden of Compliance with Tax Laws

TALLAHASSEE - Governor Jeb Bush has signed legislation (CS/SB 426) intended to make compliance with state tax law easier for a broad range of Florida businesses.

Signed May 1 by the governor, this law:

  • Protects taxpayers from being charged penalty if they have a generally clean record in filing tax returns properly and on time.

  • Eliminates "zero returns" on intangible personal property tax for corporations.

  • Protects businesses from having to pay back tax, penalty and interest if the business made a good-faith mistake in collecting tax on a transaction that the business thought was tax exempt through the "sale for resale" tax exemption provision.

  • Sets new thresholds for electronic filing of sales tax and unemployment compensation tax.

Under the "clean record" provision, a taxpayer would not be required to pay penalty if the taxpayer made an error in filing tax returns but had no other filing errors within the previous 12 months. The provision would require the taxpayer to have a record of filing timely, accurate, complete returns for the last 12 months and to have no unresolved sales tax liability to automatically qualify for waiver of penalty.If the taxpayer has filed one sales tax return in the previous year that is not timely, accurate and complete, and then commits a second filing error, the taxpayer still may qualify for compromise of penalty if the taxpayer corrects the error, pays tax and files a corrected return within 30 days of notification by DOR.

Taxpayers who have two or more filing errors in the previous 12 months and who commit an additional filing error will be held liable for penalty and interest, unless they can prove that noncompliance was due to extraordinary circumstances. The legislation defines "extraordinary circumstances" as noncompliance due to natural disasters, acts of war or terrorism, fire, other casualty or misconduct on the part of employees that the business's principals didn't know of and acted promptly to correct.

In other provisions, the new law eliminates the requirement that corporations file an annual intangible tax return even if the business owes no tax. Under Florida law, individual Florida taxpayers and couples filing jointly are not required to file intangible tax returns if they owe no tax, although DOR encourages taxpayers to file these so-called "zero returns" through the Department's simple telephone-based "Tele-File" system to avoid follow-up contact by DOR.

However, businesses have been required to file intangible tax returns even if no tax is owed. Under CS/SB 426, corporate filers will not be required to file zero returns.

Under another provision of CS/SB 426, taxpayers will not have to pay back taxes, penalty and interest if an audit determines that the business had calculated tax due by rounding to the nearest whole cent rather than applying the tax bracket system set forth by law.

Businesses would be eligible for relief only if they acted in a good-faith belief that rounding to the nearest whole cent was the appropriate method of determining tax due, if they had timely reported and remitted all taxes collected on each transaction, and if they agree to comply with laws regarding tax brackets in the future.

Resale exemption

In 1999, Florida lawmakers enacted new provisions regarding how businesses qualify for the longstanding "sale for resale" sales tax exemption. Under the 1999 law, DOR issues annual resale certificates that businesses must use to document tax-exempt purchases of items that later will be resold.

In CS/SB 426, lawmakers provided that if a business did not pay tax on a transaction based on a good-faith belief that the transaction was a nontaxable purchase for resale or that the transaction was exempt because the purchaser was a tax-exempt organization, neither the purchaser nor the vendor are directly liable for tax, penalty or interest, within certain limits. However, the business still would be required to pay a mandatory penalty that would be less than the total amount of tax due.

This new provision only would apply if the purchaser subsequently registered with DOR to collect tax, if the purchaser obtained a consumer's certificate of exemption and if the transaction would otherwise qualify as an exempt sale if the purchaser had a resale certificate or a consumer's certificate of exemption at the time of the transaction.

Electronic filing

Under a provision of the bill effective January 1, 2003, businesses must file sales and use tax returns electronically if they remit more than $30,000 per year in tax. Previously, businesses were required to file electronically if they remitted $50,000 or more in sales tax per year.

Businesses that are required to file electronically will find the task quicker and easier than ever before. DOR has implemented new electronic filing options that allow businesses to file the DR-15 and DR-15EZ sales and use tax returns through a secure connection on the World Wide Web, without having to obtain special software or pay extra fees. Under the legislation, DOR is authorized to waive its usual $5 registration fee if a taxpayer registers to collect tax using the Department's Internet-based e-filing methods. In addition, the legislation requires consolidated filers (business that are allowed to consolidate tax returns for multiple locations in one return) to file electronically.

The bill (CS/SB 426) also requires businesses to file unemployment compensation tax electronically if the employer reports 10 or more employees in any calendar quarter in the preceding year. DOR now allows employers to file the UCT-6 unemployment compensation tax report through a secure, Web-based transaction.

For more information, visit the e-Services page. ( )