The First District Court of Appeal issued an opinion in the Florida sales tax refund case, Oracle America, Inc. v. Florida Department of Revenue on December 4, 2024. The opinion was written was Judge Long and upheld the refund denial on the basis that Oracle had refunded its customer, Nielson Company, Inc., for the state sales tax and local surtaxes it collected from them during the refund period.
At the request of its customer, Oracle filed three refund claims for the Florida sales taxes and surtaxes erroneously collected from the customer and remitted to the Department of Revenue. The refund claim was denied by the Department and, after an informal protest period, was denied again by issuance of a Notice of Decision on each claim. The Notice of Decision in each case relied upon the position that Oracle needed to have refunded its customer prior to applying for the refund. While the Department originally argued the transactions at issue were not exempt, the Department had conceded the issue by appeal.
The refund denials were challenged in the Division of Administrative Hearings, where the ALJ agreed with the Department that the Florida state and local taxes needed to have been refunded to the customer prior to obtaining the refund on the basis that Oracle was not the taxpayer entitled to the refund.
On appeal, the court noted that while the Florida Administrative Code identifies the “dealer” as the proper party to seek a refund from the Department of Revenue, the statute more narrow allows refunds only to the taxpayer. As Nielson Company, Inc., and not Oracle America Inc., was the taxpayer in the transaction, the refund denial was upheld.
Oracle argued that it should not be required to take on the risk of a refund denial by refunding the amount to its customer prior to receiving a refund approval by the Department. Unfortunately, the first DCA dismissed this as a policy argument and maintained that as Oracle was not entitled to a refund even when all parties agreed that the refunded amount would go to the taxpayer.
Ultimately, this is a difficult case because Oracle’s concern is a good one. Why should a business refund nearly $750,000 in tax to a customer when the exemption is not agreed to yet by the Department of Revenue? In fact, in this case the Department originally disagreed that the sales qualified as exempt. The precedent moving forward for all businesses, but especially small businesses, is a bad one. Companies which cannot afford to pay upfront the refund to customers will have no ability to remedy the issue. Meanwhile, customers will have to engage in an analysis to determine whether the cost of fighting for the refund is worth the potential refund amount. It seems many, if not most, qualifying refund claims will never be realized.
Additional Articles by the SALTy Orange at Moffa Tax Law:
Florida Supreme Court Upholds Property Tax Exemption
Florida Corporate Income Tax Case Lost on Procedural Technicality
Florida Department of Revenue Adopts 2024 Internal Revenue Code – But What are the New FL Tax Credits?
Understanding Florida’s Sales Tax on Services: Implications and Considerations
Jeanette Moffa, Esq.
Phone: (954) 800-4138
Email: [email protected]
Jeanette Moffa is a Partner in the Fort Lauderdale office of Moffa, Sutton, & Donnini. She focuses her practice in Florida state and local tax. Jeanette provides SALT planning and consulting as part of her practice, addressing issues such as nexus and taxability, including exemptions, inclusions, and exclusions of transactions from the tax base. In addition, she handles tax controversy, working with state and local agencies in resolution of assessment and refund cases. She also litigates state and local tax and administrative law issues.
