Florida State Tax: What Business Lawyers Need to Know

As a business lawyer, your clients rely on you to guide them through various legal and regulatory challenges, including state tax compliance in Florida. While tax law may not be your primary focus, understanding Florida’s tax procedures can help you identify potential risks, protect your clients from costly mistakes, and provide strategic advice when tax disputes arise. This article provides a high-level overview of key tax compliance issues, audit risks, and dispute resolution strategies that business lawyers should be aware of when advising their clients.

1. Understanding Florida’s Tax Framework

Florida does not impose a personal income tax, but businesses operating in the state must comply with various tax obligations, including:

• Corporate Income Tax (CIT): Florida imposes a corporate income tax on C corporations and certain other business entities with nexus in the state (Chapter 220, Fla. Stat.).

• Sales and Use Tax: Businesses engaged in selling taxable goods or services must collect and remit sales tax (Chapter 212, Fla. Stat.). Businesses purchasing taxable items for use without paying sales tax are responsible for use tax.

• Reemployment Tax: Florida requires most employers to pay reemployment tax (formerly unemployment tax) to fund unemployment benefits.

• Other Industry-Specific Taxes: Depending on the business, clients may also need to comply with fuel taxes, communications services tax, or insurance premium taxes.

2. Business Registration and Tax Compliance

To avoid penalties, businesses must properly register with the Florida Department of Revenue (DOR) before conducting taxable activities. Business lawyers should ensure their clients:

• Obtain the necessary tax registrations, including a Sales and Use Tax Certificate and a Reemployment Tax Account.

• File periodic returns and remit taxes on time to avoid penalties and interest.

• Maintain accurate financial records and supporting documentation for at least three years, as required under Florida law.

3. Florida Tax Audits: Key Risks and Preparation

The Florida DOR regularly audits businesses to ensure compliance. Common audit triggers include:

• Sales Tax Discrepancies: Underreporting or failing to remit sales tax correctly.

• Nexus Issues: Businesses with sales, operations, employees, or property in states other than Florida may have unrecognized tax obligations in those states.

• Exemption Misuse: Incorrect application of sales tax exemptions or resale certificates.

• Worker Classification: Misclassification of employees as independent contractors can lead to reemployment tax assessments.

How to Help Clients Prepare for an Audit

• Conduct internal tax compliance reviews to identify potential exposure.

• Ensure clients maintain proper documentation, including exemption certificates and purchase records.

• Advise on best practices for responding to audit notices and cooperating with the DOR.

4. Resolving Florida Tax Disputes

If a client faces a tax assessment or dispute, Florida state and local tax lawyers can play a critical role in helping businesses and business lawyers navigate the resolution process. Key options include:

• Informal Protest: Businesses can submit a written protest to the DOR within 60 days of an assessment to resolve disputes at the agency level.

• Administrative Hearings: If informal resolution fails, clients can request a hearing before the Division of Administrative Hearings (DOAH).

• Judicial Appeals: Businesses may challenge final assessments in Florida circuit courts or the First District Court of Appeal.

• Voluntary Disclosure Program: For unreported taxes, the DOR’s Voluntary Disclosure Program allows businesses to come forward with reduced penalties.

5. Practical Takeaways for Business Lawyers

• Proactive Compliance: Encourage clients to maintain proper tax records, timely file returns, and seek professional tax advice when needed.

• Audit Readiness: Help clients implement best practices for compliance to minimize audit risks.

• Dispute Resolution Strategy: Be prepared to assist clients in responding to audits, negotiating settlements, and pursuing appeals when necessary.

• Collaboration with Tax Professionals: Work with tax attorneys and CPAs when complex tax matters arise to ensure comprehensive client representation.

By understanding Florida’s tax procedures, business lawyers can add value to their clients by reducing tax risks and ensuring compliance, ultimately helping businesses avoid costly penalties and disputes.