Running an auto dealership in Florida means navigating a maze of compliance rules, and few are more misunderstood—or more dangerous—than Florida’s sales and use tax laws. Collecting, reporting, and remitting sales tax properly isn’t just a clerical task. It’s a legal obligation. And if you get it wrong, the Florida Department of Revenue (FDOR) may come knocking—with interest, penalties, and possibly more.

In this article, we’ll break down the basics of how Florida’s sales and use tax laws apply specifically to auto dealers. Whether you’re selling new vehicles, used inventory, offering financing, or managing trade-ins, this guide will help you understand what’s taxable, what isn’t, and what you must document to protect your business.

1. Sales Tax on Vehicle Sales in Florida

Florida imposes a 6% state sales tax on the total sales price of a motor vehicle. But that’s just the beginning.

Most counties impose a discretionary sales surtax, which applies to the first $5,000 of the sales price. The rate varies by county. For example:

• Broward County: 1%

• Miami-Dade County: 1%

• Hillsborough County: (Now resumed) 1.5%

Dealers must apply the surtax based on where the vehicle will be registered, not where it was sold.

Example:
You sell a car at your dealership in Orange County (0.5% surtax), but the buyer lives in Miami-Dade. The proper surtax is 1%, because the vehicle will be registered in Miami-Dade County.

Failure to apply the correct surtax is a common audit trigger.

2. What’s Included in the “Sales Price”?

The sales price for tax purposes includes more than just the sticker price. It also includes:

• Dealer fees (document fees, prep fees, etc.)

• Electronic filing fees, unless passed through at actual cost

• Accessories and add-ons, even if installed after sale but included in the financing

• Warranties and service contracts, unless specifically exempt

Trade-in credits are subtracted from the taxable base only if:

• The trade-in is owned and titled in the customer’s name

• The trade-in is of like kind (i.e., a car for a car, not a boat or motorcycle)

If your deal jackets don’t reflect the proper tax base—or if you’re applying trade-in credits incorrectly—you may owe significant back taxes if audited.

3. Exempt Sales: What Qualifies and What Doesn’t

Florida allows certain vehicle sales to be exempt from sales tax, but the documentation requirements are strict.

Common exempt sales include:

• Sales to licensed dealers for resale

• Sales to out-of-state residents who meet certain delivery or removal requirements

• Government purchases

• Sales to certain nonprofit organizations with valid exemption certificates

But here’s the catch: if you don’t document the exemption properly, the sale is presumed taxable.

For example:

• An out-of-state buyer must remove the vehicle within 45 days, and you must have either a notarized removal affidavit or shipping documentation

• A sale for resale requires a valid resale certificate (Form DR-13), and you should verify it using the FDOR’s online system

Missing just one form—or keeping a copy that’s incomplete or expired—can cost you tens of thousands in back tax assessments.

4. Use Tax on Loaner Vehicles, Demo Cars, and Inventory Transfers

Use tax is Florida’s silent killer for auto dealers.

Use tax applies when you use an item of inventory for business or personal use instead of selling it. For auto dealers, this often comes into play with:

• Demo vehicles used by employees or owners

• Loaners given to service customers

• Vehicles transferred to related entities

• Vehicles titled in the dealership’s name for fleet or lease purposes

In these cases, the dealer owes use tax based on the cost of the vehicle (not the retail sales price), unless an exemption applies.

If you’re providing demo vehicles or internal transfers but not accruing use tax, you may have a serious exposure—especially if your records don’t clearly document what’s been sold versus what’s been used.

5. Repairs, Parts, and Service Work

If your dealership includes a service department, here’s how tax applies:

• Parts sold over the counter: taxable

• Parts and labor on customer vehicles: taxable as a bundled transaction

• Repairs under warranty: if reimbursed by a third party, may still be taxable

• Internal repairs on dealership-owned vehicles: may trigger use tax, especially if done using inventory parts

The rules vary depending on how items are invoiced and whether labor is separately stated. Misclassifying these transactions is another frequent audit issue.

6. Third-Party Sales Channels and Marketplace Facilitators

If you sell vehicles through online marketplaces, consignments, or auctions, be cautious. The sales tax obligations still apply—and they’re your responsibility unless specifically shifted in writing.

For example:

• Selling a vehicle through Facebook Marketplace or Craigslist does not exempt you from collecting tax

• Using a wholesale auction for inventory disposal may shift tax obligations depending on who holds the resale certificate

Make sure your records clearly indicate who is buying the vehicle, whether tax was charged, and why it wasn’t (if exempt).

7. Sales Tax Returns (DR-15) and Common Filing Errors

Every month or quarter, depending on your assigned frequency, you must file a Form DR-15, which reports:

• Gross sales

• Taxable sales

• Exempt sales

• Tax collected

• Use tax due

Common errors on the DR-15 include:

• Underreporting gross sales (especially cash deals)

• Failing to break out discretionary surtax properly

• Missing use tax entries

• Failing to match DR-15 entries with DMS or accounting records

If your filed returns don’t reconcile with your financials or sales records, the Department will find out during an audit—and assume you’re underreporting.

8. Why Documentation Is Everything

Even if your numbers are right, you can still lose an audit if your documentation is incomplete. Florida law puts the burden on the dealer to prove every exemption, exclusion, or credit. That means:

• Retaining deal jackets for at least three years (and preferably longer)

• Keeping copies of all exemption certificates and affidavits

• Verifying resale certificates online and documenting the results

• Saving delivery and removal documents for out-of-state sales

• Recording internal use or demo logs for inventory vehicles

If it’s not in writing, it didn’t happen—as far as the FDOR is concerned.

9. How to Reduce Risk and Stay Compliant

Here are a few best practices to stay on the Department’s good side:

• Perform regular internal reviews of your deal jackets and DR-15 filings

• Train your sales and F&I staff on when to collect tax, how to document exemptions, and how to handle trade-ins

• Work with your CPA and legal counsel to ensure surtax is calculated correctly

• Keep up with rate changes, especially if you sell across county lines or deliver vehicles out of county

And when in doubt, consider requesting a Technical Assistance Advisement (TAA) from the FDOR to clarify your responsibilities without triggering an audit.

Final Thoughts: It’s Not Just Paperwork—It’s Protection

Sales tax compliance may feel like a headache, but it’s a critical part of running a dealership in Florida. The cost of getting it wrong—during an audit, during a resale verification, or during an acquisition—can far exceed the cost of doing it right.

At Moffa Tax Law, we help auto dealers understand their sales and use tax obligations before the audit begins. Whether you’re looking for preventative guidance or responding to an audit already in progress, we’re here to help.

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