Florida Sales & Use Tax and How to File It!
One of the big “perks” many people talk about for living in Florida is the fact that there isn’t a state income tax. These people often forget that for business owners, this means that Florida sales tax is a more robust system that has to be calculated by nearly every sales transaction. Florida sales tax is generally 6%, but that number may vary depending on exactly what you are selling – real estate transactions and, of all things, amusement machine receipts.
Of course, since Florida relies on sales tax income to replace a traditional income tax, there are a number of specific ways that the Sunshine State makes sure to keep the coffers full – one, of course, is a Corporate Income Tax that is levied on any company that does business in Florida. Let’s look at a few others…
As mentioned above, virtually every transaction in Florida can be taxed. Technically, the law defines taxable transactions as “a sale, admission, storage, or rental.” The good news is that these are exactly the types of transactions that most, if not all, tourists will make, too, thus spreading around the costs of running the state. Florida's general state sales tax rate is 6% with the following exceptions: 4% on amusement machine receipts, 5.8% on the lease or license of commercial real property, and 6.95% on electricity.
At the same time, Florida also acknowledges that taxing certain items is unfair to the poor or the infirm or would constitute double-taxation on certain items. Due to this, many groceries and medical devices, as well as over-the-counter medication, seeds and fertilizers, and, of all things, cosmetics are all considered tax-free items in the state.
You guessed it – Florida may not be able to collect a sales tax on some things, but the state can collect a Use Tax on the consumption of goods or services that were purchased without paying sales tax. Basically, if you bought a taxable item in the state of Florida and did not pay any sales tax on it, then you’ll have to pay a use tax. There are two other primary examples of how Use Tax affects business owners; in one case, a taxable item is purchased outside Florida and brought into the state. If the purchaser did not pay sales tax on the item, they will owe use tax. Another common example is for business owners purchasing items for resale and then, using the item in the business – they will owe Use Tax.
Transient Rental Taxes
Of course, given the tourist-driven economy of much of Florida, it was inevitable that all those hotels, motels, apartments, rooming houses, mobile home parks, RV parks, condominiums, or timeshare resorts would be taxed. Florida law allows counties to impose a local option transient rental tax on rentals or leases of accommodations as long as those rentals or leases are for a term of less than six months. For a list of local option transient rental taxes, visit the Department's Local Option Taxes web page.
It is important to remember that in many counties, the local transient rental taxes are reported and remitted directly to the local government; however, sales tax and discretionary sales surtax on transient rentals are always reported and remitted to the Department. View a list of the County Local Option Transient Rental Tax Rates (Form DR-15TDT )
Discretionary Sales Surtax
Florida law also allows counties to levy taxes at the county level on top of the state sales tax. This is known as a discretionary sales surtax that applies to most transactions subject to the sales or use tax. The county surtax rate applies to a taxable item or service delivered into a county imposing a surtax. Since these taxes can also be applied to motor vehicles and mobile homes, the taxes in question in those transactions will be determined by the purchaser’s home address. Sound challenging? You bet – but the good news is that many of the details business owners need for discretionary sales tax can be found right here.
Tips on Filing
- File on time! Each reporting period will need documentation, even if no tax is due.
- Don't skip reporting periods or add a partial reporting period to the next return – it will only make things harder to keep straight.
- While you can file a paper return, it is a smart idea to sign up to receive a due date reminder email every reporting period. Electronic filers are automatically signed up to receive reminders when they enroll.
- Since there are variable rates, sales reported on lines A through E of the Sales and Use Tax Return (Form DR-15 ) may have different tax rates. It is critical that all transactions are entered on the correct lines to ensure that all calculations are correct.
- If you are reporting discretionary sales surtax (county tax) collected, make sure that the back of the return has been completed.
- Remember not to include tax collected in gross sales. This increases the amount of tax due!
- When you electronically file and pay on time, you may take a collection allowance. Be sure to calculate it correctly. The collection allowance is 2.5% (.025) of the first $1,200 of tax due, not to exceed $30 for each reporting location. If you have less than $1,200 in tax due, your collection allowance will be less than $30.
- Make sure that you are calculating the correct taxes due for the type of transaction – in some cases, such a real estate or vehicle sales, only the first $5,000 of a taxable sale or purchase is subject to the discretionary sales surtax.
Florida Sales Tax can be very challenging for small business owners. It is critical that, as an owner, you take the steps to make sure that you are staying on top of your financial obligations each month. Ultimately, the best bet is these situations is to make sure that you have all the bookkeeping for your company up to date each month to state abreast of your sales taxes due.
By: Chris Groote
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