Another year has passed, and more regulations have been put on dealerships. Now is the time to address issues for 2018 for Florida sales and use tax purposes. Being mindful an audit notice maybe sent to your dealership in 2019, we can address some of the problems you might be able to resolve now ahead of an audit.
One of the biggest changes this year for dealers involved the responsibility to collect and report on the Hope Scholarship. As a brief background, the Hope Scholarship Program allows a public school student, who was subjected to violence or bullying, the chance to apply for a scholarship to attend a private school. Everyone in your dealership should be aware of the Hope Scholarship Program at this point.
Effective October 1, 2018, dealers were required to provide motor vehicle purchasers with an opportunity to make a contribution as well as with Form DR-HS1, Hope Scholarship Program Contribution Election. If the purchaser declines to make a contribution, dealers are not required to keep Form DR-HS1. If a purchaser wants to make a contribution, the contribution is limited to the lesser of $105 or the amount of tax due on the sale of a motor vehicle. The motor vehicle must have a net vehicle weight of 5,000 pounds or less. Specifically excluded motor vehicles are heavy trucks, truck tractors, trailers, motorcycles and mopeds. A contribution may not be made on leases, warranties or hard-adds. If a contribution is made by a customer, the customer must fill out Form DR-HS1 and the dealership must keep this Form in the deal jacket if a contribution is made. Additionally, the dealer is required to report the contributions to the Hope Scholarship Program charity and the Department of Revenue via Form DR-HS2, Hope Scholarship Program Dealer Contribution Collection Report. Also, dealers are required to report any Hope Scholarship funds collected on Lines 6 and 16 of Form DR-15, Sales Tax Return. If a dealer fails to file the required Form DR-HS2 timely or at all, the dealer is subject to a penalty of $1,000 per month for each month, or part thereof, the report is not provided, up to a maximum penalty of $10,000. The Department is expected to issue a new regulation on the program in the coming months. Please stay tuned to FADA for the latest updates.
Another hot topic for dealers is ensuring your deal jackets have all of the exemption documentation in them. Sold a car to an out-of-state resident? Ensure you have the DR-123 fully completed and in the jacket. If you shipped a car to a customer outside of Florida and the customer did not take delivery at the dealership, double check you have the shipping documentation. The shipping documentation should identify the car (VIN is usually what the Department of Revenue looks for), the date of the transaction, and the purchaser. Of course, all of this information should tie to the bill of sale. If you made an exempt sale for another reason, it is a good time to ensure you have what is needed to support that exemption. Documents always go missing when you need them the most!
Last but not least, please do not forget to remit all of the sales tax you collect. Not remitting just $300 can lead to felony charges. The Department will compare any sales tax liabilities reported on your federal tax return with sales tax remitted to the Department. Alternatively, the Department will look at reports generated by your sales software to ensure the tax collected for a given month matches the tax remitted for the same month. If an auditor uncovers a difference, a sales tax assessment could be the least of your worries. As if this was not enough, these criminal penalties now apply separately to the Hope Scholarship funds collected but not remitted as well!R
Take the time when things are slow to go through and ensure you have what is needed. If not, try to do what you can to get the needed information so you are not scrambling later to put something together at the request of an auditor. An ounce of prevention…
David Brennan is an attorney at Moffa, Sutton, and Donnini, P.A., which firm has almost an exclusive focus on Florida sales tax controversy. David was a senior attorney at the Florida Department of Revenue from 2014 to 2016. He focuses his practice primarily on sales tax issues. David can be contacted by email at DavidBrennan@FloridaSalesTax.com or via telephone at 850-250-3830.
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