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Tax Answers from the Guys who Enforce the RulesMr. Charles Pate has been an enforcement official with the Florida Department of Revenue for the past twelve years. His job is to identify areas of non-compliance within the FL tax laws and remedy the situation. We recently asked Mr. Pate the following questions about taxation in the vacation rental industry. In terms of your priorities, where does the vacation rental industry rank on the list? Because of the dramatic increase in the number of vacation properties in Northwest Florida, it is an area in which I spend a significant amount of time. Why do you think some property owners don't pay sales and lodging taxes? The overwhelming majority of property owners not registered with the Florida Department of Revenue and the appropriate county(ies) are simply unaware of their responsibilities. A large majority of the owners in Northwest Florida are not Florida residents, and there can be significant differences in state tax systems. Also, there are a small percentage of owners that knowingly choose not to comply. What are the consequences of failure to collect and remit these taxes? Everyone has a responsibility to comply with state laws. Failure to comply can result in assessments of tax, penalties and interest. The Department of Revenue makes every effort to make compliance as easy as possible; however, compliance does require effort on the part of the owner by registering these properties with the Florida Department of Revenue and the local county jurisdiction. Do you coordinate your compliance efforts with the counties in Florida? The Florida Department of Revenue has a revenue information sharing and exchange program (RISE) with most counties in the state of Florida. Our enforcement and educational activities in these counties are in most cases integrated. Registration and compliance information is routinely exchanged with these participating counties . Do you utilize IRS records to enforce compliance? The Florida Department of Revenue has an information sharing and exchange agreement with the Internal Revenue Service. In circumstances where it is deemed necessary the Department has the ability to obtain the Federal reporting information relative to income of a non-compliant taxpayer. What would you say to the property owner that thinks, "I will never get caught' or, "if I do get caught, I will simply act like I didn't know the requirements." If a property owner has rented in the past and not collected and remitted the proper taxes, they are liable for state and local taxes on prior rental income. That is not a subjective determination on our part. It is the law and it is the Department of Revenue's responsibility to uphold the law. Non-compliance for an extended period can result in a significant assessment of tax, penalties, and interest. What would you say to the property owner that thinks, "No one else charges the tax; it will make my rates more expensive and I will lose rentals." We have had property owners that complain when they know other owners are not in compliance. Based on the information we receive, we can investigate the validity of that information using a number of resources. We conducted several reviews of developments in Panama City Beach area recently. These reviews were conducted after receiving complaints in that area. The Department places great emphasis on trying to assure that there is no competitive advantage achieved by circumventing the tax laws. If a homeowner has been renting for the last few years, but was not collecting and remitting the tax because they were unaware of the requirements, is there a way for them to voluntarily report the revenue and pay the taxes without getting penalized? Under Florida Department of Revenue Administrative Rules and Florida Statutes, we DO have the ability to waive penalty when there has been "self-disclosure". It is always our goal to minimize the financial impact to owners that want to voluntarily comply. How does the government utilize the proceeds generated from these taxes? The proceeds from the state sales tax goes to the general fund. By law, the local option tourist development tax proceeds go to promote tourism in Florida and to fund tourist-related infrastructure. How does the Florida Department of Revenue inform people about the tax collection and remittance requirements? We are presently working on a project to ask the developers of new condominium projects to include a one page letter from Department of Revenue in their closing packages. The purpose of the letter is to make purchasers aware of their obligations if they decide to rent. We also conduct seminars regularly in a number of the coastal counties. Theses seminars are comprehensive in their approach combining the Department of Revenues and the appropriate county. As a result we have a lot of sellers who will advise buyers of their potential obligation to register. From a compliance perspective, have you seen changes in the vacation rental industry in the last several years? In recent years, the industry has become much more diversified. We have time shares, non-ownership vacation clubs, fractional ownership, and a proliferation of Internet sites (both host only and self-marketing). We have seen a significant increase in activity in recent years. We track the movement of excess vacation rental properties in Florida through several states and multiple re-marketers. It is a challenge just to identify new business models. Are homeowners required to obtain a Florida Resort Dwelling License before they rent their vacation home? A property owner that is renting is required to be registered with the Florida Department of Revenue, the local county jurisdiction and the Florida Department of Business and Professional Regulation (FDBPR). The FDBPR is responsible for the evaluation of the physical adequacy of the property for rental activity. If a homeowner rents a home, a boat and a car in a package deal, is all of the revenue subject to sales tax and tourist development tax, or just the portion allocable to the home? The entire package is subject to "full" tax (state & local option taxes and tourist development tax) when the rental is charged as a lump sum. If the components are separately stated, then only the home is subject to state and local option taxes and tourist development tax. The boat and car would be subject to state sales tax & local option taxes but not the tourist development tax. The Florida Department of Revenue is available to make presentations to homeowners' or condominium associations. Because there are numerous vacation rental homes throughout Florida, we chose to interview the Florida Department of Revenue. If we posed these questions to other state tax departments across the U.S., we would obtain similar answers. To view additional questions asked in this interview, visit HotSpot Tax Services' website at www.hotspottax.com/news.aspx. HotSpot Tax Services is a company that specializes in sales and lodging tax solutions for vacation rental homeowners. For more information on sales and lodging taxes visit our website at www.hotspottax.com or call 877-589-0207 to speak with a specialist. ©2003 HotSpot Tax Services, LLC. All Rights Reserved. |
