State and Local tax strategy is an integral part to your business success. These business local taxes are some of the details entrepreneurs neglect because you think more taxes means less money in your pocket. Why charge and collect sales tax to add more administrative duties to your ever growing list of things to do?
But, sooner or later the tax man will catch up to your business. Especially, when your business becomes more successful. Imagine, you’ve worked all these long hours to build your business. You finally get your big break. And, have some momentum behind your business. Customers are requesting your services or buying more of your products. Plus, they are referring their friends at an exponential rate.
Then, the Florida Department of Revenue sends you a certified mail letter requesting you pay thousands of dollars in taxes. You scramble trying to find documents and explain yourself to the revenue agent. You spend hours researching on the internet to figure out how to do everything. Weeks go by. Then, it’s almost a month. And, your deadline for submitting the documents is almost here.
You panic when you realize that you need a professional. At this point, you are in over your head. You end up hiring someone on the fly because you are in a rush. And, you only want to spend a few hundred dollars to get the issue resolved. At the end of it all you still owe thousands. Plus, you have the sinking feeling that maybe you should have hired an attorney who could have saved you thousands of dollars. Penny wise and pound foolish as my mom would say. To save on the front end you ended up paying thousands on the backend. But, this doesn’t have to be your story. You can start planning today for a better long term outcome. So, be aware of the following Florida taxes that are required when starting a business.
Sales and Use Tax
Sales tax applies to the sale, rental, lease, or license to use goods, certain services, and commercial property in Florida (unless the transaction is exempt). If your business will have taxable transactions, you must register with the Department of Revenue before you begin conducting business in Florida. Florida’s sales and use tax rate is 6%. Discretionary sales surtax (also called county tax) is imposed by many Florida counties and applies to most transactions subject to sales tax. The Department of Revenue collects both taxes and distributes the surtax back to the counties. The discretionary sales surtax rate depends on the county.
Use tax is due on the use or consumption of taxable goods or services when sales tax was not paid at the time of purchase. For example:
- If you buy a taxable item in Florida and didn’t pay sales tax, you owe use tax.
- If you buy an item tax-exempt intending to resell it and then use the item in your business or for personal use, you owe use tax.
- If you buy a taxable item outside Florida and bring or have it delivered into this state and you didn’t pay sales tax on the item, you owe use tax.
Most Florida counties have a discretionary sales surtax (county tax) 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. The surtax rate that applies to motor vehicles and mobile homes is determined by the home address of the purchaser. Check the rates for each county (Form DR-15DSS) in which you sell or deliver taxable goods or services.
For certain transactions, only the first $5,000 of a taxable sale or purchase is subject to the discretionary sales surtax.
Reemployment (formerly Unemployment) Tax
Reemployment assistance gives partial, temporary income to workers who lose their jobs through no fault of their own, and are able and available for work. Employers pay for reemployment assistance through a tax administered by the Department of Revenue. Florida employers pay for reemployment assistance through a tax managed by the Florida Department of Revenue. It is one of the employer’s business costs. Workers do not pay reemployment tax and employers must not make payroll deductions for this purpose. Employer payments go into a fund from which money is paid to eligible, unemployed Floridians who file claims for reemployment assistance. After a qualifying period, employers with a stable employment history receive a lowered tax rate.
Corporate Income Tax
Corporations and entities that do business, or earn or receive income in Florida, including out-of-state corporations, must file a Florida corporate income tax return (unless the business is exempt).
- All corporations (including tax-exempt organizations) doing business, earning income, or existing in Florida.
- Every bank and savings association doing business, earning income, or existing in Florida.
- All associations or artificial entities doing business, earning income, or existing in Florida.
- Foreign (out-of-state) corporations that are partners or members in a Florida partnership or joint venture. A “Florida partnership” is a partnership doing business, earning income, or existing in Florida.
- A limited liability company (LLC) classified as a corporation for Florida and federal income tax purposes is subject to the Florida Income Tax Code and must file a Florida corporate income tax return.
- An LLC classified as a partnership for Florida and federal income tax purposes must file a Florida Partnership Information Return (Florida Form F-1065) if one or more of its owners is a corporation. In addition, the corporate owner of an LLC classified as a partnership for Florida and federal income tax purposes must file a Florida corporate income tax return.
- A single member LLC disregarded for Florida and federal income tax purposes is not required to file a separate Florida corporate income tax return. The income must be reported on the owner’s return if the single member LLC is owned, directly or indirectly, by a corporation. The corporation must file Florida Form F-1120, reporting its own income and the income of the single member LLC, even if the only activity of the corporation is ownership of the single member LLC.
- Homeowner and condominium associations that file federal Form 1120 (U.S. Corporation Income Tax Return) must file Florida Forms F-1120 or F-1120A regardless of whether any tax may be due. If you file federal Form 1120-H (U.S. Income Tax Return for Homeowners Associations), you are not required to file a Florida return.
- Political organizations that file federal Form 1120-POL.
- S corporations that pay federal income tax on Line 22c of federal Form 1120S.
- Tax-exempt organizations that have “unrelated trade or business income” for federal income tax purposes are subject to Florida corporate income tax and must file either Florida Form F-1120 or F-1120A.
Generally, the Florida corporate income tax return is due:
- On or before the first day of the fourth month following the close of the tax year, or
- The 15th day following the due date, without extension, for the filing of the related federal return, whichever is later. Any balance of tax owed must be paid in full by the due date of the Florida return. The Florida Partnership Information Return is due on or before the first day of the fifth month following the close of the tax year.
Other taxes administered by the Department of Revenue include communications services, documentary stamp, fuel, gross receipts, insurance premium, pollutants, severance, and solid waste and surcharge.
You must register before you collect, report, and/or pay the following taxes: sales and use, reemployment, gross receipts, documentary stamp, communications services, motor fuels, pollutants and severance; and fees: Miami-Dade County Lake Belt Mitigation Fee and solid waste fees and surcharge.