- Florida: Recent Publication Deciphers Several Common Business Taxes
- October 27, 2015 | Authors: David H. Godenswager; David M. Kall
- Law Firm: McDonald Hopkins LLC - Cleveland Office
In an effort to help Floridians considering business opportunities in the Sunshine State, the Florida Department of Revenue (FDOR) recently issued a publication that explains five of the more than 30 taxes and fees that it imposes on many companies. The taxes highlighted are the corporate income tax, sales and use tax, discretionary sales surtax, communications services tax, and reemployment tax.
Corporate income tax
Unless exempt, any corporation or entity that does business, earns or receives income in Florida, including out-of-state corporations, must file a corporate income tax return, even if no tax is due.
However, S Corporations and tax-exempt organizations do not file a Florida corporate income tax return if there is no federal taxable income. Likewise, homeowner and condominium associations that do not file the federal income tax return for homeowners associations, Form 1120-H, need not file a Florida corporate income tax return.
The corporate income tax liability is computed using federal taxable income, modified by certain Florida adjustments, to determine adjusted federal income. The tax rate is 5.5 percent of net income.
Sales and use tax
According to Florida statute, the state levies a 6 percent tax to the sale, rental, lease, or
license to use goods, certain services, and commercial property in Florida, unless the transaction is exempt.
For businesses that will engage in taxable transactions, the FDOR requires registration as a sales and use tax dealer before the company begins conducting operations in Florida. Once the state approves the application, it will issue a Certificate of Registration, a Florida Annual Resale Certificate, and information necessary to file and pay state taxes.
The FDOR warns firms that they must collect sales tax at the time of each sale and pay the tax for each reporting period, either electronically or with a paper form. Any use tax due must be paid with the tax return, and a taxpayer must file a return even if no tax is due.
Local governments may have their own registration and/or licensing prerequisites, which must be attended to before operations begin. Counties have the right to levy a discretionary sales surtax on the same transactions that are subject to the sales and use tax described above. If a given county has a discretionary sales surtax, a dealer must pay it with the sales and use tax, on that return.
The applicable rate is that which is imposed in the county where the goods or services are delivered; it ranges from 0.5 percent to 1.5 percent, depending on the county. The surtax applies to the first $5,000 of any item of tangible personal property, excluding commercial rentals, transient rentals, or services.
Communications services tax
All businesses that provide communications services, as defined by Florida statute, are subject to this tax. It contains two parts: the Florida communications services tax and the local communications services tax. The total tax rate for the Florida portion is 7.44 percent, while each local taxing jurisdiction has its own specific local taxing rate, which can vary quite a bit. For example, in Palm Beach County, the rate could be as low as 1.2 percent, or as high as 6.44 percent, depending on the jurisdiction.
Telecommunications, video (e.g., television programming), direct-to-home satellite and similar services, along with voice, data, audio, video or any other information or signals transmitted by any medium, are all subject to the communications services tax.
- Local, long distance, and toll telephone
- Voice over Internet Protocol (VoIP) telephone
- Video service (e.g., television programming)
- Video streaming
- Direct-to-home satellite
- Mobile communications
- Private communications
- Pager and beeper
- Telephone charges made by a hotel or motel
- Fax, except in the course of professional or advertising services
- Telex, telegram, and teletype
Florida’s statutes addressing unemployment compensation provide for reemployment assistance benefits in the form of partial, temporary income to workers who lose their jobs through no fault of their own, and are able and available to work. These tax payments by Florida employers are placed into a reserve fund from which the benefits are paid.
Employers are liable for the reemployment tax if the business:
- Has a $1,500 quarterly payroll, or employs at least one worker for a day or portion of a day for 20 weeks in a calendar year. This includes corporate officer wages, draws, dividends, distributions.
- Is a government entity.
- Has a 501(c)(3) IRS exemption and employs four or more workers for a day or portion of a day for 20 weeks in a calendar year.
- Employs workers who provide agricultural labor; and the business employs five or more workers for a day or a portion of a day for 20 weeks in a calendar year, or pays $10,000 in cash during any calendar quarter.
- Employs workers who provide domestic services in one’s private home or college clubs (fraternities or sororities) and pays $1,000 in cash during any calendar quarter.
- Bought all or part of the organization, trade, business, or assets of a liable employer.
- Must pay federal unemployment taxes.
- Voluntarily elects to cover workers.
In order the keep the fund stable, the reemployment tax rate varies under a system known as experience rating. Experience rating is based on the employer’s own employment records in relation to the employment records of all other employers. Once an employer receives its rating, the reemployment tax rate can vary from a minimum rate that changes annually based on certain factors, to the maximum of 5.4 percent.