Recent developments

Recent developments

Have there been any notable recent developments concerning state and local taxation in your state, including any regulatory changes or case law?

Unlike many states, Florida has not taken a position on how or if it will apply the recent Wayfair ruling with respect to economic nexus. There is a pending case on whether Wayfair can be applied retroactively that should be decided in early 2019. Florida is also the only state that taxes commercial rentals and the rate has been reduced on the state level to 5.7%, effective as of January 1, 2019. 

General framework

Legislation

What primary and secondary legislation governs the collection and remittance of taxes in your state?

Florida statutes Chapters 192 to 220 (212, Sales and Use Tax, 220, Corporate Income Tax). The state laws are interpreted by administrative rules that can be found in the Florida Administrative Code.

Government authorities

What government authorities (at both state and local level) are charged with the collection and administration of taxes, and what are the extent of their powers?

The Florida Department of Revenue handles most state tax issues, including state sales, use, income taxes, and motor fuel taxes. There are some taxes administered by the counties such as ad valorem taxes and local tourist development-type taxes. The Department of Business and Professional Regulation handles wholesale tobacco taxes.  

State/local balance

How would you describe the balance between taxes collected at state and local level?

Florida’s primary tax is its state sales tax, which is collected at the state level. In total, the state collects about 50% of the total taxes, while 50% is from local sources. 

Tax year and filing deadlines

What is the prescribed tax year in your state and what filing deadlines apply?

Florida’s prescribed tax year is December 31. For income taxes, returns are due as follows: 

  • For tax years ending June 30, the due date is on or before the 1st day of the 4th month following the close of the tax year; or
  • For all other tax year endings, the due date is on or before the 1st day of the 5th month following the close of the tax year.                              

The 15th day following the due date, without extension, is the deadline for the filing of the related federal return for the taxable year.

Sales tax Returns and payments are due on the 1st and late after the 20th day of the month following each reporting period. If the 20th falls on a Saturday, Sunday, or state or federal holiday, returns are timely if filed electronically, postmarked, or hand-delivered on the first business day following the 20th.

Filing frequency limits are as follows:

  • for businesses that have annual sales tax collections of more than $1,000, the return and payment filing requirement is monthly;
  • for businesses that have annual sales tax collections of $501 to $1,000, the return and payment filing requirement is quarterly;
  • for businesses that have annual sales tax collections of $101 to $500, the return and payment filing requirement is semi-annually; and
  • for businesses that have annual sales tax collections of $100 or less, the return and payment filing requirement is annually.

For more information, visit the department’s website at floridarevenue.com

Government policy

How competitive is your state in terms of taxation in relation to other states? What is the government’s general policy and approach to taxation?

Florida does not have a personal income tax and is 46th in the country on total tax collection per capita. 

Corporate income and franchise taxes

Taxable income

How is taxable income determined in your state? To what extent is the state income tax base aligned with the federal income tax base?

Florida corporate income is computed using federal taxable income, modified by certain Florida adjustments, additions, and subtractions to determine the adjusted federal income.

  • Key adjustments include: Florida additions (Section. 220.13(1)(a), F.S.); and
  • Florida subtractions (Section 220.13(1)(b), F.S.).

“Taxable income,” as defined by Section 220.13(2), F.S., is the starting point in determining what Florida corporate income tax is due. It relies on “taxable income” as defined in Section 63 of the Internal Revenue Code, that is:

  • properly reportable for federal income tax; but
  • subject to additions and limitations in Section 220.13(1) relating to additions and deductions.

Florida corporate income uses federal taxable income as its basis for taxable income in addition to other Florida adjustments to that amount.

How is in-state income apportioned for multi-state businesses? Does your state regulate transfer pricing?

Adjusted federal income is usually apportioned to Florida using a three-factor formula.

For taxpayers doing business within and outside of the state, the formula is a weighted average, designating 25% each to factors for property and payroll, and 50% to sales. Therefore:

  • if the denominator for any two factors is zero or is insignificant, the weighted percentage for the remaining factor will be 100%;
  • if the denominator for the sales factor is zero or is insignificant, the weighted percentage for the property and payroll factors shall change from 25% to 50% respectively; and
  • if the denominator for either property or payroll is zero or is insignificant, the weighted percentage for the other will be 33.33% and the weighted percentage for sales factor will be 66.66%.

Nexus

How is nexus determined for corporate income tax purposes?

Even if a business is out of state, it may be required to register or file tax in Florida. Some common examples of activities that create a business connection (also called nexus) in Florida include, but are not limited to, businesses that:

  • have employees, agents, or independent contractors conducting sales or other business activities in Florida;
  • maintain an office or other place of business in Florida;
  • assemble, install, service, or repair products in Florida;
  • own, rent, or lease real property or tangible personal property in Florida; and
  • deliver goods to Florida customers using a company-owned or leased truck.

Is affiliate nexus recognized in your state? If so, to what extent? Has there been any notable case law in this area?

Florida does not recognize affiliate nexus. 

Rates

What are the applicable corporate income tax rates?

Standard corporate tax is 5.5% but exemptions often lower a corporation’s effective tax rate.

Exemptions, deductions and credits

What exemptions, deductions, and credits are available?

These include:

  • excess charitable contribution deductions which are allowed for federal income tax purposes are detailed under Section 170(d)(2) of the Internal Revenue Code (IRC);
  • certain dividends;
  • deductions based on Section 280C(a) of the IRC relating to credit for employment of certain new employees;
  • deductions on any amount of non-business income included; and
  • any amount of taxes of foreign countries allowable as credits.

Filing requirements

What filing requirements and procedures apply? Are there special filing requirements for groups of company?

Section 220.22, F.S. grants the Department of Revenue the ability to designate entities that would not be required to file a return, but there is no mention of special filing requirements.

Rule 12C-1.022 provides that the “Florida Income Tax Code does not specifically provide for an exception from the filing requirements for any organization, association, or legal entity.”

The burden rests with a corporation to show that it is not required to file unless a specific provision within the IRC or the Treasury Regulations exempts an entity.

Corporate franchise tax

Does your state impose a corporate franchise tax? If so, is it imposed in lieu of or in addition to corporate income tax?

A franchise tax of 5.5% of the franchise tax base is imposed on banks and savings associations.

If your state imposes a corporate franchise tax, please stipulate:

(a) The applicable tax base.

Florida does not impose a personal income tax. 

(b) Tax rates.

Florida does not impose a personal income tax. 

(c) Any exemptions or deductions.

Florida does not impose a personal income tax. 

(d) Filing formalities.

Florida does not impose a personal income tax. 

Does your state impose a corporate franchise tax? If so, is it imposed in lieu of or in addition to corporate income tax?

A franchise tax of 5.5% of the franchise tax base is imposed on banks and savings associations.

Personal income taxes

Taxable income

How is taxable personal income determined in your state?

Florida does not impose a personal income tax. 

Tax residence

Under what circumstances is an individual deemed resident in your state for personal income tax purposes?

Florida does not impose a personal income tax. 

Rates

What are the applicable personal income tax rates?

Florida does not impose a personal income tax. 

Exemptions, deductions and credits

What exemptions, deductions, and credits are available?

Florida does not impose a personal income tax. 

Filing requirements

What filing requirements and procedures apply?

Florida does not impose a personal income tax. 

Employer obligations

What obligations are imposed on the employer in relation to the collection and remittance of state personal income taxes (eg, withholding)?

Florida does not impose a personal income tax. 

Sales and use taxes

Taxable goods

What goods are subject to sales and use tax in your state (at both state and local level)?

Florida imposes sales and use tax on the sale of tangible personal property unless exemptions apply. In general, services are not taxable; however, some services are subject to tax such as investigative and crime protection services, interior non-residential cleaning services, and non-residential pest control services. Florida is also the only state that taxes commercial rent. 

State rate

What is the state sales tax rate?

6%.

Local rates

What is the range of local sales tax rates levied in your state?

0% to 2%. The average is approximately 0.8%.

Exemptions

What goods are exempt from sales and use tax?

While many specific exemptions exist, the following items are generally taxable:

  • certain groceries;
  • any prosthetic or orthopaedic instruments;
  • any remedies considered to be common household remedies;
  • any seeds and fertilizers; and
  • any cosmetics considered to be exempt in the state of Florida.

This link provides a good list of specific items that may be exempt. There are also broad exemptions for manufacturing companies. 

Services

Are any services taxed?

Some services are subject to tax such as investigative and crime protection services, interior non-residential cleaning services, and non-residential pest control services. Florida is also the only state that taxes commercial rent. 

Filing requirements

What filing requirements and procedures apply?

Returns and payments are due on the 1st and are considered late after the 20th day of the month following each reporting period. If the 20th falls on a Saturday, Sunday, or state or federal holiday, returns are timely if filed electronically, postmarked, or hand-delivered on the first business day following the 20th. For example, if the sale took place during January and returns are filed monthly, the tax return is due on February 1 and considered late after February 20; however, if returns are filed quarterly, the return is due on April 1 and considered late after April 20. A return must be filed for each reporting period, even if no tax is due.

Property taxes

Taxable value

How is the value of property assessed for tax purposes in your state? Which types of property are subject to tax?

Both real property (realty) and tangible personal property (business equipment) are subject to property tax.

State rate

What is the state property tax rate?

Florida property tax is based on market value as of January 1st that year.

The state government does not collect any property taxes, though local governments receive much of their funding through these taxes.

Local rates

What is the range of local property tax rates levied in your state?

The local rates cannot exceed 10 mills (mill rate: one mill is equal to $1 in property tax levied per every $1,000 of a property’s determined taxable value).

Exemptions and deductions

What exemptions and deductions are available?

There are several exceptions and deductions available, including:

  • homestead exemption up to $50,000:
    • only the first $25,000 of the exemption applies to all taxes; and
    • the remaining $25,000 applies only to non-school taxes;
  • widow(er) exemption—$500 available to widows and widowers who have not remarried (not available if they were divorced at the time of their ex-spouse’s death);
  • senior citizen exemption;
  • blind person exemption;
  • total and permanent disability exemption; and
  • veteran exemptions.

Filing requirements

What filing requirements and procedures apply?

Every person who has the legal title to real or personal property, on January 1, and is entitled to an exemption must file an application for exemption on or before March 1 of each year with the county property appraiser.

Real estate transfer tax

How is the transfer of real estate taxed in your state (including tax base, rates, exemptions, and filing formalities)?

Tax applies on the deed relating to real property interest transfers for consideration. The rate is 0.7% or $0.70 tax on each $100.

Unclaimed and abandoned property

Reporting and remittance

Describe your state’s regime for reporting and remitting unclaimed and abandoned property. How is the value of such property calculated? How assertive is your state in enforcing its rights to unclaimed property?

General rules apply to all intangible property if it is presumed unclaimed for more than five years after the property becomes payable or distributable.

For the state to take custody of the property, other conditions listed in Section 717.103 must exist. For example, if records do not indicate the identity of the person who is entitled to the property, and it is established that the last known address of the apparent owner is in Florida, the state can take custody of the unclaimed property.

Excise and other indirect taxes

Excise taxes

What excise taxes are levied in your state, including applicable goods, rates, and filing formalities?

Other taxes include communications services tax, fuel tax, tourist development taxes, gross receipts tax, alcohol, tobacco, and cigarette taxes and intangible taxes. 

Other indirect taxes

Are any other indirect taxes levied in your state?

Intangible tax, property tax, and re-employment tax.

Other taxes

Other taxes

Do any other taxes apply to businesses in your state? If so, please include applicable tax bases, rates, exemptions/deductions, and filing formalities.

Re-employment tax.

Incentives

Incentive schemes

Does your state offer any tax incentive schemes to attract businesses and promote investment?

There are a number of tax incentive schemes in Florida, including:

  • Rural Job Tax Credit:
    • provides an incentive for eligible businesses, located within designated rural counties, to create new jobs; and
    • credit can range from $1,000 to $1,500 per qualified employee.
  • Urban High-Crime Area Job Tax Credit:
    • provides an incentive for eligible businesses, located within designated urban areas, to create new jobs; and
    • credit can range from $500 to $2,000 per qualified employee.
  • Capital Investment Tax Credit:
    • available to businesses in a designated high-impact sector (e.g., silicon technology, transportation industries, or solar panel manufacturing facilities).
  • Community Contribution Tax Credit:
    • credit of 50% of a qualified community contribution to an eligible sponsor for a project identified in Section 220.03(1)(t), F.S.
  • Contaminated Site Rehabilitation Tax Credit (Voluntary Clean-up Tax Credit):
    • available to taxpayers that voluntarily rehabilitate brownfield sites or sites contaminated with dry-cleaning solvent.
  • Entertainment Industry Tax Credit.
  • Hazardous Waste Facility Tax Credit:
    • credit available to the owner of any commercial hazardous waste recycling facility that incurs expenses for hydrologic, geologic, or soil site evaluation and permit fees required by the Florida Department of Environmental Protection; and
    • credit is equal to the amount of expenses incurred.
  • New Markets Tax Credit:
    • credit equal to 39% of the purchase price of a qualified investment as defined in Section 288.9913(9), F.S. may be taken.
  • Research and Development Tax Credit:
    • provides a corporate income tax credit to eligible businesses for certain qualified research expenses.
  • Scholarship-Funding Organization—Tax Credits for Contributions.
  • State Housing Tax Credit:
    • available to private corporations that build low-income housing projects in urban areas.
  • Florida Alternative Minimum Tax Credit (AMT):
    • credit equal to the excess of the Florida AMT paid over the amount of regular corporate income tax is available.
  • Florida Health Maintenance Organization Consumer Assistance Assessment Credit:
    • credit equal to 20% of the assessments paid to the Florida Health Maintenance Organization Consumer Assistance Plan for each year following the year in which such assessment was paid is available.
  • Florida Life and Health Insurance Guaranty Association:
    • credit to a member insurer based on any assessments described in Section 631.718, F.S.
  • Renewable Energy Tax Credits:
    • credit is available for the production of renewable energy and for investment in renewable energy technologies.

Planning considerations

Compliance

What tax compliance procedures and best practices should businesses operating in your state be aware of?

Florida is relatively aggressive in tax collection, especially in transition taxes as they represent more than 70% of the state budget. It is critical for businesses to know the rules and adequately keep paperwork for exempt transactions. 

Strategic planning

What strategic planning considerations should businesses operating in your state bear in mind to optimize tax efficiency?

Florida is a relatively low-tax state and does not have a state income tax. Experts are often engaged to assist companies and individuals to allocate their income to Florida to reduce overall taxes.