As a Florida business, you will have to know what the sales tax is for the state and, depending on whether your county adds a tax, what it is for your county. This discretionary tax is tacked onto the state’s sale tax. Florida also charges a use tax and transient rental taxes. This guide does not fully describe all of Florida’s laws and regulations regarding taxes. Businesses should contact a business attorney or visit the Florida Department of Revenue (DOR) to learn the rules and regulations associated with their industries and the types of taxes due.
Types of taxes
Florida has three types of taxes related to selling goods and services. Every business is subject to the state’s sales tax.
Sales tax
Businesses must collect tax every time they make a sale, charge admission to an event, or rent a home, room, or storage unit in Florida. The state sales tax rate is 6 percent as of 2022. The DOR has lower taxes for some receipts, including amusement machine receipts taxed at percent, the license or lease of commercial real property taxed at 5.5 percent, and electricity taxed at 6.95 percent.
Use tax
Under certain circumstances, businesses must pay a use tax. This tax is due on taxable goods and services if the business did not pay the tax when it purchased the item or service. Businesses must pay use taxes when they:
- Buy an item that is taxable and they did not pay sales tax on the item.
- Buy a tax-exempt item for resale, but end up using the item in the business or for personal use. For example, the business bought a case of wall cleaner with the intent to sell it. Instead, the business used the wall cleaner in the business. It would then owe a use tax on the wall cleaner.
- Buy a taxable item out of state and did not pay tax on it. This used to be common before states started requiring businesses to charge sales tax on out-of-state sales. For example, if a business bought Widget A in a state that did not tax the widget, and that item is for use in the business, you never had to pay taxes. Now, when a business buys that same widget in the same state that does not tax the widget, the Florida business must pay Florida’s use tax on the widget.
In most cases, businesses that sell items to out-of-state consumers and businesses now add the tax for the state where the item is being shipped.
Discretionary sales surtax
A discretionary tax is a sales tax implemented at the local government level. Not all counties have the same percentage, and the amount is added to the state’s base sales tax. The discretionary surtax is implemented on tangible personal property being delivered to the county. Mobile homes and motor vehicles are subject to the discretionary tax for the business’s or person’s business or home address. In some cases, counties tax only the first $5,000 of a taxable item.
Transient rental taxes
Florida also allows counties to impose transient rental taxes. Essentially, this tax is a sales tax on rentals and leases for accommodations in mobile home parks, rooming houses, RV parks, apartments, condos, hotels, motels, and timeshares that are six months or less. Each county can name the percentage it wants to add to the state’s base rate tax.
Businesses pay the regular and discretionary sales taxes on rentals to the Florida Department of Revenue. However, the transient rental tax is usually paid to the jurisdiction charging it.
Out-of-state retailers must pay sales and use tax
Suppose you have a business in another state and no physical presence in Florida. In that case, you must still register and pay sales, use, and discretionary sales surtax in Florida if the remote sales into Florida were over $100,000 for the previous year. This new law went into effect in July 2021.
Remote sales are those sales made by phone, mail, internet, or other forms of communication wherein the product is delivered or shipped to a Florida address.
Registering for Florida's taxes
Every business must register to report and pay Florida’s taxes. If a business has more than one location, each location must also register to report and pay taxes. A business could file a paper form using Form DR-1 or the online registration portal.
- Additional locations: For each additional business location or a registered business location that moved to a different county, you must use Form DR-1A to register the new or moved business.
- Certificate of registration: Once you register the business, the state will send you a Certificate of Registration and a Florida Annual Resale Certificate for Sale Tax (exemption certificate), along with tax return forms. You must display the certificate of registration in the business where it is visible to your customers.
- Changes to legal entity: If you convert from one entity, such as a for-profit corporation, to another, such as a limited liability company, or if the ownership of the business changes, you must re-register online or use From DR-1.
- The Annual Resale Certificate allows a business owner to purchase items, property, and services tax-free when the business resells the item, property, or service. The certificate expires each year on December 31. If the business registers electronically, it prints its own certificate. If the business is registered by paper filing, the State of Florida forwards a new certificate to the business in the middle of November.
- If the business sells or rents a tax-free product or service, it must document the tax-exempt sale by asking the consumer for a copy of its Annual Resale Certificate. For example, your business purchases Widget B wholesale to resell to the public. Another business purchases Widget B to resell to its customers. You did not pay tax since you purchased Widget B to resell, and the business purchaser also does not pay tax as it is reselling Widget B. However, you must document that tax-free sale. When your business customer resells Widget B, its customer will pay the tax.
Florida tax exemptions
The Florida law provides for several exemptions to sales tax, including certain:
- Foods, such as cereals and baked goods;
- Medical goods;
- Farm equipment, including that used in forestry;
- Water delivered through pipes for irrigation and other farm uses; and
- More.
If you are not sure as to whether goods or services are tax-exempt, even after reviewing the statute, contact a business tax attorney for advice.
Calculating Florida's sales and use tax rates
A business must calculate sales and discretionary taxes on each transaction that is taxable. You must carry the tax to the third decimal and round up. If the third decimal is higher than 4, round the tax up to the next cent.
A business could also apply the rounding to the aggregate tax amount on all items on an invoice. The new “rounding” rule took effect July 1, 2020. Point-of-sale updates should have taken place by September 30, 2021.
For example, Widget C costs $10.49. The sales tax is 6 percent, plus the discretionary tax for the county is 1 percent, for a total of 7 percent. The tax is $0.7343. Since the third digit is ‘4,’ the tax is $0.74.
However, if the price of Widget C is $10.29, the tax would be $0.7203. Since the third digit is a ‘0,’ the tax would be $0.72.
Every invoice must show the sales and discretionary sales tax separate from the cost of the items on the invoice. However, a business can combine sales tax and discretionary sales tax into one total.
For example, a customer buys a screwdriver and a box of screws. The state tax is 7 percent, and the county tax is 1 percent. The line item could include both taxes separately for each item or combine both taxes to show the consumer paid 8 percent in total taxes for each item.
The tax laws provide for different taxes for certain items, which a business can find as linked:
Filing and paying Florida's sales and use taxes
Businesses can file and pay Florida’s sales and use taxes by hand on Form DR-15, or they can use the file and pay function. A business can also purchase software from a list of approved vendors to file and pay the taxes.
- All returns and tax payments are due on the first of the month. Taxes are late after the 20th of the month unless the 20th falls on a Saturday, Sunday, federal, or state holiday. In this case, returns and payments will be considered timely if they are postmarked, hand-delivered, or electronically filed on the first business day after the 20th.
- If you file monthly, the returns are due on the first day of the month immediately following the collection month. For example, reports and payments for January are due on February 1 and are late after February 20.
- If you file quarterly, the returns are due on the first day of the month immediately following the end of the quarter. For example, reports and payments for the first quarter, which is January through March, are due on April 1 and are late on April 20.
- If you file and pay electronically, the cut-off time is 5:00 p.m. eastern time on the day before the due date of the 20th; otherwise, the business could incur penalties and interest. Additionally, if a business pays electronically and on time, the business receives a collection allowance of 2.5 percent of the first $1,200 due. This amount cannot exceed $30.
- Late penalties are 10 percent of the amount owed. However, the minimum late penalty is $50, even if the business had no taxable sales. Finally, a business that paid $20,000 or more in taxes, including local sales tax, during the last fiscal year must pay electronically throughout the next calendar year.
Most new businesses are set up to file and pay sales and use tax quarterly. Depending on the amount of tax you collect, you may qualify for a different filing frequency. Base the filing frequency on the amount of goods and services you sold in the previous year, or estimate if this is your first year of business.
Florida also places filing frequency limits on taxpayer businesses.
- If the total sales tax annual amount is over $1,000, a business must report and pay monthly.
- If the annual amount is $501 to $1,000, the business can pay quarterly.
- If the annual amount is $101 to $500, the business can file reports and pay semiannually.
- Finally, if the business owes $100 or less in total sales tax, it can file and pay annually.
Florida's tax holiday for sales tax exemption
The sales tax rate on clothing is 6 percent plus the county’s discretionary tax. However, Florida does have a tax holiday each year. During the tax holiday, clothing, certain accessories, and footwear under $60 are not taxed. Additionally, school supplies costing less than $15 and the first $1,000 of personal computers and some computer accessories are tax-free.
Items that do not qualify for the tax holiday include:
- Any item of clothing that costs more than $60;
- Computers and computer accessories purchased for commercial purposes;
- School supplies that cost more than $15;
- Non-exempt books;
- Repairs and alterations of clothing and accessories;
- Any eligible items sold in an entertainment complex, theme park, airport, or public lodging establishment; and
- Rentals and leases of eligible items.
FAQs
The Florida sales tax rate is 6 percent for 2022, plus any discretionary tax that a county or other local jurisdiction might charge.
The base rate has not increased to 7 percent. However, if a business is based in a county that charges a discretionary tax, the rate could be 7 percent. The last change to Florida’s base tax rate was on February 1, 1988, when it increased from 5 percent to 6 percent.
