Reflections on a Vetoed Bill.

• Date: 01 September 2022
• Author: Moffa, Jeanette

On June 24, Gov. Ron De-Santis vetoed Senate Bill 1382, preventing the Department of Revenue from moving forward with sweeping changes that would have expanded the department's authority while simultaneously tying taxpayers' (and tax practitioners') hands when abuses of authority occur. Months later, the bill that came and went in six short months still haunts state and local tax practitioners. Will the Department of Revenue try to pass a similar bill again? It seems likely when less than 10% of the legislature voted against S.B. 1382. With that type of success in the legislature, and nothing short of the right to operate a business at stake, the implications of this bill are still worth careful consideration today.

Tipping the Scales: Audit Procedure

One of the primary problems S.B. 1382 attempted to address was the failure of taxpayers to produce records. Noncooperative taxpayers were primarily targeted in two ways: 1) direct punishment for the failure to supply records during audit; and 2) presumptions that department estimates of tax due are correct. Additionally, the bill loosened restrictions on the statute of limitations, allowing a tolling of F.S. [section]95.091(3) and [section]215.26(2), in various cases.

Cooperation or Punishment: Suspension of Licenses

Senate Bill 1382 expanded the department's authority to suspend the dealer licenses of businesses that are uncooperative during the audit process. Currently, the department generally handles the audits of uncooperative taxpayers by estimating tax due based on the "best available information." (1) Taxpayers without records may have to pay top dollar, as these estimated assessments can be high, but businesses can continue operating as normal during and after the audit.

However, in addition to estimating tax due, S.B. 1382 would have allowed the department to suspend resale certificates. Failure to comply would result in the revocation of the resale certificate and the triggering of proposed F.S. [section]212.13(2)(b)3, which added:

If a dealer's resale certificate is suspended under this subsection in the course of the dealer's first audit before the department for sales and use tax, the failure of a dealer to comply is deemed sufficient cause under s. 561.29(1)(a) for the division [Department of Business & Professional Regulation] to suspend the dealer's license and the department shall promptly notify the division and the dealer of such failure for further appropriate action by the division. For those in the heavily audited alcohol and tobacco or convenience store industries, the revocation of licenses further extended to those from the Department of Business and Professional Regulation. Not only would businesses no longer be able to purchase inventory tax exempt for resale, but convenience stores would not be able to purchase or sell alcohol or tobacco. The inability to purchase alcohol and tobacco products would shutter a convenience store almost immediately. This would all occur before an audit was finalized under the proposed legislation.

Preventing a business from operating before an audit has concluded is a severe consequence for the failure to produce records, particularly when the Department of Revenue may rely on third-party records from other governmental agencies to estimate tax due. However, not only were businesses to face this type of punishment for failure to produce records, but they were given a limited time frame in which to comply before license revocation was initiated. Senate Bill 1382 proposed to update F.S. [section]212.13(2)(b)2 as follows:

Dealers shall maintain records of all monthly sales and all monthly purchases of alcoholic beverages and produce such records for inspection by the department. During the course of an audit, if the department has made a formal demand for such records and a dealer has failed to comply with such a demand, the department may issue a written request for such records to the dealer, allowing the dealer an additional 20 days to provide the requested records or show reasonable cause why the records cannot be produced. If the dealer fails to produce the requested records or show reasonable cause why the records cannot be produced, the department may issue a notice of intent to suspend the dealer's resale certificate. The dealer shall then have 20 days to file a petition with the department challenging the proposed action pursuant to s. 120.569. If the dealer fails to timely file a petition or the department prevails in a proceeding...