Don't Tax Me, bro'....BZZT!

As someone who spent the formative part of his career in New Hampshire, a fairly Libertarian state, I devoted a lot of trial and error to my business dealings with sales tax after moving to Florida. The Granite State has no such tax, or income tax for that matter, so I guess I considered the whole thing kind of silly. Our highly skilled and efficient bookkeeper, Jennifer Walker, who has survived a full fledged sales tax audit, thinks otherwise and I have learned to defer to her wisdom.

Herewith is my best effort at saving you from the trouble I caused myself (and Jennifer). It is not to be considered professional advice, but a laypersons discussion of issues we run into here at the print shop. Before taking any action be sure to consult an actual tax professional.

Florida sales tax (plus local county kicker) must be collected on the sale of any printing project unless the buyer has furnished, in advance of the sale, one of two Florida Department of Revenue certificates. (This assumes the job is produced by a Florida company for delivery within the state...if the entirety of the product ships outside the state no tax is due.)

DR-14 Consumer's Certificate of Exemption is the proof that must be furnished by an entity who does not have to pay Florida sales tax by virtue of their non-profit or governmental status. This group would include schools, churches, government offices, and most charities. The DR-14 should not be confused with the Federal IRS form which defines their status as "non-profit" and exempt from Federal income tax...that is a separate issue entirely and will not suffice for FL DOR purposes.

The most common pitfalls regarding this exemption are 1) that the certificate has not been applied for and granted, or 2) the tax exempt entity is the end user, but not the payer of the printer's invoice. The latter situation arises when the job is ordered and paid for by a third party, such as an ad agency, who may not utilize the tax exempt status of the end user in their intermediate transaction with the printer. We worked on a job recently where the agency pre-billed a non-profit for printing without including sales tax, but was then liable for it in their transaction with the shop. The 7.5% tax ate up half their mark-up. The solution to this problem moves us to the next form.

DR-13 Florida Annual Resale Certificate for Sales Tax is proof of a buyer's eligibility to make purchases exempt from Florida sales tax when the goods will be re-sold to a subsequent end user, with appropriate tax to be paid on that final transaction. In this scenario the buyer becomes a seller and is then responsible for determination of the end-user's tax status and collecting any tax due for submission to the state. The resale certificate requires a fair amount of record keeping and reporting, but is the most legitimate way of doing business if you routinely act as a printing "broker".

The most common pitfalls with resale are 1) the certificate must be presented to the vendor prior to the first transaction and then resubmitted each year they continue to do business, 2) the "Presented To" and "Presented By" section at the bottom must be filled out, and 3) the goods must actually be for resale...you can't buy your own business cards this way. It's important to communicate to the print shop whether the job is for resale or not.

To sum up: Be prepared to pay sales tax on any purchase of printing produced and delivered within Florida unless one of the two certificates has been presented, and further that the entity named on the check or credit card tendered for payment MUST match both the name on the invoice and the name on the certificate of exemption. If all three don't match the exemption can't be honored because of the potential for fraud.

It's the customer's responsibility determine the tax status of the job, and to communicate with the shop if an exemption is appropriate so the transaction can be processed appropriately. Failure to do so leads to unnecessary paperwork and a "retrospective" approach which may viewed in a dim light by the Florida DOR in the event of an audit. This is no joke...just ask Jennifer, who spent several days with DOR auditors some years ago and learned many lessons as a result.

On a final note, before you consider moving there to escape sales and income taxes, remember this; when you open your New Hampshire property tax bill, or register a car up there, it's best to be seated. The money has to come from somewhere.

It's also a little snowy just now...

Hoping 2010 is off to a good start,

Hugh Butler
Your friend in the printing business