Sales Tax Audit Help – Florida Department of Revenue Audit Representation – West Palm
Florida Sales & Use Tax – Manufacturing Industry
If you are going through a sales tax audit contact us today and speak to a tax attorney, CPA, or former state of Florida sales tax agent who could limit your exposure.
We are A+ rated by the Better Business Bureau and have been in practice in the state of Florida since 1982.
 

Florida passes record $74.5 billion spending budget for fiscal year 2013-2014

 
Florida passes record $74.5 billion spending budget for fiscal year 2013-2014 that will be more than $4 billion higher than the fiscal year 2012-2013 spending.
Gov. Rick Scott’s office announced plans to discuss cutting taxes and fees with Florida residents. Scott announced he proposes to cut taxes by $500 million for the next fiscal year, but early on in the budget cycle, hasn’t released details about his plans.
Dubbed the “it’s your money’s tour”, Gov. Scott will conduct meetings in West Palm Beach, Fort Lauderdale, Jacksonville, Tampa and Orlando.
With spending increases and cutting taxes there is only one way to balance the budget – Looking for Low Hanging Fruit through an Audit of Your Business.
The manufacturing industry, a major source of audit assessments will see an increase in audit activity to generate funds to cover the increased spending budget and the reduced taxes and fees.
We are a Florida tax firm comprised of tax attorneys, CPAs and a former Florida sales tax auditor that deals with Florida Sales Tax Audits and can help your company during a Sales tax audit.
Being a former State Sales Tax Agent I will explain to you below some of the sales tax audit techniques used by the state of Florida Department of revenue

 

Florida Sales Tax Audit Manufacturing Industry

Manufacturers Methods of Operation and Accounting Systems
The auditor will focus attention to the method of operation and accounting systems used by a manufacturing concern.
Manufacturing activities are performed for various purposes including, but not limited to:
• the manufacturer of a product for resale, either as a finished product or as a product that is incorporated into a final product
• the manufacture of a product for the manufacturers will use in the manufacturing process
• the fabrication of a product for use by the manufacturer perform a contract to prove real property
• the manufacture of a product for research and development purposes; either for the design of a new product or for new uses of an existing product.
 

• The auditor will become familiar with your accounting system and an experienced auditor will know that there’s nothing simple about the accounting system within a manufacturing company.

• The auditor knows that they will have to determine whether the accounting system is reliable when evaluating internal controls.

 
The various parts of the manufacturing process that affect the accounting system are discussed as follows:
• raw materials, also called direct materials
• labor
• indirect costs
• overhead
• inventories
• other sales and purchases
 

Sales for Resale

Manufactures may produce products for resale that includes finished products ready for sale by a purchaser, either a wholesaler or retailer to the end consumer or they may produce products that are purchased by other manufacturers for the incorporation into a final product sales of tangible personal property by a manufacturer for purposes of resale are exempt from sales tax, provided the transactions are conducted in strict compliance with section212.07 and Section 212.18, F.S. and Rule 12A-1.039, F.A.C. if a manufacturer fails to conduct such transactions in compliance with the referenced authorities he or she will be liable for payment of the tax that was erroneously exempted as well as the applicable penalties and interest.
 

Sales to Contractors

 
Sales of tangible personal property by a manufacturer to a real property contract are generally subject to state tax. While the sale of real property is not subject to sales or use tax, tangible personal property purchased by a contractor for conversion into real property is subject to tax.
Taxation is appropriate where the contractor is considered the end-user of the tangible personal property purchased for performance of such contracts. Rule 12A-1.051, F.A.C., discusses in detail sales to or by contractors as well as the types of contracts that they may use.
 

Sales to Not-For-Profit, Governmental and Other Exempt Entities

 
Occasionally, a manufacturer will sell tangible personal property to a customer claiming tax exemption as a not for profit organization or governmental entity.
The most common not-for-profit entities are those that fall under Section 501(c) (3), IRC, which include religious, educational and charitable tensions.
Section 212.08(7)(p), F.S. provides a general tax exemption for 501(c)(3) organizations, while Sections 212.08(7)(k),(1),(m)(n)(o) and (p), F.S. provide specific tax exemption for religious, educational and charitable institutions.

Occasional and Isolated Sales

A manufacturer may occasionally sell or transfer tangible personal property that is not within its normal course of business.
An isolated sale or transaction occurs when the manufacture distributes or transfers such tangible personal property in exchange for the surrender of a proportionate interest in an entity or conversely for purposes of obtaining a proportionate interest in an entity.
Provided such transactions meet the requirements of Rule 12A-1.037, F.A.C., they are exempt from tax as isolated or occasional sales or transaction.
In order for manufacturer’s sale to qualify as an exempt occasional sale, the tangible personal property being sold cannot be an item manufactured by the manufacturer for sale or purchased for resale.
Additionally, any applicable tax must have been paid and such sales cannot have occurred more than two times within a 12 month period
 

Purchases

Fixed Assets
For purposes of day to day operations, manufacturers invest heavily in fixed assets by either leasing or purchasing these assets. Regardless of the method, tax is due on the transactions for the fixed assets unless a specific exemption applies (See Section 212.05, F.S.),.
Items Fabricated for a Manufacturer’s Own Use
A manufacturer may fabricate tangible personal property for its own use in the manufacturing process, including tools, dies, molds, patterns or other items use to produce the final product. Pursuant to Section 212.06(1)(b), F.S., the manufacturer is responsible for paying tax on the cost price of these items which are not sold to consumers.
If the manufacturer sells these items, as required by Section 212.05, F.S., sales tax must be collected on the selling price.
Fabricated cost includes:
• direct materials and related freight and handling
• direct labor costs including payroll burden
• production service costs
Rule 12A-1.043, F.A.C. discusses in detail fabrication costs and other costs related to the manufacturing process.
 

Items Consumed in the Manufacturing Process

In the course of manufacturing products for sale, manufacturers can sue other items of tangible personal property that may or may not become and ingredient or component of the final product.
Consumption of these items by the manufacturer will generally result in the manufacturer being liable for use tax as the end user of the tangible personal property consumed.
Rule 12A-1.063, F.A.C., discusses the tax consequences of items consumed in a manufacturing process and provides examples of tangible personal property often consumed in a manufacturing process that may or may not be subject to a manufacturer’s use tax.

Sales Tax Audit Help Florida – Manufacturing Industry – Florida – Jacksonville, Tampa, Orlando, Miami