The Florida Department of Revenue Seeks Legislation to Use Businesses’ Credit Card Data Against Them

The Florida Department of Revenue is actively pursuing legislation to mandate payment settlement companies, such as banks and credit card companies, to annually report credit card and third-party sales transactions for all Florida businesses. The Department will then use this data to analyze any business’s tax collection, and to audit or levy assessments if the Department believes the collections are too low. If this legislation is approved, it will likely significantly increase audits and assessments on Florida companies.

The legislative proposal may be found beginning on page 321 of this meeting notice for the House Ways & Means Committee on February 11, 2020.

Federal Section 6050W & Form 1099-K:

Section 6050W of the Internal Revenue Code requires certain entities to file a return each year providing information about payments made by credit card or third party merchants. These entities include banks, credit card companies or payment platforms, like PayPal.

The federal return is Form 1099-K, and is required to be filed for each calendar year on or before the last day of February of the year following the transactions.

Florida Department of Revenue’s Proposal:

The Department’s proposal would mandate that all entities filing the federal form, must file a duplicate electronic form with the Florida Department of Revenue within 15 days from filing the federal return.[1] The Florida informational return must include participating payees (businesses), payees with a Florida state address or Florida state taxpayers.[2] The informational return would include the aggregate annual amount of payments for each Florida business.

The Department seeks this credit card and payment processing data to make it easier to audit those businesses for potential underpayments. These audit “campaigns” will result not only in more audits, but any resulting assessments will likely be based on estimated industry data requiring each individual businesses to prove every penny of actual collection and remittance. The result will likely be very large sales tax, corporate income tax and communications services tax proposed assessments using this data.

A few states with generally aggressive tax reporting requirements are already requiring duplicates of the federal forms to be filed, including: Alabama, Tennessee, North Carolina and New York.

If you have concerns regarding this legislation, please contact your Florida legislator, the Dean Mead Government Relations Team, or the Dean Mead State and Local Tax Team.

[1] Entities that fail to file the form in Florida would be subject to a new $1,000/month penalty, not to exceed $10,000/year.

[2] The legislation provides no guidance how a payment settlement company should determine that its payees are registered Florida taxpayers.