Fla. Admin. Code R. 12A-19.070

Current through Reg. 50, No. 235-239, December 10, 2024

Section 12A-19.070 - Assignment of Service Addresses to Local Taxing Jurisdictions; Liability for Errors; Avoidance of Liability Through Use of Specified Methods; Reduction in Collection Allowance for Failure to Use Specified Methods

(1)

(a) Dealers of communications services that are required to collect local communications services taxes must assign each customer service address to a specific local taxing jurisdiction for purposes of determining the appropriate local communications services tax rate to be applied to sales made to that address. Local communications services taxes must be collected and remitted for each service address in accordance with the service address assignments in the effective communications services tax Address/Jurisdiction Database, which is the official electronic database maintained by the Department that is posted 90 days prior to its adoption and becomes effective every January 1 and July 1, as discussed in Rule 12A-19.071, F.A.C.

(b)

1. In determining the liability for any additional local communications services taxes, interest, and penalties of a dealer who does not use a method as described in paragraph (2)(a) and has failed to assign one or more service addresses to the correct local taxing jurisdiction, the Department will take into account all underpayments and overpayments of the local tax.

2. The dealer will be held liable for the net aggregate underpayment of tax and associated interest and penalties for incorrectly assigning one or more service addresses when:

a. The dealer does not use or employ one or more of the methodologies described in paragraph (2)(a) for assigning service addresses to local taxing jurisdictions;

b. The Department determines that there are misallocations of the local communications services taxes collected by the dealer between local taxing jurisdictions during the tax period(s) examined; and,

c. The dealer's assignment of service addresses to local taxing jurisdictions results in a combined net aggregate underpayment of local communications services tax during the tax period(s) examined.

3. In addition, a specific penalty of 10 percent of any tax collected but reported to an incorrect jurisdiction as a result of an incorrect address assignment, not to exceed $10,000 per return, will be imposed on any dealer that does not use a database described in paragraph (2)(a).

(c) When a dealer fails to respond to a contact by the Department to the dealer's designated managerial representative regarding the completeness or accuracy of the dealer's return, or when a dealer's records are determined to be inadequate for purposes of determining whether the dealer properly allocated tax to or between local governments, the Department may use the best information available to determine the proper allocation or reallocation. In such circumstances, the Department shall seek the agreement of the affected local governments.

(2)

(a) A dealer will not be liable for any additional local communications services taxes, interest, or penalty due solely because of an error in assigning a service address to a local taxing jurisdiction if the dealer exercised due diligence in employing one or more of the following methodologies in assigning that service address:

1. The Address/Jurisdiction Database;

2. A database that has been certified by the Department, as provided in Rule 12A-19.072, F.A.C.;

3. An enhanced zip code method, as discussed in Rule 12A-19.073, F.A.C.; or

4. A database that, upon audit by the Department, is determined to have met the accuracy rate criterion required for certification under Rule 12A-19.072, F.A.C.

(b) A dealer must timely notify the Department of the method or methods to be used in assigning service addresses. Upon initial registration with the Department for communications services tax purposes, dealers must provide that information when completing Form DR-1, Florida Business Tax Application (incorporated by reference in Rule 12A-1.097, F.A.C.). If a dealer changes the method or methods to be used, the dealer must notify the Department of the change in method or methods and of the effective date of the change on Form DR-700020, Notification of Method Employed to Determine Taxing Jurisdiction (Communications Services Tax) (incorporated by reference in Rule 12A-19.100, F.A.C.).

(c) Due Diligence. In order to avoid liability for any additional local communications services tax, penalty, and interest resulting from errors in the assignment of customer service addresses to local taxing jurisdictions under paragraph (a), a dealer must exercise due diligence in employing one or more of the described methodologies. The dealer must exercise the care and attention that is expected from and ordinarily exercised by a reasonable and prudent person, under the circumstances, when ascertaining the correct local taxing jurisdiction to which the purchaser's service address should be assigned.

1. A dealer is exercising due diligence if that dealer expends reasonable resources to accurately and reliably implement one or more of the methods described in paragraph (a) and maintains adequate internal controls in the assignment of service addresses.

a. Internal controls in the assignment of service addresses are adequate if the dealer has in place and consistently follows procedures to obtain and incorporate accurate updates to its database at least once every six months and corrects errors in assignments of service addresses within 120 days from discovering or being notified of such errors by any person. A dealer's internal controls must ensure that procedures are in place to prevent the recurrence of errors that the dealer was previously notified of and has previously corrected. A dealer may choose to update its database more frequently than once every six months, as long as the dealer has in place and consistently follows procedures to obtain and incorporate accurate updates. The file containing approved pending address additions and the file containing approved pending address deletions described in paragraph (1)(b) of Rule 12A-19.071, F.A.C., that are maintained by the Department and available to dealers and local government users may be used by the dealer to update the dealer's database more frequently than the minimum of at least once every six months. However, the availability of the pending files on the Department's website does not constitute notice to a dealer of errors in the dealer's assignments of service addresses contained in the pending files.

b. Internal controls in the assignment of service addresses are not adequate if the procedures in place to prevent the recurrence of previously corrected errors are not used to prevent the recurrence of incorrect assignments. Once notified by any person of an error, the dealer must ensure that the corrected information is preserved in its database. In the event that an error recurs, the dealer will be considered to have exercised due diligence as required for the protection described in paragraph (a) only if the recurrence occurs even though the dealer did in fact exercise the care and attention that is expected from, and ordinarily exercised by, a reasonable and prudent person under the circumstances, with regard to the recurrence of the error.

2. A communications services dealer must maintain records to establish that the dealer has exercised due diligence for the period of time during which the Department is authorized to assess taxes on sales of communications services by that dealer. Examples of such records include instructions or procedures provided to employees, contracts and correspondence with third-party vendors or service providers concerning the acquisition or maintenance of data, documentation establishing that the data was consistently updated at least once every six months, records concerning customer or local taxing jurisdiction objections to the assignment of service addresses and responses to those objections, records of changes made to the assignment of service addresses and when the changes were made, and any other records that pertain to the acquisition, maintenance, and revision of the data upon which service address assignments are based. For purposes of documenting that the dealer corrected errors within 120 days of notice or discovery, dealers should maintain documentation that establishes that the amount of time between the initial notification or discovery of the error and correction of the error did not exceed 120 days. Keeping records of each step within the process or procedures used to correct the error is not necessary; however, to establish due diligence, the dealer must be able to demonstrate that the overall time required to correct errors did not exceed 120 days. A dealer will not be entitled to the protection described in paragraph (a) during any period that the dealer does not have records establishing that the dealer exercised due diligence for that period.

3. If a communications services dealer uses a certified database provided by a third-party vendor, the communications services dealer must exercise due diligence in its own conduct in using the database. A dealer using a certified database provided by a third-party vendor is exercising due diligence if that dealer expends reasonable resources to accurately and reliably implement the third-party vendor's certified database and maintains adequate internal controls in the assignment of service addresses. As part of its due diligence, the dealer must comply with the vendor's instructions or directions in the dealer's use of the certified database. Further, the dealer has a duty to take reasonable steps to ascertain that the vendor maintains the database so as to ensure continuing qualification for certification. For example, if a vendor failed to provide an update to the database when scheduled to do so, a reasonable and prudent dealer relying on that vendor's database would contact the vendor and make inquiry. A dealer that uses a third-party vendor's certified database must ensure that when the dealer discovers or is notified of errors in assignments of service addresses, the errors are corrected within 120 days from discovering or being notified of such errors and that procedures are in place to ensure that the error is not repeated when a subsequent update is obtained from the vendor. Nothing in this subparagraph requires a dealer using a certified database to update its database more than two (2) times a year, so long as each update incorporates all changes received from the vendor since the prior update.

(d) If a communications services dealer uses multiple databases or methodologies, such dealer is protected from liability for any additional local communications services tax, interest, and penalty only as to service addresses assigned as specified in paragraph (a) of this subsection. Such a dealer is liable as provided in subsection (1) for any additional local communications services taxes, interest, and penalties in regard to erroneous jurisdictional assignments for any service address not assigned by a methodology described in paragraph (a). A dealer that uses multiple databases must maintain documents demonstrating that a service address has been assigned employing a methodology described in paragraph (a) in order to be held harmless for any additional local communications services taxes resulting from erroneous assignment of that service address.

(e)

1. Employing one or more of the methods described in paragraph (a) protects a dealer from liability for any additional local communications services taxes and related interest and penalties that would otherwise have been due to a local taxing jurisdiction. All requests by a purchaser for a refund or credit must comply with the provisions of Section 202.23, F.S., which controls a purchaser's entitlement to a refund or credit. A dealer's employment of one or more of the methods described in paragraph (a) does not deprive a purchaser of the right to a refund or credit of overpayment of local communications services taxes resulting from an erroneous assignment of that customer's service address to a local taxing jurisdiction with a higher rate than that in effect in the correct local taxing jurisdiction. If a purchaser complies with the procedural requirements of Section 202.23, F.S., and establishes that the dealer has incorrectly assigned the purchaser's service address and that an overpayment of local communications services tax has resulted, the dealer must refund or credit the amount of the overpayment to the purchaser. Upon making such refund or credit, the dealer would be entitled to an equal refund or credit from the Department upon proper reporting to the Department of the amount and jurisdictions involved. Dealers are not entitled to retain or take credits for taxes collected from any customers assigned to an incorrect local taxing jurisdiction in excess of the taxes due to the correct local taxing jurisdiction unless a refund or credit has been provided to the customer.

2. For purposes of this paragraph, a purchaser that requests a refund or credit from the provider in accordance with the provisions of Section 202.23, F.S., and that establishes that a dealer has assigned the purchaser's service address to a different local taxing jurisdiction from the one to which that address was assigned in the effective Address/Jurisdiction Database as of the date of the sale has established a presumption that the dealer's assignment was erroneous, because the effective Address/Jurisdiction Database is conclusive for purposes of the communications services taxes. If a dealer believes that the assignment of the purchaser's address in the Department's database is incorrect, the dealer should refer the claim for a refund or credit to the Department for a determination in accordance with the procedures in Section 202.23, F.S. A dealer who assigned a purchaser's service address in accordance with the effective Address/Jurisdiction Database at the time of the sale on which the purchaser asserts that tax was overpaid should refer the purchaser to the Department in order for the purchaser to object to the Address/Jurisdiction Database as a substantially affected person. The dealer is not required to make a refund or credit to the purchaser unless the Department has subsequently revised the assignment of that address to correct an error, such revision was to the effective Address/Jurisdiction Database that became effective prior to the date of the sale involved in the claim as provided in paragraph (3)(g) of Rule 12A-19.071, F.A.C., and the purchaser has requested a refund or credit in the manner required by Section 202.23, F.S. The provisions of this rule are subordinate to Section 202.23, F.S., and are intended to provide additional information regarding the effect of incorrect service address assignments by dealers who are employing a method identified in paragraph (2)(a).

(3) Collection Allowance.

(a) Any communications services dealer that employs one or more of the methodologies described in subparagraph (2)(a)1., (2)(a)2. or (2)(a)3. for assigning service addresses to local taxing jurisdictions is entitled to a collection allowance of .75 percent on taxes collected on service addresses assigned using the described methodologies and will not be denied the collection allowance solely because the dealer assigned one or more addresses to an incorrect local taxing jurisdiction. Any communications services dealer that employs any methodology that is not described in subparagraph (2)(a)1., (2)(a)2. or (2)(a)3. for assigning service addresses to local taxing jurisdictions is entitled to a collection allowance of .25 percent on taxes collected on service addresses assigned using such other methodology. A communications services dealer who is not liable for an assessment of additional local communications services taxes, interest, and penalties by reason of employing a database that is found upon audit to meet the accuracy criteria for certification, as described in subparagraph (2)(a)4., is entitled to a collection allowance of .25 percent until such time as an application for certification of the database is made and approved.

(b) A communications services dealer must maintain records to demonstrate that a .75 percent collection allowance was claimed only in regard to taxes that were collected for service addresses that were assigned employing one or more of the methodologies that qualify for that allowance. If a communications services dealer's records do not clearly establish that the assignment of the service addresses was made employing one or more of the methodologies described in subparagraph (2)(a)1., (2)(a)2. or (2)(a)3., the dealer shall be entitled to only a .25 percent collection allowance on sales made to such service addresses.

(c) A communications services dealer must also timely file its return, remit all tax reported, and meet all the other requirements of Section 202.28, F.S., in order to be entitled to any collection allowance. This rule deals only with determining the amount of collection allowance available to a dealer who otherwise qualifies to receive the allowance. It does not create any separate entitlement to an allowance other than that set forth in Section 202.28, F.S.

Fla. Admin. Code Ann. R. 12A-19.070

Rulemaking Authority 202.26(3)(b), (f), (g), 202.28(1) FS. Law Implemented 202.22(1), (4), (5), (6), (8), 202.23, 202.28, 202.34(1)(a), 202.35(3) FS.

New 11-14-05, Amended 12-20-07, 1-17-13, Amended by Florida Register Volume 46, Number 048, March 10, 2020 effective 3/25/2020.

New 11-14-05, Amended 12-20-07, 1-17-13, 3-25-20.