Sales Tax Limits – Compliance Q&A

Sales and use tax compliance can trigger a lot of questions. For example:

What is meant by the Florida sales tax limit of $5,000? What does it refer to?

Sales and use tax is imposed at the state level for all states with a general sales tax (excludes Alaska, Delaware, Montana, New Hampshire, and Oregon). Sales and use tax is imposed at the local level in 38 states (including Alaska and Montana). Local tax laws vary by state but local sales and use taxes are typically imposed at the county or municipal level. They may also be imposed in special jurisdictions — for example, a community improvement district or transportation development district.

In Florida, local tax may be imposed at the county level in the form of a Local Option County Tax, also called the Discretionary Sales Surtax. Most but not all Florida counties impose the surtax, which applies to most transactions subject to the state sales and use tax. For a current list of counties that impose the surtax, see Form DR-15DSS.

Transactions are subject to the surtax when they occur in, or are delivered into, a county that imposes a surtax. Additional information is available at the Florida Department of Revenue.

Limits

Localities may choose to limit the amount of surtax per transaction, and a majority of counties do so. In such cases, the surtax applies to the first $5,000 of the sales amount on the sale, lease, rental or license to use any single item of tangible personal property (TPP).

The single item designation can apply to multiple items only if the items are typically sold in bulk or are part of a component set. However, items deemed to be a single item for the cap purposes may be invoiced or even shipped separately.

The $5,000 cap does not apply to rentals of real property, transient rentals, or services. It also does not apply to the state sales tax. In other words, on a sale of TPP of $10,000, Florida state sales tax would apply to the entire $10,000 but (if the county has a limit) local discretionary surtax would apply only to the first $5,000.

Tax caps

Florida is not the only state with sales tax limits, or caps. Some states put a limit on the amount of tax imposed on specific items. For example, the maximum tax on watercraft in Virginia is $2,000, the maximum sales tax paid on motor vehicles in South Carolina is $300, and the maximum tax on qualifying aircraft and jet engines is $2,500 in North Carolina.

Have a sales tax question of your own? Ask it here.