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How does Avalara handle the FL Discretionary Surtax?

Overview

You want to know how AvaTax calculates the Florida Discretionary Surtax (county tax) cap, where county tax applies to only the first $5000 of a sale.

Environment

AvaTax

Resolution

  • By default, AvaTax calculates the Florida Discretionary Surtax tax at the item level and not the invoice level, as this is the general rule when calculating this tax for Florida.
    • For example: You sell 2,000 1 pound bags of rice for $3 each. Invoice shows Qty of 2,000  at $3 each. Although the total is $6000, this invoice does not have a single item valued over $5,000, so the Florida Discretionary Surtax cap isn't applied.  The full $6,000 is used in calculating the surtax.
    • You sell a pallet of 2,000 pounds of rice for $6,000. Invoice shows Qty of 1 at $6,000 each.  Even if the palette may be divided into smaller sub-units, it is still sold as a single unit.  This invoice has a single item valued over $5,000,  so the Florida Discretionary Surtax cap is applied and that the county tax rate is only applied to the first $5,000 of the line item.
  • The law in Florida states that, in order to apply to an entire invoice, the items must be part of a whole.
    • For example, an invoice containing the individual parts of a roof itemized out separately still hits the surtax limit.
  • The general rule of thumb if you are questioning this item vs. invoice policy is to verify if the state believes the invoice in question should be taxed at the item or invoice level.
    • Avalara always suggests to call the state to get a determination. For more information, please see the Florida Department of Revenue.
    • If needed, map certain AvaTax tax codes to an item to make Florida Discretionary Surtax calculate at the invoice level. 
    • Avalara Custom Florida Tax Cap is a rule import you can use to create this tax code.
      • Open the spreadsheet and change the TAXCODE (field K) to the tax code you want to use.
  •  If you update the system, so that we apply the Florida Discretionary Surtax to the entire invoice value, both of the example invoices could have the Florida Discretionary Surtax applied and you could see the county tax rate applied to the first $5,000 of the value.
  • The surtax cap applies to Tangible Personal Property, so you will not typically see the surtax cap applied to services, etc. A full explanation is available at the Florida Department of Revenue.