Everything You Need to Know About Florida State Tax

Florida state tax rates are among the lowest in the United States, with a median tax burden of 9.10%—below the national median state-local tax burden of 11.6%. One reason why Florida has such a low tax burden is that there is no personal income tax, no estate tax, and no intangibles tax. This is good news for anyone thinking of retiring in Florida—you won't pay tax on your social security or investments, and your kids won't pay an inheritance tax.

While Floridians don't pay income taxes, they still pay federal income taxes and FICA payments toward social security and Medicare. The IRS also charges a self-employment tax to make sure freelancers, contractors, and other self-employed citizens will be prepared once they reach retirement age. If you have a small business in Florida, FL small business bookkeeping services are essential to make sure you fulfill your obligations and don’t pay more tax than you should.

State Taxes in Florida

If you don't pay personal income taxes, how does the state of Florida pay for roads, schools, government facilities, and hospitals? In reality, there are several ways in which Florida state taxes are charged. Sales and use tax are two of the most important, but there are several other kinds of taxes as well.

Sales Tax

Florida sales tax is payable on most goods and services except for exempt groceries and medicines. The Florida sales tax rate is 6% for everything except:

• Amusement machine receipts—taxed at 4%

• Lease or commercial real property license—taxed at 5.5%

• Electricity—taxed at 6.95%

In addition to the 6%, customers pay local taxes at an average tax rate of 1.01% and a maximum rate of 1.5% for 2022. So, depending on where you live, you can expect to pay a total sales tax rate of 7.5% for most purchases.

For customers, sales tax is added automatically to your purchases, and there's not much else you need to worry about. However, for businesses, you need to make sure you charge and pay the correct Florida sales tax rates in case you are selected for a Florida sales tax audit.

Use Tax

Use tax is a bit like sales tax, except that it is charged on goods that are purchased outside of Florida and brought into the state. Use tax rates are the same as sales tax rates for a use tax of 6%. You will need to pay a use tax on goods purchased outside of Florida:

• If no tax was charged at the time of purchase

• If tax was charged at a rate lower than 6% at the time of purchase

• For vehicles that are kept in Florida for 6 months or longer for which you paid less than 6% in sales tax at the point of sale

As the Florida Department of Revenue depends on individuals and businesses to declare their out-of-state purchases and calculate their use tax obligations themselves, this is the most difficult kind of tax for the state to collect. However, if you bring in an eligible purchase for which use tax is owed, you are still liable for this tax plus penalties if you are audited by the state.

Florida Property Taxes

Property tax is not charged at the state level in Florida. However, each county sets a property tax at a millage rate (per $1,000 of property value) based on the market value of your property as of 1 January of the current tax year. For most people, the annual Florida property tax bill comes to around $1,000-$2,500 depending on the appraised and assessed values of the property and the county millage rate.

Owner-occupiers, senior citizens, active-service military, veterans, widows and widowers, first responders, and people with disabilities are often eligible for exemptions and discounts on the Florida real property tax. An accountant in Jacksonville or your nearest city in Florida will be able to explain any exemptions that might be available to you.

Florida Excise Taxes

Excise taxes in Florida are attached to certain luxury items like gas, cigarettes, cell phones, and alcohol. On average, Florida residents spend $615 in excise taxes each year.

Gas Tax

Gas sales in Florida are subject to a gas tax or fuel tax, which costs 4.00 cents per gallon. While the ultimate consumer pays the gas tax, it is pre-collected by the company that sells that fuel and paid in monthly installments. The fuel tax includes an inspection fee, state tax, local taxes, and a pollutants tax.

Cigarette Tax

The Florida cigarette tax rate is $1.339 for each purchase of a 20-pack of cigarettes. This excise tax is also paid by the end consumer although it's the merchant who is responsible for the tax.

Cell Phone Tax

Cell phone plans in Florida come with an average excise tax of $16.57 per phone service plan. This amount could be listed under "Other" or "Misc. taxes and Fees" on your monthly cell phone bill.

Car Tax

People who buy a car or motorcycle in Florida pay excise fees in the form of a registration fee and a title fee. These taxes must be paid directly to the Florida Department of Transportation, after which the new owner will be given registration and title papers as evidence that the fees were paid.

Alcohol Tax

The state of Florida charges an excise tax on beer, wine, and liquor. The 2022 tax rates for alcoholic beverages are:

• $0.48 per gallon for beer

• $2.25 per gallon of wine

• $6.50 per gallon for liquor

The alcohol excise taxes are already included in the purchase price for all alcoholic beverages sold in Florida.

Florida Corporate Income Tax

Corporations that conduct business or generate income in Florida are subject to corporate income taxes set at 5.5% from January 1, 2022. Some tax credits are available for paying salaries in Florida and making specific kinds of investments in Florida.

Businesses that need to file a corporate income tax return include:

• All corporations (including those that are exempt from tax)

• Banks and savings associations

• Associations and artificial entities

• Out-of-state corporations that are members of a Florida partnership

• Limited Liabilities Companies

• LLC partnerships

• Corporations that own a single-member LLC

• Homeowner and condominium associations

• Political organizations

• Tax-exempt organizations

Consulting with an accountant that specializes in Florida taxes—like Golden Apple Agency—is the best way to identify deductions, tax credits, and other incentives that could help to lower your taxable income.

Florida Income Tax Return

Aside from corporations, businesses and owners of farms and rental properties may also be required to file a Florida state income tax return. Professional tax planning and tax return assistance can help you optimize your state income tax return and make sure you keep key business tax return documents for the required minimum timeframes.

Florida Tax Holiday

Finally, residents of the Sunshine State are occasionally treated to Florida tax holidays! (nice, huh?) On these dates, Florida residents can purchase certain items sales-tax-free at participating stores.

The most famous Florida tax holiday is the back-to-school sales tax holiday which takes place during the second week of August (check the exact dates at the start of each calendar year). During this period, clothing items under $100, some school supplies costing less than $15 each, and computers costing less than $750 can be purchased tax-free.

Optimize Your State Taxes

Whether you're an individual, family, business, or corporation in Florida, being aware of Florida's state tax rates and types can help you plan your budget and spending strategically. Tax credits, exemptions, discounts, and deductions can often help you to avoid overpaying on taxes.

If you want to reduce your day-to-day spending, consider buying fewer items that are subject to an excise tax and shop for essential items during tax holidays. When in doubt, consult with a Florida business accountant or tax planner. Tax professionals are there to help you save.