*This article is targeted to Automotive Dealers
*Although the following information is specific to the State of Florida, we encourage you to read this article, as other states may adopt similar programs in the future.
What is the Hope Scholarship Program?
The State of Florida has created a new voucher program, called the Hope Scholarship Program, which allows students attending public schools who have been the victim of bullying or other school violence to receive a scholarship to help pay the tuition of a private school. The program is estimated to benefit 7,300 children and has an estimated cost of $27 million for the remainder of the 2018-2019 school year. That cost is estimated to increase to $40 million for a full school year, with an additional 900 children to benefit in the 2019-2020 school year (including those students who renew their scholarship from the prior year).
The program is going to be funded through contributions made by taxpayers when they purchase or register a qualified vehicle. Beginning on October 1, 2018, the taxpayer can assign up to $105 of the sales tax due to go to the new program. If the total sales tax due is less than $105, they can assign up to the total sales tax due to the program.
The contribution cannot be made from taxes other than the sales tax imposed by Chapter 212 Section 05-2018 Florida Statutes, sales tax due on a warranty or other taxable item sold in conjunction with a motor vehicle, or on tax due from the lease or rental of a motor vehicle.
A qualified vehicle is a car, truck that weighs less than 5,000 pounds, or other vehicle that is used to transport people and propelled by power. However, Heavy trucks, truck tractors, trailers, motorcycles, and mopeds are explicitly excluded from the definition of a qualified vehicle.
How this involves your Dealership:
The contribution can be made through a new or used motor vehicle dealer, a private tag agency, or the county tax collector. Form DR-HS1, Hope Scholarship Program – Contribution Election Form, must be provided to any purchaser or register of a qualified vehicle. The form does not need to be completed or retained by the dealer, tax agency, or tax collector if the taxpayer chooses not to make the contribution. If a contribution is made, the applicable reporting must be done by both the company collecting the contribution and the recipient organization (the recipient organization will report contributions received on Form DR-HS3, Hope Scholarship Program – Contributions Received by an Eligible Nonprofit Scholarship-Funding Organization). We recommend retaining the contribution documentation for ten (10) years (the same record retention period recommended for sales and use tax filings).
The contribution must be reported on Form DR-HS2, Hope Scholarship Program – Dealer Contribution Collection Report. This can also be completed online. The due date of the form is the 1st day of the month after the sales and use tax reporting period. The credit must also be reported on the regular sales and use tax return. Penalties for not filing the appropriate report is $1,000 per month, up to $10,000 per month. Additional penalties may apply if it is determined that contributions were received but never reported to the state (even if those contributions were appropriately remitted to the eligible organization).
We recommend that our dealer clients maintain a record of the contribution form being offered to eligible customers. We also recommend that a separate sales tax account be set up to segregate the contributions from sales taxes collected. Although the statute does not specifically discuss penalties for not offering customers the option to make the contribution, maintaining the appropriate records now could help to combat any future problems.
Through our strategic partnership with DocVision, we will be able to provide our Florida dealers on Reynolds & Reynolds, CDK, or DealerTrack, a Sales Tax Reporting Tool that can assist in filing sales tax returns. The Sales Tax Reporting Tool will be updated for the new Hope Scholarship Program contribution reporting requirements prior to October 1, 2018.