If you are a convenience store owner, then you are most likely aware that the Florida Department of Revenue (FDOR) has been auditing your industry aggressively the last six or seven years. Unfortunately, it doesn’t look like this trend is going to lessen any time soon. In fact, we have seen an unusually large amount of audit notices issued in the Jacksonville area since the end of 2017.
Opening the mailbox to find the FDOR audit notice is not a pleasant situation. Whether you have prior experience or not, the audit notice will cause at least some level of dread. But, the fact your business will be audited should not necessarily cause widespread panic. It is important to respond appropriately to the audit notice and begin preparing to try and achieve accurate audit findings.
The first step should be to gather and review the available records for the audit period. Hopefully, supporting documentation is kept with copies of sales tax returns. If you have that information, then you should be ahead of the game. If not, then you will need to work to get information ready for review. This is not a light burden if you are the owner of a small store and have to spend time working in the store on a regular basis. For many owners, they have to work long hours almost daily to maintain costs and protect business assets – including sales revenue.
Whether you have ample or sparse records, you need to get information ready to document what your sales were for the applicable audit period. Even with “good” records, it is highly likely that the FDOR auditor is going to estimate what your taxable sales “should have been” based on vendor purchase information provided by the Florida Division of Alcoholic Beverages and Tobacco (ABT). Not coincidentally, vendors became legally obligated to provide purchase information to ABT right about the time FDOR sales tax audits started increasing for the convenience store industry.
The FDOR’s audits of convenience stores estimate the “expected” sales tax due based on factors that are skewed toward overestimating additional tax due. These estimation factors include alcohol and tobacco sales and mark-up percentages. Making things even more difficult, these percentages have started changing to the detriment of convenience store owners. Specifically, the FDOR now “assumes” that a convenience store’s sales are less than 45% of alcohol and tobacco products as a percentage of gross sales. The Department previously assumed this percentage was closer to 49%. Most convenience store owners know that their alcohol and tobacco sales (primarily beer and cigarettes) account for a significantly higher percentage of gross sales than what the FDOR is currently using to estimate.
It is important that a convenience store owner understands the FDOR audit process to know the correct information to provide to get accurate audit findings. Once audit findings are made, there is a presumption that these findings are correct if the audit findings are informally protested. And, the FDOR views the burden to overcome the presumption of correctness for the audit findings as a very high one. The informal protest process is vital to correcting overestimated tax due and involves a generally shorted process that limits the ability to provide information. So, the store owner needs to have responsive information ready to work to correct the audit estimate.
While a prior audit provides some experience with the audit and protest procedures, it is vital that the convenience store owner be as prepared as possible at an early point in the audit and/or protest process. It is never too early to start working on a response to the audit notice. This frequently is how a convenience store owner can best obtain the most accurate audit result possible. Our firm has handled an extensive amount of convenience store audits and protest and can provide guidance on situations with varying level of available records. We provide a free initial consultation that can help convenience store owners better understand what to expect from the audit field work and how to start preparing for the protest process if the audit findings identify an overstated amount of additional tax due.
About The Author: Mr. Parker is a sales and use tax attorney and an associate in the law firm the Law Offices of Moffa, Sutton, & Donnini, P.A., based in the firm's Tampa office. Mr. Parker's practice includes state tax audits and controversies involving sales and use tax and all other state taxes including communication service tax, cigarette & tobacco tax, motor fuel tax, and Native American taxation. Mr. Parker received his law degree and L.L.M. in Taxation from the University of Florida. You can read more about Matthew on his firm bio.
At the Law Office of Moffa, Sutton, & Donnini, PA, our primary practice area is Florida taxes, with a very heavy emphasis in Florida sales and use tax. We have defended clients against Florida sales and use taxes for more than 25 years with over 100 years of cumulative experience working for our firm. Our partners are both CPAs/Accountants and Attorneys, so we understand both the accounting side of the situation as well as the legal side. We represent taxpayers and business owners from the entire State of Florida. Call our offices today for a FREE INITIAL CONSULTATION to confidentially discuss how we can help put this nightmare behind you.
ADDITIONAL RESOURCES
FL DOR ABUSES CONVENIENCE STORE INDUSTRY, published October 4, 2015, by James Sutton, CPA, Esq.
TAMPA BAY CONVENIENCE STORE OWNER ARRESTED FOR SALES TAX, published April 24, 2016, by James Sutton, CPA, Esq.
FL DOR CONTINUES C-STORE ONSLAUGHT FOR FLORIDA SALES TAX, published May 17, 2014, by Jerry Donnini, Esq.
NAPLES CONVENIENCE STORE OWNER ARRESTED SALES TAX, published November 16, 2014, by James Sutton, CPA, Esq.
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