If you get chosen to be audited by the Florida Department of Revenue you should understand how most auditors think and operate. Auditors are taught two main concepts that drive most audits.
- ALL transaction in the state of Florida are taxable, unless proven otherwise.
- Both parties, the buyer and seller, are liable for any tax due.
This basically means that everything you do in your business, every sale and every purchase is open to audit and therefore assessment by the Department. If you do not have the documentation to prove that sales tax was charged and remitted correctly, then you can be held responsible.
I highly recommend that anybody who gets audited seek out competent representation at the start of a Florida sales and use tax audit as everything you say and give an auditor can be used against you and the tax laws of Florida are complicated and confusing. At least get a consultation to discuss your situation! Many taxpayers are worried that they might upset an auditor and don’t want to seem confrontational at the start of an audit by hiring representation. I would ask you to review your audit notice. You should get an official notice, DR-840 or DR-846, which will state in writing you have 60 days to prepare for the audit, as is the law per Florida Statutes. You may also get a letter at the same time stating you need to fill out a form or a questionnaire or submit to an interview before the 60 days have expired. I believe this shows an auditor’s true focus. If an auditor is not going to respect your rights at the beginning of an audit, it should tell you of how they feel about the entire audit process and your rights as a taxpayer going forward.
Auditors will ask for everything under the sun and they may not be entitled to everything they ask for. They will ask for documentation and information from outside the audit period and information that has nothing to do with sales tax. A competent representative can help you decide what needs to be provided to get an audit completed with as little trauma and potential liability as possible.
Remember auditors will examine more than just your sales. They will also investigate fixed assets purchased, commercial rental paid, and the expenses of a business. How the auditor treats each of these issues will depend on the information provided.
Another thing to keep in mind is that the auditor may already have information on your business from third party entities that they will not tell you about. This information can include; information from your federal tax returns, 1099 data from credit card companies you have used, sales records from the department of motor vehicles (DMV), alcohol and tobacco purchases from the alcoholic beverages and tobacco department (ABT), as well as other sources. They can use this information to estimate an assessment on what they term “best information available”, either what you have provided or what the already have. It has been my experience that the “best information available” always seems to be the information that leads to the largest assessment.
Auditors seem to look at each area and try to use worse case scenarios to maximize any assessment. I strongly encourage anyone to seek competent representation if they receive an audit notice and before talking with an auditor.
About the author: Steven C. Middel is a senior auditor who joined the Law Offices of Moffa, Sutton, & Donnini, P.A. in 2015. Mr. Middel concentrates in the following areas of Florida sales and use tax: Audit, protest, collections, and criminal defense. Mr. Middel joined the firm after spending almost 5 years as a multi tax auditor for the Florida Department of Revenue. You can learn more about Mr. Middel in his BIO HERE.
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 Florida businesses against the Florida Department of Revenue since 1991 and have over 100 years of cumulative sales tax experience within 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
Florida Sales Tax Audit Help, published August 24, 2020, by James Sutton, CPA, Esq.
FL Sales and Use Tax for Pandemic Closed Business, published August 26, 2020, by Matthew Parker, Esq.
Go to Jail for Not Paying Florida Sales Tax?, published November 3, 2013, by James Sutton, CPA, Esq.
FL Sales Tax Audit - Know Your Rights, published August 26, 2020, by Steve Middle
Florida Sales Tax – Voluntary Disclosure Program, published April 9, 2019, by Jeanette Moffa, Esq.