Receiving a Florida sales and use tax audit notice is right up there with getting a root canal. It can be and is a very unpleasant experience. When such a notice is received, the recipient knows (s)he is in for the long haul. What many victims in receipt of such an audit notice do not understand is how aggressive the Florida Department of Revenue can be and is. While this article speaks generically about many issues relating to auditors and their overall aggressiveness, a specific case study will be reviewed and discussed in detail.
A client came to us and hired our firm because the Florida Department of Revenue was assessing (in this case, it could be argued was extorting) our client an exceptionally large amount of sales/use tax and interest. The basis of the assessment was because the Florida Department of Revenue had notice the two pieces of tangible personal property being assessed had a Florida address associated with it. Because of this, the Florida Department of Revenue concluded sales/use tax must be owed because the address of the property was a Florida address. That was all the Florida Department of Revenue had. There was no proof the item ever came to Florida; however, audit staff believed such proof was not needed as they were convinced our client was guilty until proven innocent. Such an approach is commonplace by the Florida Department of Revenue.
We disagreed with the assessment and filed an informal protest. Think of an informal protest as an “appeal.” We were assigned our appeals officer. After presenting proof the property never entered Florida, one would believe the assessment should and would be fully removed. Guess again! We get the decision from the appeals area. The decision upholds the full amount of the audit assessment as well as says to pay up or else. The reasoning for upholding the assessment was fed directly to the appeals area by the audit staff – we had to provide proof tax was paid in another state. Yes, let that sink in for a moment. Our argument was the items never entered Florida, and the Florida Department of Revenue’s position in the decision was we had to prove tax was paid in another state. Such a response is nonsensical, but is the norm for the Florida Department of Revenue.
After getting such a result, we filed a “re-appeal” since we very much disagreed with the assessment. We were assigned the same appeals officer. We provided similar information as the first go round; yet, the information was from another source. Both batches of information showed the exact same thing – the items never entered Florida. Reasonable minds prevailed and the Florida Department of Revenue removed the whole amount of the assessment within a month after that information was sent. Again, the information sent to the Florida Department of Revenue each time was almost the exact same information but just from two different, independent, third-party sources.
When things do not make sense, it is worthwhile to take a closer examination of what may be going on behind the scenes. After obtaining internal Florida Department of Revenue records, I was utterly shocked at what I eventually found. I came across an email string. The appeals officer’s supervisor, who is truly a great person, got involved. We will call this individual “appeals officer supervisor.” The appeals officer supervisor contacts the auditor’s supervisor (called “audit supervisor”) to see what proof the Florida Department of Revenue has about the items having ever been in Florida. The audit supervisor reaches out to their supervisor (called “auditor boss”) saying audit supervisor looked for use in Florida, but could not find anything. The audit supervisor went on to ask auditor boss to review, if possible, for the information. Auditor boss did so and circle back with appeals officer supervisor and audit supervisor to say auditor boss could not find any records of the items having ever been in Florida. Let that sink in for a moment. Work was being done now, after the audit assessment, that should have been done when formulating the assessment. Better late than never though.
From here, the appeals officer supervisor states the understanding they have nothing to demonstrate the item was ever in Florida other than a Florida address. Auditor boss confirms and appears to justify their position that more information was needed to determine the location of the items, which was only now being provided. In other words, the auditor boss was blaming the situation on the one being audited (i.e., our client) because our client did not provide the alleged needed information; however, regardless of that, I find it difficult to excuse the lack of work done during the audit to support the assessment. Of note, the burden is on the Florida Department of Revenue to prove something is taxable, which was clearly lacking here. Rather, it seemed it was nothing more than being caught in the assessment mill of the Florida Department of Revenue.
At this point, the appeals officer supervisor (correctly) states they are not sure they can uphold the assessment just based upon having an address in Florida. Auditor boss does not say “yes, I agree with you” or “I can see that.” The response was the auditor boss understands. That is it. In what appears to be yet another attempt at justifying the assessment. The auditor boss then says the current position seems to be one that would be difficult to defend and that the information provided seems reasonable.
From the context, it did not appear to me the auditor boss was attempting to get to the right amount of tax being owed (or in this case, not owed); rather, the comments suggest to me the auditor boss was more concerned about what they could use to keep the assessment rather than getting to the right outcome. If true, such a position runs contrary to the espoused policy of the Florida Department of Revenue but does go to illustrate what we see wholeheartedly and on a daily basis – aggressive tactics taken by the Florida Department of Revenue to persecute businesses whenever possible.
What is the take home message of all of this? If you receive an audit notice from the Florida Department of Revenue, expect to be assessed an outrageous amount of money despite the information you provide. When cornered, the Florida Department of Revenue will sometimes attempt to save face at the last possible moment but begrudgingly and only if absolutely necessary might then reduce the assessment. There have certainly been numerous times that when despite the evidence provided, the Florida Department of Revenue will still assess tax against hardworking business owners who look to keep their employees employed and food on the table. Most auditors do not understand or may not care about this objective. The auditor’s objectives are clear – make an assessment and move on to the next business.
In conclusion, if you receive an audit notice, you must obtain representation right away. Only individuals specializing in Florida sales and use tax can adequately represent you and fight for your interests. If you believe the audit will go away, the audit will work out for the best, or the auditor will be reasonable, such an approach can and will get you in a mountain of trouble. All too often I hear from our clients – “David, I wish we had hired you sooner.” Do not end up being one who regrets not being represented from the beginning. You must effectively fight back and stand up for your rights as an American citizen and Florida taxpayer.
About the author: David Brennan is partner with Moffa, Sutton, & Donnini, P.A. His primary practice area is multistate tax controversy. David received a B.S. in Accounting and Finance, with a minor in Computer Science, from Florida State University. He worked as an accountant for a CPA firm before attending law school at Regent University. He received his Juris Doctor in 2013 and was licensed to practice law in Florida in the same year. In 2015, David earned his Masters of Laws in Taxation from Boston University. While working for the Florida Department of Revenue as a Senior Attorney, David focused on various sales and use tax issues. You can read 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. Contact us for a FREE INITIAL CONSULTATION to confidentially discuss how we can help put this nightmare behind you.
AUTHORITY
Section 213.015, F.S. – Taxpayer Rights.
ADDITIONAL RESOURCES
2023 FLORIDA SALES TAX UPDATE PART I, published July 5, 2023, by David J. Brennan, Jr., Esq.
2023 FLORIDA SALES TAX UPDATE PART II, published August 14, 2023, by David J. Brennan, Jr., Esq.
FL SALES TAX CAR DEALERS PLAYBOOK, published April 22, 2023, by David J. Brennan, Jr., Esq.
FLORIDA SALES TAX AUDITS PROCESS AND TRAPS, published March 4, 2023, by David J. Brennan, Jr., Esq.
2023 FLORIDA SALES TAX RATE ON COMMERCIAL RENT, published January 23, 2023, by James Sutton, CPA, Esq.
PHONE CALL FROM FLORIDA DEPARTMENT OF REVENUE: SALES TAX, published October 15, 2022, by Jeanette Moffa, Esq.
FLORIDA SALES TAX INFORMAL WRITTEN PROTEST, published November 17, 2018, by James Sutton, C.P.A., Esq.
FLORIDA SALES TAX - VOLUNTARY DISCLOSURE PROGRAM, published April 9, 2018, by Jeanette Moffa, Esq.