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FL Auto Dealers: DOR Cherry-Picks Statutes to Over-Assess Auto Dealers


When an audit is initiated against a car dealer, it can send owners scrambling for records of all kinds. From bad debts to out-of-state sales, there are countless documents from the three-year period that must be produced to the Department. The auditor’s goal is to take those documents, comb through them for every unintentional error or missed item, and compile a huge assessment against the business that can result in millions of dollars lost. Often, these assessments can put dealers out of business and occasionally these audits can result in criminal investigations.

Those records you meticulously made and stored are the basis for your assessment. They are the records your business will live or die by. At least, that is the law. But what happens when your records aren’t the best?

The short version: your fate lies in the auditor’s definition of adequacy. Considering that most auditors have never run a business and live in an idealized world in which everyone is an accountant and recordkeeping is the most important thing, it is safe to say that “adequate,” according to them, is closer to “perfect” in the real world. Feeling uncomfortable with your records? You aren’t alone. It is uncommon for the Department to find any records that they deem “adequate.”

Luckily, the law is on the side of the Taxpayer. Section 212.12(6)(b), Florida Statutes, allows the Department to still use records that they deem “inadequate.” According to the statute, the Department may make an assessment based “upon the basis of a test or sampling of a dealer’s available records.” More specifically, the Department is supposed to use those records to determine the proportion of taxable sales versus exempt sales. In other words, the Department takes your inadequate records and extrapolates an assessment based upon the ratio it finds within them. Depending on your records, this can result in a relatively fair assessment or a grossly inaccurate one.

Alternatively, if you don’t provide any records to the Department or there are no records available, the auditor is authorized to use the “best available information” under section 212.12(5)(b). This information typically comes from of three potential sources: Taxpayer’s gross deposits into the company bank account(s), gross income shown on the federal tax returns, and/or DMV records. The problem? There are a lot of problems with this approach, but worst of all, the Department of Revenue will use whichever source that generates the highest estimates assessment. Additionally, DMV records are not always accurate. They may contain vehicles not sold by the Taxpayer.The records contain three different dates. Depending on which date the auditor uses, they could potentially capture vehicles sold by the Taxpayer but outside of the audit period. The consequence is that the Department takes every car it finds on the DMV records and compares it to the sales tax returns to assess the maximum amount of tax due. Furthermore, many taxpayer’s have other deposits not from sales (such as intercompany funds transferred that are not subject to sales tax. Many businesses has income from sources completely outside the scope of sales tax. The “best available information” may be the “best” for the Department, but it is often the “worst” for the Taxpayer.

It seems like either way the Taxpayer loses. If they provide inadequate records, the Department can make a test or sample off bad records to come out with an assessment that similarly “inadequately” reflects the tax due. If they don’t provide records, then the Department relies on DMV records that may overestimate sales.

Unfortunately, that’s not the worst of it. When Taxpayers provide “inadequate records,” instead of following section 212.12(6)(b), Florida Statutes, and making that sample, the Department is now commonly comparing those “inadequate records” with the “best available information” rather than instead of it. The consequences can be catastrophic to Taxpayers. The Department cherry-picks Florida law to include as many vehicles as possible into the total sales amount and then uses that to calculate an error ratio that it applies to the entire audit period. While the Department is supposed to use either section 212.12(5)(b) or section 212.12(6)(b), it is in fact using both. This policy is not substantiated by the statutes or any properly adopted rule.

Time will tell if the Department will be held accountable for their policy of cherry-picking whichever laws can be combined to create the highest assessment. In the meantime, Taxpayer’s face a tough, but achievable, challenge to improper assessments.

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.

Florida Sales Tax Attorney; Florida Sales Tax Audit; Miami Sales Tax Attorney; Orlando Sales Tax Attorney; Tampa Sales Tax AuditAbout the Author: Jeanette Moffa is an associate attorney with Moffa, Sutton, & Donnini, PA, joining the firm in 2015. Jeanette earned her law degree from Florida International University College of Law. Previously Jeanette was an adjunct professor at Palm Beach State College where she teaches a variety of English courses as well as at both Broward College and Miami-Dade College. Prior to law school, she received a Master of Fine Arts in Creative Writing with a specialization in creative nonfiction from Florida Atlantic University. Before that, she attended the University of Florida for her B.A. in English.


Section 212.12 – Department’s policy when records are inadequate or no records are available.

Additional Sources

When Sales Tax Auditors May Not Pick And Choose Records to Use, Published April 19, 2015, by Joseph Moffa, CPA, MBA, Esq.

Florida Sales Tax Audits of Car Dealers on the Rise, Published November 14, 2014, by James Sutton, CPA, Esq.

FL Sales Tax Audits on Used Car Dealers – What is Taxable?, Published July 22, 2014 by Matthew Parker, Esq.

FL Sales Tax Fraud – 12 Used Car Dealers Arrested, Published July 12, 2014, by James Sutton, CPA, Esq.

FL Tax – Voluntary Disclosure Can Be the Perfect Solution, Published on October 5, 2012, by Jerry Donnini, Esq.