The Florida Department of Revenue often engages in what they have politely coined “campaigns.” A “campaign” really means that they will be conducting a disproportionate number of audits in a particular industry. Armed with third party data, the FDOR often uses it to systemize audits to maximize tax due in fewer man hours so they can audit an industry at an alarming rate. For example, in 2011, the FDOR was able to obtain records of all alcohol and tobacco purchases by retailer, plug in a few assumptions and spit out audits to the tune of about 250 per quarter in the convenience store industry. Using a similar system, the Florida Department of Revenue has recently targeted the restaurant industry.

Unlike the convenience store audit onslaught, the recent restaurant campaign is much more simplistic. Rather than sifting purchases through a complex assumption formula, DOR has a more direct way to estimate a restaurant’s annual sales. It simple obtains a company’s federal returns and its 1099-k’s.

The use of the federal return for a sales tax audit is relatively obvious – it provides the reported total sales of a business for federal income tax purposes. In many cases, a restaurant may have more sales reported on its federal return when compared to the same years’ monthly sales tax returns. The Florida DOR can easily obtain your company’s federal return from the IRS and cross reference that document against your sales tax returns. You can bet that any excess sales on your federal return will be treated as taxable sales and trigger your business for audit.

The Form 1099-K is slightly less obvious. As many restaurant and retail businesses know, a 1099-K is a form filed by third party credit card processing companies. The Florida Department of Revenue can access your company’s 1099-K’s and compare those to your federal and state tax returns. It almost goes without saying that a business should have reported sales at least to cover its credit card sales reported on its 1099-K’s. Further, the FDOR has or soon will have ratio in which it estimates total sales by analyzing a company’s reported credit card transactions. If the 1099-K’s exceed your sales tax returns, federal tax returns, or both, or if you are reporting an exceedingly high ratio of credit card sales, a dreaded sales tax audit might be lurking.

Using its shiny new third-party data from the IRS, the Florida Department of Revenue has begun auditing the restaurant industry by the hundreds. Hopefully this article will serve as a wake-up call for the industry, which has a notorious reputation of underreporting and generally few exempt sales to hide behind. If you are audited, we have found that the FL DOR's previous campaigns produce estimated assessments are anywhere from 20-70% too high. In addition, if handled properly, the penalties can be eliminated in many cases. It is also imperative to know that if you or your client's company receives a large assessment, it is worthwhile to fight in an attempt to bring the numbers down. Moreover, payment plans are often available to pay off the tax due.

To avoid a sales tax audit there are few things that should be checked

  1. Compare federal returns to the corresponding period of DR-15’s. If the federal return materially exceeds the DR-15’s considers amending the returns or filing a voluntary disclosure for unpaid sales tax
  2. Compare 1099-K’s against state & federal returns. Do reported credit card sales equal or exceed reported total sales? If so, consider filing a voluntary disclosure for unpaid sales tax
  3. Use Common Sense. You and your client know the business. If reported credit card sales are a disproportionately high percentage of sales or there is a large amount of undocumented exempt sales, there is likely a problem or an audit on the horizon.

It is rarely advisable to take on these types of cases without the help of an expert Florida sales tax attorney or other professional to navigate the process. I have personally handled over a hundred of these types of cases over the last few years and know what the FL DOR will and will not accept to reduce the assessment. Our lawyers also have strong backgrounds in accounting and are capable of handling criminal sales tax cases should the need arise. It is also worth pointing out that there is no accountant-client privilege, should the case turn criminal. If you or a client of yours is has been contacted (or you fear being contacted) by the Florida Department of Revenue, then please call or email our offices today for a free initial (and confidential) consultation about your matter.

Florida Sales Tax Attorney; Florida Sales Tax Audit; Florida Sales Tax Protest; Florida Sales Tax Restaurant; Florida Sales Tax convenience storeAbout the author: Mr. Donnini is a multi-state sales and use tax attorney and a shareholder in the law firm the Law Offices of Moffa, Sutton, & Donnini, P.A., based in Fort Lauderdale, Florida. Mr. Donnini's primary practice is multi-state sales and use tax controversy, with a heavy emphasis on the tobacco, alcohol, motor fuel and related industries. Mr. Donnini also practices in the areas of other state taxes including communication service tax, cigarette & tobacco tax, motor fuel tax, and Native American taxation. Mr. Donnini received his LL.M. in Taxation at NYU. You may also read more about Mr. Donnini in his FIRM BIO. If you have any questions, then please do not hesitate to contact him via email JerryDonnini@Floridasalestax.com or phone at 954-642-9390.

If you are interested in learning more about Florida sales and use tax, then take a look at our up and coming speaking engagements HERE.


Rule 12A-1.0115, Florida Administrative Code (Sales of Food Products Served, Prepared, or Sold in or by Restaurants, Lunch Counters, Cafeterias, Hotels, Taverns, or Other Like Places of Business and by Transportation Companies)


Protest a FL Sales and Use Tax Audit, published August 8, 2019, by Matthew Parker, Esq.

FL Sales Tax vs Restaurant Management Agreements, published October 9, 2018, by Jeanette Moffa, Esq.

Restaurant Florida Sales Tax Handbook, published January 4, 2018, by James Sutton, CPA, Esq. and David Brenna, Esq.

For Myers Sales Tax Theft – Restaurant Owners Arrested, published August 20, 2014, by Matthew Parker, Esq.

Going to Jail for Not Paying Florida Sales Tax?, published November 3, 2013, by James Sutton, CPA, Esq.

FL Tax – Voluntary Disclosure Can Be The Perfect Solution, published October 5, 2012, by Jerry Donnini, Esq.