The Florida Department of Revenue is governed by certain statutes and rules on how they are supposed to conduct a Florida sales and use tax audit. I would like to go over some of these basic rights so that you can have a better understanding of what you can expect if the Florida Department of Revenue (DOR) darkens your door with an audit.
Representation
The right to be represented by counsel. The Florida statutes explicitly state you have the right to council or representation during an audit. I highly recommend you do so and from the very start of the audit. Florida sales tax is very complex and DOR employees are not always looking out for the taxpayer’s best interest. If you start an audit and then realize you may need help at some point in the process you might find that you have dug a hole, because of a simple misunderstanding, that can be much more difficult to get out of rather than avoiding the hole in the first place. Competent representation can help to identify potential liabilities, keep misunderstanding from arising and make sure your rights are protected throughout the audit process.
60 days to prepare before start of an audit
A Florida sales and use tax audit starts with the issuance of either a DR-840, a full audit, or a DR-846, a limited scope audit. The differences between the two are the subject of another article. The taxpayer has 60 days from the date of this notice to prepare for the audit by statute. I have had DOR employees state these 60 days is merely a suggestion. It is not! It is in the Florida statutes and is listed on any audit notice. Auditors will request information or want an interview before the 60 days and then state the taxpayer “volunteered” the information. I have also had them state the information they are requesting is not part of the “actual” audit and therefore not subject to the 60-day rule. My response is usually if the information is not part of the audit then it is not needed for the audit. The 60 days is best used preparing for the audit and identifying how best to comply to any requests. If an auditor states that you MUST comply with information before the 60 days has expired, I would take it as a warning sign, and it should let you know the auditor’s intentions as far as your rights as a taxpayer are concerned.
120 days to start audit
Florida statutes and rules state that an audit must commence within 120 days after issuing a notice. They also list what specifically defines the phrase “commence an audit”. Usually this is not a problem but when it has occurred, I have had DOR employees state that they commenced an audit for various reasons not listed in the rules and that as DOR employees they can define what commences an audit means. I strongly disagree. The statute and rules are very specific. If an audit does not commence within 120 days after issuing the notice the tolling period (audit period) shall terminate.
Documentation requested
Auditors will sometimes ask for information that has nothing to do with sales and use tax. They will state they need the information to “better understand” your business and its practices. I find this disingenuous at best. Anything they ask for is for a reason and it usually is not in your best interest. One thing they sometimes request the taxpayer’s entire QuickBooks backup. I strongly suggest you do not supply this. Not only can this have information from outside any given audit period, it can have proprietary information about your business and customers. There are other ways the needed information can be supplied. They will also sometime send a re-employment tax questionnaire for the taxpayer to fill out, to me this is a fishing expedition. If they want to conduct a re-employment tax audit, they should issue a re-employment tax notice, a completely different notice. No good can come from supplying this information. The auditor usually requests a laundry list of everything they want, which can be EVERYTHING, but what they are entitled to depends on your type of business and the circumstances of the audit. Competent representation can help you determine what documentation is needed to complete the audit and comply with these requests in the proper manner without putting an unnecessary burden on your business.
Completing the audit in a timely manner
Florida statutes state any audit must be completed within one year from the audit notice. Due to protest rights and other issues this usually means the auditor must issue their audit findings no later than 9 months from the original notice. There are many things that can affect these dates, but these are the general rules. Usually the Department of Revenue is very good at making sure they meet these guidelines, but when they do miss them it can have serious effects on any potential liability the DOR is trying to assess and the department is not always forthcoming as to your rights concerning the impact of any missed deadlines.
These are just some of the potential issues that arise concerning a taxpayer’s rights during a Florida sales and use tax audit. Many different issues can arise during an audit and I again strongly recommend you get competent representation before starting the audit process.
If you have any questions or concerns on anything contained within this article or on Florida sales and use tax audits in general feel free to contact me at your convenience.
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.
When a Closed Business Isn’t Closed to FL DOR, published September 26, 2014, by Matthew Parker, Esq.
Go to Jail for Not Paying Florida Sales Tax?, published November 3, 2013, by James Sutton, CPA, Esq.