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FL Sales tax audit – From Audit Notice (DR-840) to NOPA


A Florida sales and use tax audit from the Florida Department of Revenue (FDOR) can come at any time. With auditors all over the state in local service centers and auditors in Tallahassee that can conduct audits of taxpayers in any county, the Department can alert a business at any time about the FDOR's intent to audit a business's books and records. Many articles, some by companies outside of Florida or with no Florida office, generally touch "generally" on many aspects of the audit and protest process. With audit notices coming out seemingly currently coming out at a high rate, this article will focus on the audit process - from audit notice to Notice of Proposed Assessment (NOPA).

The Form DR-840 is the Department's Notice of Intent to Audit books and records. In the past, the auditor would contact (usually call) the taxpayer under audit to alert the taxpayer to the fact that it will be receiving an audit notice and confirm the correct mailing address to send the audit notice to. However, I am seeing more instances of the auditor actually discussing business operations and records during this initial call. Businesses need to be aware that any statements made to the auditor will be noted and likely documented - possibly also by a tax audit supervisor who could be listening on the initial call. A business would be well advised to listen more than talk about the audit process and what can/will be available and provided.

The purpose of the FDOR sales tax audit is to compare filed monthly sales tax returns for the business for the prior three years (or period it was open if less than three years - however most audits occur when there is a full three year period to audit). During the initial call and then after in the audit notice, the Department is going to request a litany of records - and will keep requesting throughout the audit field work. The important first thing to know is that a taxpayer under audit is provided 60 days to prepare for the audit. This generally is a good time to prepare for the audit to try and most efficiently and accurately work to arrive at correct findings - or avoid exaggerated audit findings.

In the past, the auditor would communicate with taxpayers under audit to discuss records and the gathering of information by the taxpayer for the upcoming audit field work that would begin on day 61. Currently, that does not happen. Auditors now state they "cannot" discuss the audit unless the taxpayer waives the 60 day preparation period. This does not help the process but you cannot change how the Department conducts its audits. Consequently, taxpayers under audit need to maximize the 60 day preparation period since the auditor will look to move quickly with audit field work and document review on day 61. As auditors are evaluated on how much time it takes them to perform an audit, there is an incentive for the auditor to find tax quickly and move the findings forward in the process

An important thing to note early on with FDOR audits is that the Department is authorized to estimate audit findings if records are not provided by the audited taxpayer. I mention this because businesses need to be prepared for the fact that the Department most likely will still try to estimate audit findings EVEN if records are provided - even an extensive amount of records. This is important to know so that the audited taxpayer has realistic expectations. It is more important to know so that the audited taxpayer provides "quality of quantity." A common estimation "basis" by the FDOR is the records "do not reconcile' and are deemed unreliable. This is the "key" finding in most audits that the Department cites to info order to "estimate" findings. Thus, the sixty day preparation period should be used with this possibility in mind - as well as moving forward with the almost inevitable additional information requests that will come from the auditor.

When the sixty days has passed, the auditor likely is going to send a letter right the week or two before day sixty one to set up a conference on day sixty one or very close to it. The auditor does this to "commence" the audit since statutes require audits to be commenced within 120 days from the audit notice or else the tolling of the statute of limitations is waived which compromises the audit period. That is a subject for another article in and of itself. Suffice it to say, the Department generally does not let that happen except under extreme circumstances. Frequently, if records are not provided by day 90 (from the audit notice) the Department simply issues estimated audit workpapers (Form DR-1215 Notice of Intent to Make Audit Changes). This serves to "confirm" commencement of the audit. It generally is also a "wake up call" for the audited taxpayer for what is in store relative to the tax alleged to be due for the audit period - and even through the number of exhibits alleging tax due.

The goal for the audit field work will be to provide records that accurately show compliance or what tax is due. That doesn't always happen for many reasons but mostly due to the time constraints associated with tax season(s) or an unrepresented business trying to handle daily operations around a demanding auditor who fails to grasp the reality of what demands are on a small business to stay open - especially during difficult financial times. If information is or is not provided, the auditor likely is going to "conclude" inadequate records were provided to estimate tax due. The other common result is that federal returns were used by the auditor showing gross sales exceeding reported sales on the audited taxpayer's sales tax returns and the difference routinely is estimated as fully taxable "unreported" sales. With these finding/estimates, the Department invariably will allege tax collected and not remitted. This is done and used a basis to maintain penalty - now commonly at 50% of tax due.

When the DR-1215 is issued, the audited taxpayer is provided thirty days for an informal conference. The audited taxpayer can set up a conference with the auditor (and their supervisor most likely) or provide information. If information is provided, then it will be reviewed to see if a revised DR-1215 (revised workpapers) will be issued. If revised workpapers are issued, there will not be another 30 day period provided to respond again. The revised workpapers should be accompanied by a letter indicating the next thing that will be issued is the NOPA. If a conference is scheduled, then a taxpayer can discuss the findings or make a settlement offer. Know that this is not likely to result in any acceptance by the Department - unless there is agreement to the findings. If this is the case, then penalty could be compromised. This is not guaranteed and I am seeing less penalty compromised at the audit level than ever before. When the compromise is unsuccessful to resolve the audit, then the NOPA letter will be issued.

At this point, the NOPA will be issued within a couple weeks to a couple months. The NOPA usually is issued within a month. The time before the NOPA issuance is vital as it can and should be used to get ready for the protest process. The informal protest is due within 60 days of the date of the NOPA. A formal protest ca be filed within 60 days from that deadline or 120 days from the date of the NOPA. The protest process is a subject for its own article and beyond the scope of this one.

To summarize, the audit notice is an "omen" that should be handled with caution and planning. There are serious repercussions that will follow via the audit findings. Businesses should start preparing immediately for the audit (and protest) process. Businesses should immediately evaluate the state tax filings and operations to identify exposure areas and responsive records to gather. Time will not stop ticking so wasting any time will result in high estimated tax due in the issued workpapers. Identifying the accurate and responsive information to show taxable operations (and exempt/nontaxable sales) will help get the most accurate findings in the end. Just note that this most likely will require use of the protest process - informal and formal protests. Understanding the issues and how the process will operate will help the taxpayer best navigate the FDOR sales tax audit to ultimately resolve it in the best way possible. Like with many things in life, One of the most critical mistakes I have seen happen is when taxpayers simply assume they did it "right" and provide voluminous information under the belief "they have nothing to hide." This has resulted in many large estimated audit findings. it is not a bad thing to ask for help. Even if that is just a free initial consultation. Knowing your rights and the process can identify exposure areas in sales, purchases, fixed assets, and/or commercial rent. Then the audited taxpayer/tax professional can determine if additional assistance is needed. We handle all types of audits and offer a free initial consultation and welcome the chance to help any audited taxpayer best prepare for the audit process ahead of them.

Florida sales tax attorney; Florida sales tax audit; Florida sales tax litigation; Florida sales tax criminal attorney; Florida sales tax collection lawyerAbout the author: Mr. Parker is a partner in the Law Offices of Moffa, Sutton, & Donnini, P.A., based in the firm's Tampa office. Mr. Parker's practice concentrates on sales and use tax and includes criminal defense of sales tax cases and state tax audits/controversies proceeding from audit through administrative litigation involving sales and use tax and all other state taxes including reemployment tax, communication service tax, and cigarette & tobacco tax.  Mr. Parker also handles matters involving the Department of Business and Personal Regulation and Office of Financial Regulation and the industries they oversee. Mr. Parker received his accounting degree, law degree, and L.L.M. in Taxation from the University of Florida. If you have any questions please do not hesitate to contact him at 813-775-2132 or or his firm bio.

About the law firm: 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.


Florida Sales Tax Audits - Common Industries Targeted, published November 9, 2018, by Steve Middel.

Use Avalara: Sales tax audit defense, published March 6, 2020, by Matthew R. Parker, Esq.

FL Sales Tax Audit - Understanding Auditor's Perspective, published September 3, 2020, by Steve Middel.

FL Sales and Use Tax Audits - Audit Notices Are Coming, published September 15, 2020, by Matthew R. Parker, Esq.

Protest a FL Sales and Use Tax Audit, published August 9, 2019, by Matthew R. Parker, Esq.