If you’ve received a Notice of Intent to Audit Books and Records (Form DR-840) from the Florida Department of Revenue (FDOR), take a deep breath—but don’t take it lightly. A Florida sales tax audit can feel like a storm rolling in on a sunny day: unexpected, unsettling, and potentially devastating if you’re not prepared. But with the right knowledge and strategy, you can weather the storm—and even come out stronger on the other side.
This guide walks you through the audit process, common pitfalls, and how to mount a strong defense, all in the practical, no-nonsense tone you’ll find on FloridaSalesTax.com.
☎️ The Call That Starts It All
It usually begins with a phone call. A polite voice on the other end says they’re from the FDOR and that your business has been selected for a sales tax audit. It might feel like a scam—but it’s not. That call is often followed by the dreaded DR-840 letter, officially notifying you of the audit and requesting records.
Important: The Department must wait 60 days before beginning the audit unless you waive that right. Use this time wisely.
🧾 What the Auditor Wants
The DR-840 will outline the audit period (typically the last 3 years) and the types of taxes under review. You’ll be asked to provide:
- Sales tax returns (DR-15s)
- Federal income tax returns
- General ledgers
- Sales invoices
- Exemption certificates
- Bank statements
- Shipping documents
Even if you’ve been diligent, missing documentation can lead to large assessments. The burden of proof is on you—not the auditor.
⚠️Common Traps That Trigger Assessments
Auditors are trained to look for patterns and inconsistencies. Here are some of the most common issues that lead to assessments:
1. Missing or Invalid Exemption Certificates
If you sell to tax-exempt customers (e.g., nonprofits, resellers), you must have valid exemption certificates on file. No certificate? The sale is taxable—period.
2. Out-of-State Sales Without Proof
Shipping goods out of Florida? You need documentation proving the goods left the state. Otherwise, the sale is presumed taxable.
3. Deposits and Prepayments
If you collect deposits, you may owe tax when the deposit becomes non-refundable—even if the sale hasn’t closed.
4. Cash Sales and Z-Tapes
Restaurants and retailers often get tripped up by cash sales and missing Z-tapes. If your reported sales don’t match your bank deposits, expect questions.
🛡️ Building Your Defense: Step-by-Step
Step 1: Don’t Go It Alone
This isn’t the time to DIY. Florida sales tax law is complex, and even well-meaning business owners can make costly mistakes. Engage a professional—ideally one who’s both a CPA and an attorney with experience in Florida sales tax audits.
Step 2: Conduct a Pre-Audit Review
Before the auditor arrives, review your records with your advisor. Identify potential issues and gather documentation to support your positions.
Step 3: Control the Audit Environment
If you handle the audit yourself, the auditor may spend days in your office, talking to employees and combing through records. When represented, your advisor becomes a buffer—handling communications and limiting the auditor’s access.
Step 4: Challenge Estimating Techniques
Auditors often use estimation methods when records are incomplete. These can include:
- Mark-up analysis
- Bank deposit analysis
- Observation tests
These methods can produce inflated assessments. A skilled advisor can challenge the assumptions and negotiate more accurate results.
🧠 Know Your Rights
You have the right to:
- Representation: You can have a CPA or attorney represent you.
- Appeal: You can challenge the audit findings through informal protest, administrative hearing, or even litigation.
- Privacy: The auditor must follow strict protocols and cannot harass or intimidate you.
- What NOT to give: Ther auditors ask for everything, but you only have to give them enough to confirm sales and exemptions. If you give too much, they will find ways to assess more tax!
📉 What Happens If You Do Nothing?
Ignoring the audit or failing to respond can lead to:
- Estimated assessments
- Tax liens
- Bank levies
- Criminal charges (in extreme cases)
Florida takes sales tax seriously. It’s considered trust fund money—collected from customers and held for the state. Misuse or underpayment can be treated as theft.
🧩 Real-World Example: The Restaurant That Got Burned
A Tampa restaurant owner thought he was doing everything right. He charged tax on meals, filed returns, and kept decent records. But he didn’t realize his POS system was underreporting cash sales. The auditor used bank deposits to estimate sales and issued a $150,000 assessment.
With help from a seasoned sales tax attorney, the owner was able to:
- Prove some deposits were loans, not sales
- Provide missing Z-tapes
- Reduce the assessment by over 60%
The lesson? Even honest mistakes can be costly—but they’re not always fatal.
🧭 After the Audit: What’s Next?
If the audit results in an assessment, you’ll receive a Notice of Proposed Assessment (NOPA). You have 60 days to respond. Options include:
- Informal protest: Submit documentation and arguments to the auditor’s supervisor.
- Technical Assistance & Dispute Resolution (TADR): A more formal review within the FDOR.
- Litigation: File a petition with the Division of Administrative Hearings (DOAH).
Each step has deadlines and procedural rules. Don’t miss them.
🧰 Proactive Tips to Avoid Future Audits
- Conduct internal audits annually
- Train staff on sales tax rules
- Keep exemption certificates up to date
- Use accounting software that integrates with your POS
- Consult a Florida sales tax expert before making major changes
🏁 Final Thoughts: Don’t Panic—Prepare
A Florida sales tax audit isn’t the end of the world—but it can feel like it if you’re unprepared. The key is to act quickly, get expert help, and take the process seriously from day one.
At the end of the day, the FDOR isn’t out to destroy your business—but they will enforce the law. Your job is to make sure your side of the story is heard, your records are in order, and your rights are protected.
If you’re facing an audit, don’t wait. Reach out to a Florida sales tax attorney who knows the system inside and out. The sooner you act, the better your chances of a favorable outcome. If you want to read more about sales tax audits in your specific industry, click on the first blog article below, which has links to articles on most of the industries in Florida.
About the Author: James Sutton is a Florida licensed CPA and attorney as well as a shareholder in Moffa, Sutton, & Donnini, PA. Mr. Sutton is charge of the Tampa office of the firm and practices almost exclusively in the area of Florida Sales & Use Tax Controversy. Mr. Sutton handles audits, protest, litigation, criminal cases, revocations, collections, and consulting engagements all in the area of sales tax. Mr. Sutton is an active member in the FICPA, AICPA, AAA-CPA, and FIADA. Mr. Sutton is also the State and Local Tax Chairman for the AAA-CPA and past president of the Florida AAA-CPA. For 2022 to 2024, Mr Sutton was the Chairman for the State Tax Committee for the FICPA. Otherwise, you can learn more about Mr. Sutton in his firm bio HERE and you call him directly at 813-775-2131.
About the 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 even have former sales tax auditors on staff. 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.
ADDITIONAL RESOURCES
FLORIDA SALES TAX AUDIT HELP, published January 8, 2025, by James Sutton, CPA, Esq.
FL SALES TAX AUDIT – FROM AUDIT NOTICE (DR-840) TO NOPA, published September 17, 2023, by Matthew Parker, Esq.
FLORIDA SALES TAX INFORMAL WRITTEN PROTEST, published November 17, 2018, by James Sutton, CPA, Esq.
FLORIDA SALES TAX: ARE TARRIFS TAXABLE?, published May 24, 2025, by James Sutton, CPA, Esq.
FLORIDA SALES TAX: TRANSFEREE LIABILITY, published June 13, 2025, by James Sutton, CPA, Esq.
FLORIDA SALES TAX ARREST: FT LAUDERDALE CAR DEALER, published June 9, 2025, by James Sutton, CPA, Esq.
© 2025 James Sutton, CPA, Esq. All Rights Reserved
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