So you just received a Form DR-840 in the mail from the Florida Department of Revenue. Maybe your first reaction is that it's no big deal — you run a good business, you file your returns on time, and you've never intentionally cut corners on taxes. That reaction is completely normal. Unfortunately, it is also almost always wrong. And it would definitely be wrong if you did cut corners.
Let me be direct with you: very, very few Florida sales tax audits end with the Department finding nothing. For over three decades of defending businesses in Florida sales tax controversy, our firm has seen audit assessments blindside business owners who were genuinely trying to do everything right. The Florida sales tax law is extraordinarily complex, the burden of proof sits almost entirely on your shoulders, and the auditor walking through your door has been trained — specifically and professionally — to find money that you owe the state. This is not a process to take lightly, and this is certainly not a process you want to navigate alone.
This article will walk you through exactly what a Florida sales tax audit looks like from start to finish, identify the areas most likely to hurt you, and explain what you can do to protect yourself and your business.
It Starts With the DR-840: The Notice of Intent to Audit
The formal starting gun for your audit is the Form DR-840, Notice of Intent to Audit Books and Records. (or possibility DR-846 – Limited Scope Audit) This document notifies you that the Department has selected your account for a sales and use tax compliance audit. The moment this arrives, the clock starts.
Under Florida law, you have 60 days from the date on the DR-840 before the auditor can actually begin reviewing your books and records. That 60-day window is not a grace period to relax — it is the most important phase of the entire audit. This is your opportunity to get representation, conduct an internal review of your records, identify your vulnerabilities, and set the stage for how the audit will unfold.
Why does representation matter so early? Because the decisions you make in those first 60 days — what records you organize, how you describe your business operations, whether you agree to conduct the audit at your place of business or at the auditor's office — can have an enormous impact on the final assessment. Once you start talking to the auditor without guidance, it is very difficult to walk things back.
Do not contact the auditor to discuss your business before you have spoken with an experienced Florida sales tax attorney.
The Opening Interview: Where Audits Are Won or Lost (Often Lost)
After the 60-day period expires, the auditor will want to schedule what is known as an opening interview. This is positioned as a friendly conversation where the auditor simply gets to know your business. Do not be fooled.
The opening interview is, in reality, the auditor's first opportunity to gather facts about how your business operates, what your sales look like, how you handle exemptions, and what your record-keeping system does (or doesn't) capture. Auditors are trained to be personable, conversational, and non-threatening. They are also trained to listen for exactly the kinds of statements that can be used to expand the scope or increase the size of an assessment.
For example, if you casually mention that your business did a lot of cash sales during a certain period, or that you handled out-of-state purchases through a particular vendor, you have just handed the auditor a target. The Department has extraordinary authority to estimate taxes when records are incomplete or when the auditor believes the information provided doesn't tell the full story. A stray comment in an opening interview can result in an estimated assessment many times larger than what would have been found through a records-only review.
The safest and most strategic approach is to have an attorney present for and conduct all communications with the auditor on your behalf. This is not obstruction — it is your legal right, and it is smart.
What Records Will the Auditor Request?
The Department will send you a lengthy records request checklist that can feel overwhelming at first glance. This typically includes:
- Federal income tax returns
- Florida sales and use tax returns
- Bank statements (all accounts)
- General ledgers and journals
- Sales invoices and receipts
- Purchase invoices
- Exemption certificates and resale certificates
- Payroll records
- Depreciation schedules
- Point-of-sale system reports
Here is something that surprises many business owners: you do not have to produce every single item on this list. The Department's records request is intentionally broad. Providing more records than necessary often results in the auditor discovering additional issues that never would have been found had you exercised more discretion about what to turn over.
This is one of the most important reasons to have counsel. A skilled Florida sales tax attorney knows what the Department is actually entitled to for your specific audit, what the auditor is likely looking for in your industry, and how to produce records in a way that tells the most favorable accurate story about your business.
What Is the Auditor Actually Looking For?
The audit covers a three-year look-back period in most cases (the Department can go back further if fraud is alleged). During this time, the auditor is examining two primary areas:
1. Your Sales: Did you collect and remit the right amount of tax?
Auditors will cross-reference your reported sales against your bank deposits, your federal income tax returns, and your POS data. Discrepancies between these sources are a major red flag. If your bank deposits are consistently higher than your reported sales, the auditor will likely use those deposits as a basis for estimating unreported taxable sales. This kind of bank deposit analysis can produce staggering assessments — even when the discrepancy is caused by non-taxable items like loan proceeds, insurance payments, or transfers between accounts.
2. Your Purchases: Did you pay tax on everything you should have?
This is the part that most surprises business owners. The audit is not just about what you sold — it is about what you bought. Florida imposes use tax on items purchased from out-of-state vendors when no Florida sales tax was charged. If you ordered equipment, supplies, or materials from an out-of-state supplier and paid no Florida tax, you owe use tax on those purchases. Most businesses have some exposure here, and most have never tracked it properly.
The Issues That Most Commonly Trip Up Florida Businesses
After representing businesses across virtually every Florida industry, here are the areas I see generate the largest and most unexpected assessments:
Exemption Certificate Failures. If you sold items tax-exempt — whether for resale, to a non-profit, or under another exemption — you are required to have proper, valid exemption certificates on file at the time of sale. If the auditor asks for these certificates and you cannot produce them, the entire transaction becomes taxable. Certificates that are expired, incomplete, or not specific to the sale in question are treated the same as no certificate at all. For businesses with high transaction volumes, this single issue can generate six-figure assessments.
Commercial Rent. Florida is the only state in the country that imposes sales tax on commercial rent – or it was until October 1, 2025 at which time the tax was repealed. You might think you can now ignore this tax. Unfortunately, your typical 3 year sales tax audit started today will extend back periods when the tax on commercial rent was still law. If you lease office space, retail space, warehouse space, or land for business purposes, sales tax is due on that rent — and it must be collected by the landlord and remitted. If your landlord has not been charging you sales tax on your lease, the liability does not simply disappear. The Department has increasingly targeted commercial landlords and their tenants on this issue.
Construction and Improvement Costs. If your business made significant improvements to real property — particularly improvements to a building owned by your landlord rather than by you — the taxability of those materials and labor can become extremely complicated. Contractors and subcontractors are frequent audit targets, as are businesses that directly purchase materials for installation. Getting this wrong can result in tax being assessed twice: once at the time of purchase and once on the contract price.
Use Tax on Business Purchases. As mentioned above, purchases from out-of-state vendors with no Florida tax charged create a use tax obligation. Amazon business accounts, direct imports, online marketplace purchases — all of these are audit landmines for businesses that have not been tracking and self-reporting use tax.
Estimated Assessments. When records are incomplete, missing, or in a format the auditor cannot reconcile, the Department has broad authority to use statistical sampling and estimation methods to extrapolate a tax liability across your entire audit period. These estimates are almost always unfavorable to the taxpayer. Challenging an estimated assessment is possible — but it requires significant documentation and legal expertise to do successfully.
DR-1215: The Notice of Intent to Make Audit Changes
After all the questions have been answered and hours of gathering and providing records, many business owners are giving a false since of how well everything is going by the auditor. I mean, they want you to keep talking and providing records… to keep you feeling confident that the audit is there to help you. That all changes when you get the DR-1215 Notice of Intent to Make Audit Changes. This document is the first time the auditor reveals their hand to show you all the things they are accusing you of owing plus 50% penalties, and 3 years of interest. Hopefully you were sitting down when you opened it. It is usually a shocking number and it is often very soon after when my phone rings.
Personally, the DR-1215 stage of the audit is my favorite time. You now have a long document, often more than 30 pages, detailing exactly what the auditor wants to tax and why. From an attorney’s perspective, I now have a hit list. I know what to attack. I know what records will best defend the positions and, usually, I know whether the auditor is even allowed to concede the issue (at the audit level). You see, sales tax controversy just begins with the audit. A very large amount of issues taxpayers believe are unjust in a sales tax audit are not resolvable at the audit level. Maybe we need to challenge in an administrative protest or even a formal Chapter 120 petition against the state.
After the Audit: The Notice of Proposed Assessment
When the auditor finishes the review, they will issue a Notice of Proposed Assessment (NOPA). This document shows the total amount of tax, penalties, and interest the Department believes you owe. You have 60 days from the date of the NOPA to respond.
At this stage, your options are:
Informal Protest. (within 60 days) You can submit additional documentation and legal arguments directly to the Department in Tallahassee. This is reviewed by a Department conferee — someone with more authority than the auditor and, in theory, more flexibility to weigh the merits of your position.
Litigation. (within 120 days) You can file a Chapter 120 petition with the Division of Administrative Hearings (DOAH) or challenge the assessment in circuit court. DOAH is often preferred because you are only required to pay what you reasonably believe you owe — rather than the full assessment required to file in circuit court.
These deadlines are hard deadlines. Miss the 60-day window to protest, and the assessment becomes final and collectible. At that point, the Department can pursue collection through liens, levy on bank accounts, and in some cases, pursue personal liability against business owners and officers.
Why You Need an Attorney From Day One
I understand the impulse to handle this yourself. You know your business better than anyone. You have an accountant. You've never been in trouble with the state before. All of that may be true — and none of it changes the fact that the Florida sales tax audit process is designed to find liability, and the Department's auditors are experienced professionals who do this every day.
The most common and most costly mistake I see business owners make is waiting too long to get help. By the time they call our office, they have already had the opening interview, already produced years of records without thinking strategically about what to provide, and already made statements to the auditor that have locked them into positions they cannot walk back.
Having an attorney from the moment the DR-840 arrives means: all communications go through counsel, audit records are reviewed and produced strategically, the auditor conducts the audit under controlled conditions (ideally in our offices, not yours), and your rights are protected at every step.
What You Should Do Right Now
If you have received a DR-840 or are currently under audit, here is what I recommend:
- Stop communicating with the auditor directly. Every conversation is a potential landmine.
- Call a Florida sales tax attorney immediately — If your CPA is very competent with Florida sales tax, then perhaps they are the first call. But if not, then consider at least a free initial consultation with someone who handles Florida sales and use tax controversy specifically all day, every day. With attorney client privilege, you can discuss your skeletons with me and, whether you hire me or not, I take them to my grave.
- Do not gather or produce records until you have received guidance on what to provide and how to present it. You don’t want to spend hours putting something together that is either not going to be helpful or, even worse, hurt you.
- Do not ignore any deadlines. The NOPA window and protest deadlines are among the most unforgiving in Florida tax law.
A Florida sales tax audit is not the end of the world — but only if you treat it seriously from the beginning. The businesses that come through these audits in the best shape are the ones that got qualified help before the auditor ever set foot in their office.
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 in 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, protests, litigation, criminal cases, revocations, collections, and consulting engagements all in the area of sales tax. Mr. Sutton is an active member in the FICPA and Florida Bar Tax Section. 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. You can learn more about Mr. Sutton in his firm bio and reach 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 150 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 – IS LABOR TAXABLE?, published October 4, 2025, by James Sutton, CPA, Esq.
FLORIDA SALES TAX – REPEAL OF COMMERICAL RENT TAX, published August 16, 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 AUDIT HELP, published January 8, 2025, by James Sutton, CPA, Esq.
FLOIRDA SALES TAX AUDIT PROCESS AND TRAPS, published March 4, 2023, by David Brennan, Esq.