Florida Sales Tax Audit Readiness Checklist
Florida sales tax compliance is a core responsibility for businesses that sell taxable goods or services in the state. The Florida Department of Revenue conducts sales tax audits to verify that companies have correctly reported and remitted the sales tax they owe. The audit process begins when the Department issues a formal written Notice of
Intent to Audit Books and Records (Form DR-840), which provides at least 60 days'
notice before the audit commences.
Understanding what sales tax audit readiness means, why audits occur, and how to prepare reduces confusion and helps protect your business from escalating penalties.
This checklist explains the audit process, common triggers, what documentation you need, and what to expect at each stage of state review. Proper preparation helps businesses navigate both desk audits and field audits conducted by the Florida DOR.
What This Issue Means
A Florida sales tax audit is a formal review by the Florida Department of Revenue of your business records to verify that you have reported and paid the correct amount of sales tax. The state examines your sales records, tax returns, and supporting documentation to confirm accuracy. An audit does not automatically mean you owe additional tax or that penalties will be assessed: it is simply an examination of your compliance record.
The Department conducts two types of audits: desk audits completed in Department offices and field audits conducted at your place of business. Both types require a formal
DR-840 notice to begin the process. Florida sales and use tax audits also examine use tax compliance for items purchased without sales tax.
Why the State Issued This or Requires This
The Florida Department of Revenue conducts sales tax audits for several common reasons. The state may select businesses randomly for routine compliance verification.
Audits may also be triggered by discrepancies in reported sales figures, missing or late tax returns, customer complaints, industry-wide compliance reviews, or examination of refund claims.
In some cases, the state conducts audits as part of standard business oversight to ensure all taxable sales are correctly reported. The audit process is designed to educate taxpayers, enforce Florida tax laws uniformly, promote tax compliance, and deter tax evasion. Audits do not always result in additional tax owed; the auditor may adjust a credit carryover or determine that a refund is due.
What Happens If This Is Ignored
If a business does not respond to audit notices or fails to provide requested documentation, the state typically issues follow-up communications. It may estimate your tax liability based on available information. Continued non-response can result in estimated assessments, penalties, and interest for late payment or underpayment, as well as potential collection actions. If you fail to produce adequate records, your tax liability will be estimated based on available information.
The state may also refer the matter for further enforcement action if a business becomes unresponsive. However, the Department will not take enforcement action,
such as issuing a tax warrant, until you receive the Notice of Proposed Assessment and have a chance to pay or protest the audit findings voluntarily.
What This Does NOT Mean
Receiving an audit notice or a Notice of Intent to Audit Books and Records does not mean you have committed fraud or that a criminal investigation will follow. It does not automatically mean additional tax is owed. It does not mean your business license will be revoked or your business will be closed.
An audit is a standard administrative process designed to verify compliance, not necessarily to penalize. The outcome depends on what the audit reveals. The
Department wants to help taxpayers avoid penalties and interest caused when taxpayers do not collect, file, and pay taxes correctly and on time.
Checklist: How to Prepare for or Respond to a Florida
Sales Tax Audit
Step 1: Understand Your Audit Notice
Read the entire Notice of Intent to Audit Books and Records (Form DR-840) carefully.
Identify the audit period (the months or years being reviewed). Note that the Department cannot begin the audit for at least 60 days after issuing this notice unless you waive the
60-day preparation period.
Locate the contact information for the assigned auditor or department representative.
Keep the notice in a safe, accessible location. You may receive a questionnaire to assess the potential for an electronic audit using electronic records.
Step 2: Gather Your Sales Records and Tax Returns
Locate all sales tax returns and Florida sales tax return documentation filed during the audit period. Locate all sales records, sales invoices, receipts, and POS system reports for the audit period. Organize documents by month and by category (taxable sales, exempt sales, taxable services).
You must keep records for three years since an audit can extend back that far. The
Department may audit for periods longer than three years if you did not file or filed a substantially incorrect return or payment. Check that the totals on your tax returns match your actual sales records and bank statements.
Step 3: Identify Exempt Sales and Exemption Certificates
Locate all resale certificates or exemption certificates you have on file. Verify that exemption and resale certificates are properly dated and completed. Match exemption certificates to the sales listed on your returns.
Identify any exempt sales that were not clearly marked as exempt on your records.
Organize exempt sales documentation separately for easy reference. Note which customers provided valid resale certificate documentation.
Step 4: Review Your Tax Calculations and Payments
Verify that you applied the correct sales tax rate for each month in the audit period, in accordance with Florida sales tax laws. Check the current Florida sales tax rate and verify it matches what you charged. Check whether local surtaxes apply to your business location.
Calculate sales tax owed for each month manually and compare to what was reported.
Verify that the amounts you reported on tax returns match payments made to the state.
Locate proof of all sales tax payments, including bank statements, receipts, and payment confirmations.
Step 5: Prepare Documentation of Business Operations
Gather your business license and any permits related to your sales activity. Locate articles of incorporation or partnership agreement if applicable. Identify the types of products or services your business sold during the audit period.
Document any significant changes in your business during the audit period. Prepare a written description of how your business operates and what you sell. Note any periods when your company was closed or not operating. Include property records for any real estate used in business operations.
Step 6: Identify Cost of Goods Sold and Purchases
Locate all purchase invoices from suppliers for the audit period. Verify that inventory purchases are clearly documented in inventory records, general ledgers, and journals.
Identify which purchases were taxable and which were not.
Check that purchases are correctly recorded in your accounting system. Locate resale certificates from your suppliers if you purchased goods for resale. Ensure your invoicing system properly tracks all purchase transactions.
Step 7: Prepare Documentation for Any Refund Claims or Credits
If you claimed any refunds or credits during the audit period, locate supporting documentation. Gather evidence of goods returned to suppliers. Locate documentation of bad debt write-offs if claimed.
Prepare explanations for any unusual transactions or adjustments claimed. Keep all documentation organized and readily accessible. Include depreciation schedules if fixed assets are relevant to the audit period.
Step 8: Organize All Documentation
Create a clear, organized folder or binder with all audit materials. Index your documentation so the auditor can quickly locate information. Make copies of all original documents, including federal income tax returns, if requested to maintain your own records.
Include a cover sheet or table of contents explaining what is included. Keep records in chronological order by month. Well-organized records and proper documentation can save you time and money, and help speed the completion of an audit.
Step 9: Respond to the Audit Notice
Contact the auditor using the information provided in the audit notice. Confirm receipt of the audit notice and your understanding of the audit period. Ask whether the audit will be conducted at your business location or whether you should mail documentation.
If you want the auditor to discuss the audit with your authorized representative, such as a tax professional, you must complete a Florida Department of Revenue Power of
Attorney and Declaration of Representative (Form DR-835). For a field audit, the auditor will call you to arrange a date for the review of your records.
Step 10: Provide Documentation and Cooperate During the Audit
Provide all requested documentation by the stated deadline. If mailing, send the documentation via a tracked mail service and keep the confirmation. If delivering in person, ask for a receipt confirming what was provided.
During the auditing process, you have the right to be informed of basic findings and proposed changes. Feel free to ask questions. Auditors are there to assist with compliance and understanding of Florida tax law.
Step 11: Understand the Audit Results
After the audit, you will receive a Notice of Intent to Make Audit Changes, which summarizes the audit results and includes a written statement of your protest and appeal rights. You have 30 days after the notice is issued to notify the auditor of any agreement or disagreement with the findings.
If you agree with the audit findings, sign the notice and pay the amount due, if any. If you cannot pay the full amount, contact the auditor to discuss a payment plan. If you disagree with the audit findings, you have 30 days to request a conference with the auditor and the auditor's supervisor.
- State enforcement notices and responses
- Sales tax audits, assessments, and collections
- Payroll & trust fund tax enforcement issues
- Penalty and interest reduction options
- Payment plans and state tax relief eligibility
- Representation before state tax agencies
Step 12: Understand Your Appeal Rights
After the audit is complete, you will receive a Notice of Proposed Assessment, which provides you with an official notice of the amount due. This document serves as a request for payment and provides instructions for filing a formal or informal protest if you disagree with the proposed changes.
You have 60 days from the date of the Notice of Proposed Assessment to file a written protest. During the protest period, the Department will not take enforcement action such as filing a tax warrant. A proposed assessment does not become final if a taxpayer timely files an informal or formal protest within the 60-day period.
What Happens After This Is Completed
After you respond to the audit and provide documentation, the Florida Department of
Revenue reviews your records and prepares audit findings. If the audit reveals no issues, the Department will send a letter stating that the audit resulted in no changes to the tax returns you filed for the audit period.
If adjustments are owed, you receive a Notice of Proposed Assessment explaining any additional tax debt owed, penalties assessed, and interest calculated. The assessment includes payment instructions and information about your appeal rights. You have 60 days to file a protest, and enforcement actions are suspended during this period.
Common Mistakes to Avoid
Missing response deadlines stated in the audit notice can result in estimated assessments based on incomplete information. Do not miss the 30-day deadline to respond to the Notice of Intent to Make Audit Changes or the 60-day deadline to protest a Notice of Proposed Assessment.
Providing incomplete documentation can slow the process and result in unfavorable estimates. Submit all requested records, including POS system reports, credit card processor statements, and third-party vendor documentation, in an organized form. Not responding to follow-up requests is considered non-cooperation and may result in enforcement escalation.
Destroying or failing to preserve records during an audit creates significant problems.
Under Florida law, the state expects records to be maintained for at least 3 years.
Providing inaccurate information creates additional compliance problems and may result in penalties and fees.
Not keeping copies of submitted materials leaves you without proof of what was provided. Always maintain your own copies of everything provided to the auditor.
Ignoring the final assessment or missing protest deadlines means you lose your right to challenge the findings.
Frequently Asked Questions
How long does a sales tax audit typically take?
The length of an audit varies depending on the complexity of your records and the audit period reviewed. Electronic audits using computer-assisted methods may be completed more quickly than manual reviews. The Department must begin the audit within 120 days after issuing a Notice of Intent to Audit unless you request a delay under Florida
Statutes.
Can I request an extension if I do not have all my records ready?
You may request a reasonable deadline extension by contacting the auditor. Submit your request in writing and explain the reason for the delay. The 60-day preparation period before the audit begins provides time to prepare your records.
What if I am missing some sales records from the audit period?
Inform the auditor immediately of any missing records. Document what is missing, why it is missing, and the steps you have taken to locate it. Provide alternative documentation if available. If you fail to produce adequate records, your tax liability will be estimated based on available information.
Can I have my accountant or tax professional represent me during the audit?
Yes, you may be represented by authorized agents, including a tax professional or tax specialist. You must complete a Florida Department of Revenue Power of Attorney and
Declaration of Representative (Form DR-835) if you want the auditor to discuss the audit with your authorized representative. This form authorizes the Department to release confidential tax information to the representative.
What if I disagree with the audit findings?
You have 30 days after receiving the Notice of Intent to Make Audit Changes to request a conference with the auditor and the auditor's supervisor. If disputes remain unresolved, you have 60 days from the date of the Notice of Proposed Assessment to file a formal or informal protest. The protest must be filed in writing within 60 days.
Will I be charged penalties and interest on additional tax owed?
The state typically assesses interest on unpaid tax from the due date. Penalties may be assessed depending on the nature and extent of underpayment. The Notice of
Proposed Assessment explains any penalties and interest applied and the reason for them.
Facing State Tax Enforcement Action?
If you’ve received a notice related to sales tax or payroll tax enforcement and are unsure how to respond, our team can help you understand your options and next steps.
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