Florida’s DR-1215 Notice of Intent to Make Audit Changes

Understanding the DR-1215 Notice and Its Significance for Businesses

The Florida Department of Revenue (DOR) issues Form DR-1215, Notice of Intent to Make Audit Changes, as part of its sales and use tax audit process. This document serves as an official notification to businesses that the state has completed its audit review and intends to make adjustments to tax liabilities, interest, and penalties. It follows an in-depth examination of a company’s financial records and tax reporting history, indicating that discrepancies or potential tax deficiencies have been found.

Receiving a DR-1215 does not mean the audit is final; rather, it provides an opportunity for businesses to review the proposed changes, submit additional documentation, and challenge erroneous assessments before a final tax assessment is issued. Businesses that fail to respond or dispute the notice effectively risk substantial tax liabilities, penalties, and further enforcement actions.

This guide outlines what businesses need to know about the DR-1215, how to respond strategically, and best practices for minimizing exposure during a Florida tax audit.

Why Did Your Business Receive a DR-1215 Notice?

A DR-1215 is issued when an auditor has completed their review and determined that tax was underpaid, improperly collected, or incorrectly reported. Some common reasons businesses receive a DR-1215 include:

• Discrepancies between reported sales tax and financial records (e.g., gross sales on federal tax returns, bank deposits, or credit card reports do not match reported taxable sales).

• Failure to charge or remit sales tax on taxable transactions (e.g., sales of tangible personal property, services, or digital goods subject to tax).

• Incorrect handling of tax-exempt sales (e.g., missing resale certificates, exempt sales lacking documentation).

• Failure to pay use tax on purchases (e.g., equipment, supplies, or out-of-state purchases where sales tax was not collected).

• Misclassification of sales transactions, leading to underreported taxable sales.

• Issues related to accrual-based sales tax reporting, including incorrect timing of tax remittances.

• Auditor estimations based on sampling techniques, which may result in inflated tax liabilities if sample periods are not representative.

Since the DR-1215 precedes a final assessment, businesses have a valuable opportunity to review findings and challenge errors before an official tax bill is issued.

Steps to Take After Receiving a DR-1215 Notice

Step 1: Thoroughly Review the Audit Findings

• The DR-1215 will contain exhibits detailing the proposed changes.

  • A Exhibits: Adjustments related to sales tax, including taxable sales, exemptions, and misreported revenue.

  • B Exhibits: Adjustments related to use tax, typically for taxable business purchases where sales tax was not paid.

• Cross-check the auditor’s calculations with your company’s general ledger, financial statements, and tax returns.

• Identify any errors or inconsistencies in the auditor’s assumptions, sample selections, or calculation methods.

Step 2: Gather Supporting Documentation

• If tax-exempt sales were denied, locate missing resale certificates, exemption affidavits, or supporting invoices.

• If out-of-state sales were taxed incorrectly, ensure you have proof of delivery, shipping records, and non-Florida registration documents.

• For purchases assessed with use tax, find invoices that show tax was properly paid at the time of purchase.

• Compare reported taxable sales to bank statements, general ledgers, and 1099-K merchant reports to refute any overestimated assessments.

Step 3: Request an Audit Conference

• Businesses have 30 days from the date of the DR-1215 to request a formal meeting with the auditor or their supervisor to dispute findings.

• This is a critical opportunity to present documentation, contest errors, and negotiate adjustments.

• If the auditor used sampling methods, challenge any assumptions that do not accurately represent overall sales tax liability.

Step 4: Provide a Targeted Response

• Only submit documentation relevant to disputed findings; avoid providing excessive records that could open new areas of inquiry.

• Prepare a detailed response that outlines specific errors in the audit findings and provides corrective evidence.

• If your business identified errors but has already corrected them, provide proof of amended filings, tax payments, or policy changes.

Step 5: Negotiate Penalty Reductions

• If penalties were assessed, consider requesting a waiver or reduction.

• If the errors were unintentional and due to reasonable cause, businesses may qualify for penalty abatement.

• Demonstrating good-faith efforts to comply with Florida tax laws can support a request for penalty relief.

Common Mistakes Businesses Make After Receiving a DR-1215

Businesses that fail to act carefully in response to a DR-1215 often face higher-than-necessary tax assessments. Common mistakes include:

• Ignoring the DR-1215 or missing the 30-day deadline, which results in an automatic tax assessment.

• Providing excessive or irrelevant records, potentially leading to additional audit adjustments.

• Not challenging incorrect sampling methods, which can inflate tax liabilities beyond actual deficiencies.

• Signing the DR-1215 prematurely, effectively waiving the ability to dispute errors later.

• Failing to seek professional assistance, resulting in missed opportunities to reduce liability.

What Happens After the DR-1215?

If a business does not dispute the findings or fails to resolve discrepancies within the 30-day window, the Department of Revenue will proceed with issuing a Notice of Proposed Assessment (NOPA). This document finalizes the audit findings and creates a formal tax liability, which can include:

• Sales tax owed based on audit adjustments.

• Use tax assessments for taxable business purchases.

• Interest accruals on unpaid taxes.

• Substantial penalties, ranging from 10% to 50% for late payments or underreported tax.

Once a NOPA is issued, businesses can still file an appeal, but the window to dispute findings is narrower and often requires a more complex legal process.

Best Practices for Avoiding Future Sales Tax Issues

To prevent similar audit findings in the future, businesses should:

• Conduct internal sales tax compliance reviews regularly to identify and correct errors before an audit occurs.

• Ensure resale and exemption certificates are valid, complete, and properly stored.

• Use accounting systems that accurately track taxable and non-taxable sales.

• Reconcile sales tax filings with financial statements to ensure consistency.

• Educate staff on proper tax compliance practices to minimize reporting errors.

Final Thoughts: How to Protect Your Business

Receiving a DR-1215 is not the end of the audit—it is the last opportunity to challenge inaccurate findings before a final tax bill is issued. Businesses that take a proactive and strategic approach can significantly reduce financial exposure and ensure fair treatment in the audit process. By understanding the audit process, responding effectively, and maintaining thorough records, businesses can protect themselves from excessive tax assessments and penalties while ensuring ongoing compliance with Florida tax laws.