How to Challenge a Sales Tax Assessment

Receiving a sales tax assessment from the Department of Revenue can be daunting, but businesses and individuals have the right to fight a sales tax assessment through a formal protest process. Challenging a sales tax assessment does not have to be an adversarial experience. Instead, it is an opportunity to fight the Department of Revenue using established administrative procedures to correct errors, clarify misunderstandings, or negotiate tax liabilities.

This article focuses specifically on the informal protest process, which is often the first step in disputing a tax assessment. While businesses also have the option to file a lawsuit in Circuit Court or submit a Petition for a Chapter 120 Hearing with the Division of Administrative Hearings, this guide will walk you through the informal protest option and how to present a strong case to challenge a sales tax determination.

What is an Informal Protest?

An informal protest is a written request submitted to the Florida Department of Revenue (DOR) asking for a review of a proposed sales tax assessment. The protest process provides taxpayers an opportunity to dispute the assessment before it becomes final. This is a critical step because once the assessment is finalized, the remaining legal options become more complex and costly.

Deadlines for Filing a Protest

A protest must be filed within 60 days from the date of issuance of the Notice of Proposed Refund Denial (Form DR-832R) or a Notice of Proposed Assessment. If the taxpayer is outside of the United States, they have 150 days to file a protest.

Failing to meet the deadline results in forfeiting the right to an informal protest, leaving the taxpayer with only the more formal (and often more expensive) legal remedies.

Effective Sales Tax Protests

A well-structured protest can significantly impact the outcome of your case. The following elements should be included:

1. Taxpayer Information:

   • Business name and contact details (including telephone number)

   • Taxpayer’s account number and Federal Employer Identification Number (FEIN)

2. Assessment Details:

   • Type of tax being disputed (e.g., sales tax, use tax)

   • The dollar amount of the proposed assessment under dispute

   • The tax period covered by the assessment

   • A copy of the Notice of Proposed Assessment or Notice of Proposed Refund Denial

3. Statement of Disputed Issues:

   • Clearly outline which parts of the assessment you disagree with.

   • If there are no disputed factual issues, state this explicitly.

   • If there are factual disputes, provide a statement explaining the material facts in question.

4. Legal and Factual Basis for the Dispute:

   • Explain why the assessment is incorrect using supporting documentation.

   • Reference applicable laws, rules, regulations, or case law to support your argument.

   • If the Department misinterpreted financial records or tax returns, clarify the misunderstanding.

5. Supporting Documentation:

   • Provide exemption certificates, invoices, contracts, or any other records proving compliance with tax laws.

   • Include financial records that support the reported sales or exempt transactions.

   • If requesting a refund, include proof of payment and documentation supporting the refund claim.

6. Requested Relief:

   • Clearly state the resolution you seek (e.g., reduction in tax liability, complete reversal of assessment, correction of misclassified transactions).

7. Oral Argument Request (if desired):

   • Taxpayers can request an in-person or virtual conference to present their case verbally before the Informal Dispute Resolution (IDR) Division.

8. Additional Relevant Information:

   • Any extra information that supports your position or clarifies your records.

Why Hiring a State and Local Tax Lawyer is Crucial

While taxpayers have the right to file a protest on their own, hiring an experienced tax attorney can significantly improve the likelihood of success. Here’s why legal representation is highly recommended:

1. Expertise in Tax Law

   • Tax attorneys understand the nuances of sales tax laws, administrative procedures, and legal precedents that can strengthen your case.

   • They can identify legal arguments that a taxpayer might overlook, improving the chances of a favorable outcome.

2. Navigating Complex Audits and Protests

   • Sales tax audits and assessments often involve large volumes of financial data. A tax lawyer can organize and present this data effectively.

   • They can negotiate with the Department of Revenue on your behalf, ensuring your rights are protected.

3. Avoiding Common Pitfalls

   • Many taxpayers make procedural mistakes, such as missing deadlines, failing to provide required documentation, or submitting unnecessary records that open up further scrutiny.

   • A tax attorney will ensure that all filings are correct and submitted on time.

4. Maximizing Legal Strategies

   • An attorney can help determine the best course of action, whether it’s pursuing an informal protest, negotiating a settlement, or preparing for litigation.

   • If the informal protest is unsuccessful, they can guide you through filing in Circuit Court or a Chapter 120 administrative hearing.

5. Minimizing Financial Risk

   • Sales tax assessments can result in significant liabilities, including penalties and interest. A tax lawyer can work to reduce or eliminate penalties by presenting strong legal arguments and negotiating penalty waivers. Alternatively, taxpayers who file protests and are not represented by an attorney are sometimes disappointed to learn that the Department of Revenue can increase an assessment during the Informal Protest process!

Conclusion

If you receive a sales tax assessment, you have the right to fight a sales tax assessment through an informal protest before escalating to a lawsuit or administrative hearing. The protest process provides an opportunity to resolve disputes with the Department of Revenue efficiently and cost-effectively.

While some cases are straightforward and can be resolved through written arguments, more complex cases may require the assistance of a tax professional. Hiring a tax lawyer ensures you navigate the process with expertise, minimize financial risks, and effectively fight the Department of Revenue to secure the best possible outcome for your case. By taking prompt action and leveraging the right legal strategies, taxpayers can challenge unfair assessments and protect their business or personal finances from unnecessary tax liabilities.