If you’ve ever wondered how the Florida Department of Revenue (DOR) manages to find missing sales tax—even when restaurant owners are convinced they’ve done everything right—there’s a reason: they’re very good at it.

Over the years, the DOR has developed a toolbox of audit techniques specifically designed to detect underreported sales, uncollected tax, or missing records. These methods aren’t random. They’re designed to fill in the blanks when your records don’t tell the full story—or when the numbers just don’t add up.

In this article, we’ll pull back the curtain on how the DOR approaches sales tax audits, particularly for Florida restaurants. Whether you’re already under audit or just want to prepare your business, understanding these methods can help you protect yourself—and avoid nasty surprises down the road.

1. The Starting Point: Sales Tax Returns and Bank Records

Every Florida sales tax audit begins with a basic comparison:

• What you reported on your sales tax returns (Form DR-15)
  vs.

• What you actually deposited into your bank account

This is called the bank deposit analysis, and it’s one of the simplest—and most revealing—ways auditors spot underreported income.

If your total deposits are significantly higher than your reported gross sales, that’s a big red flag. The DOR assumes that all money coming into your accounts is related to taxable sales unless you prove otherwise. If you received loans, personal transfers, or vendor refunds, you’ll need documentation to show that.

✅ Tip: Keep clear records of any non-sales deposits—especially if they’re large or recurring. Label them properly in your accounting software or bank notes.

2. The POS Trap: Point-of-Sale Records vs. Reported Sales

Florida auditors love point-of-sale (POS) systems. Why? Because POS systems track everything: total sales, tax collected, payment type (cash, card, etc.), item-level details, and employee activity.

The DOR will often request a full export of your POS data for the audit period. They’ll look at:

• Total taxable and nontaxable sales

• Voids, comps, and discounts

• Sales by time of day or employee

• Z-tapes or daily summary reports

• Sales tax collected vs. tax remitted

If your POS shows $850,000 in taxable sales but you only reported $700,000 on your DR-15 returns, you can expect a thorough examination—and possibly a hefty proposed assessment.

⚠️ Common mistake: POS systems are sometimes set to exclude certain revenue categories—like delivery, catering, or service fees—from your end-of-day totals. That doesn’t mean those items aren’t taxable—it just means you could be underreporting without knowing it.

3. Credit Card Reconciliation: The “Square and Stripe” Check

Many restaurants now rely heavily on credit card transactions, especially through platforms like Square, Clover, or Toast. These platforms generate detailed sales data that the DOR can request or compare against your returns.

Auditors will often request:

• Credit card processor statements

• Merchant service summaries

• Monthly or daily settlement reports

They’ll compare total card sales to what you reported. If you reported $30,000 in taxable sales in June, but your credit card processor deposited $35,000, they’ll start asking questions. And if your returns show more tax collected than your actual transactions, they’ll suspect errors—or worse.

✅ Tip: Reconcile your POS reports, bank deposits, and credit card statements monthly. That way, discrepancies are easier to catch before the DOR does.

4. When Records Are Missing: The Markup Method

If your records are incomplete, inconsistent, or missing altogether, the DOR doesn’t just give up—they estimate.

One popular estimation tool is the markup method. Here’s how it works:

• The auditor looks at your cost of goods sold—usually from purchase invoices, supplier records, or federal income tax returns.

• They apply an industry-standard markup percentage to estimate what your total sales should have been.

✅ Example: If your restaurant bought $100,000 worth of food and the auditor applies a 300% markup (a typical ratio in some restaurant categories), they’ll estimate your sales at $300,000—and compare that to what you reported.

The problem? Your actual markup may vary significantly depending on menu mix, spoilage, waste, theft, or discounts. But if you don’t have strong records, the DOR will use their estimate—and the burden is on you to prove them wrong.

5. The Test Period Method: Extrapolate and Multiply

Another tool auditors use is the test period method. When a full audit of every day or every transaction is impractical, the DOR selects a representative sample period—such as one month or one quarter—and uses it to project the rest of the audit period.

For example:

• They analyze May 2023 in detail

• They find $50,000 in underreported sales

• They extrapolate that to all 12 months of 2023, estimating a $600,000 underreporting

This method is especially common when restaurants have incomplete records, or when auditors believe a pattern of underreporting exists.

⚠️ Watch out: If your sample period includes an unusually busy month (e.g., tourist season or a big catering event), the DOR’s projection could overstate your actual liability.

✅ Tip: If the DOR proposes using a test period, review it carefully and propose a different month if it’s not truly representative.

6. Observations and Surprise Visits

In some audits—particularly where the DOR suspects serious underreporting—the auditor may conduct unannounced site visits or in-person observations.

They may:

• Count customers entering and exiting

• Take note of how many staff are working

• Observe average ticket prices and tip behavior

• Review posted menus and pricing

• Ask employees basic questions (“How many tables are here? Are you busy on weekends?”)

This is legal, and it can be used to build a case for underreported sales, especially if the restaurant’s reported numbers seem suspiciously low.

✅ Tip: Always assume an auditor could be watching. If your reported sales don’t align with your customer traffic, something’s probably off in your reporting.

7. Pulling Data from Third-Party Platforms

The DOR knows that many Florida restaurants use platforms like:

• Uber Eats

• DoorDash

• Grubhub

• Catering websites

• Gift card processors

• Payroll providers

During an audit, they may request (or subpoena) data from these providers to check:

• Reported gross sales from delivery platforms

• Sales tax collected (and whether it was remitted by the platform or the restaurant)

• Employee tip reporting and payroll withholding

If the sales reported by Uber Eats are not reflected in your DR-15 returns, expect the auditor to ask why—and potentially include the discrepancy in the assessment.

8. Penalties and Interest: The Hidden Cost of Audit Methods

Once the DOR finishes its analysis—whether through your records or its own estimations—it will prepare a Notice of Intent to Make Audit Changes (DR-1215), and eventually a Notice of Proposed Assessment (NOPA).

But here’s where the techniques hurt even more: estimated results often come with higher tax due, and the state adds penalties and interest on top.

• Penalties for late payment, late filing, or negligence can range from 10% to 50% of the tax owed.

• Interest compounds daily, and by the time the audit concludes, it can be significant.

Final Thoughts: Know the Tools, Stay in Control

The Florida Department of Revenue doesn’t need to find a smoking gun. Their audit tools—bank comparisons, POS data, markup formulas, test periods, and third-party platforms—can build a case against your restaurant even without direct proof of wrongdoing.

That’s why it’s so important to:

• Keep detailed, organized records

• Reconcile bank, POS, and sales tax reports regularly

• Ask your accountant to review your returns periodically

• Get help early if you’re selected for audit

When you understand how the DOR operates, you’re in a much better position to defend your business, explain your numbers, and avoid costly surprises.