Florida Criminal Sales Tax Investigations of Restaurants: What Every Restaurant Owner Needs to Know

In Florida, restaurant owners are increasingly becoming targets of criminal sales tax investigations—not just civil audits. These investigations can result in felony charges, arrests, and even prison time. If you operate a restaurant in Florida, understanding how and why the Florida Department of Revenue (FDOR) initiates a criminal sales tax case is critical.

This article explains what triggers a criminal investigation, what the FDOR looks for, and what you can do if your restaurant is under scrutiny.

Why Are Restaurants Targeted for Criminal Tax Investigations?

Restaurants are often cash-heavy businesses with high transaction volumes and complex point-of-sale (POS) systems. Unfortunately, these factors also make restaurants prime candidates for both accidental underreporting and deliberate tax evasion.

The FDOR focuses on restaurants for criminal tax investigations when there are signs of intentional wrongdoing, such as:

• Falsified sales records
• Failure to remit collected sales tax
• Use of “zapper” software to alter POS reports
• Operating without a valid sales tax certificate
• Habitual late filing with large balances due
• Evidence of fraud from whistleblowers or former employees

From Audit to Arrest: When a Sales Tax Case Becomes Criminal

Not every sales tax audit leads to a criminal investigation—but many do, particularly when the Department believes fraud is involved.

Here’s how the process typically unfolds:

1. Sales Tax Audit Initiation: The FDOR begins with a routine audit. You may receive a Form DR-840 (Notice of Intent to Audit Books and Records).
2. Evidence of Fraud Found: If the auditor finds evidence of intentional misreporting, such as doctored Z-tapes or undeclared 1099-K income, the case may be referred to the Criminal Investigations Unit (CIU).
3. Criminal Referral: The CIU will conduct a parallel investigation, often without notifying the restaurant owner. They may subpoena bank records, surveillance footage, or POS reports.
4. Charges Filed: If enough evidence is gathered, the FDOR may recommend felony theft of state funds charges to the State Attorney’s Office. The restaurant owner may be arrested.
   

The Role of 1099-Ks in Criminal Investigations

Many restaurants try to match their sales tax filings to their internal POS reports—but forget that the FDOR receives 1099-K data from third-party processors like Square, Toast, or Clover.

If your reported sales are significantly lower than your 1099-K totals, this can raise a red flag. Investigators use 1099-K data to reconstruct actual sales and look for:

• Large gaps between reported and actual income
• POS records that don’t match merchant processing totals
• Patterns of underreporting in multiple tax periods

Example:

If a restaurant’s 1099-K shows $1,000,000 in credit card sales but they reported only $700,000 in gross sales to the FDOR, the $300,000 gap may be seen as evidence of intentional fraud—especially if there’s no legitimate explanation.

What Crimes Are Commonly Charged?

The most common Florida criminal sales tax charges for restaurants include:

• Theft of State Funds under Fla. Stat. § 206.56 or § 212.15
• Willful failure to collect or remit tax
• Fraudulent tax returns
• Conspiracy to defraud the state

Penalties may include:

• Felony charges (often first-degree)
• Fines 
• Restitution orders for unpaid taxes
• Probation or jail time
• Loss of business license

How FDOR Builds Criminal Cases Against Restaurants

The Florida Department of Revenue may use the following types of evidence to build a case:

• Bank statements vs. tax returns
• POS exports from your system (Square, Clover, Aloha, etc.)
• Z-tapes and X-reports
• Internal spreadsheets or handwritten ledgers
• Employee statements
• Security footage
• 1099-Ks or other third-party reporting

Even minor discrepancies, when repeated over time, can be construed as evidence of intent to defraud the state.

What Should You Do If You’re Under Investigation?

If you think your restaurant may be under criminal investigation—or if you’ve already received a subpoena or been contacted by a criminal investigator—do not speak to investigators without legal counsel.

Here’s what to do:

1. Hire a Florida tax attorney experienced in criminal tax defense.
2. Do not destroy or alter any records.
3. Gather your POS, bank, and Z-tape records.
4. Avoid contact with former employees who might be cooperating witnesses.

Can You Fix the Problem Before It Goes Criminal?

Sometimes. If you’re proactive, it may be possible to resolve your case on a civil basis through voluntary disclosure or negotiated settlement before criminal charges are filed.

An experienced Florida sales tax lawyer can:

• Negotiate repayment plans
• Dispute the amount of tax owed
• Challenge the FDOR’s evidence
• Help avoid felony charges altogether

Conclusion

If you’re a restaurant owner in Florida, don’t assume a sales tax issue is “just a business problem.” Criminal sales tax investigations are real—and rising.

What starts as a missing return or underpayment can end with handcuffs if the FDOR believes the underreporting was intentional.

Whether you’ve received a notice, been contacted by investigators, or simply want to protect your business, it’s essential to consult with a Florida tax attorney familiar with criminal sales tax defense.

© 2025 Jeanette Moffa. All Rights Reserved.