Receiving notice of a 2025 Florida sales tax audit can send waves of panic through any business owner. Sales tax is a critical source of revenue for the state, and the Florida Department of Revenue (FDOR) closely monitors compliance. If you’ve found yourself in the crosshairs of an audit, don’t worry—you’re not alone, and there are clear steps you can take to navigate the process.
This blog serves as your guide to understanding what a sales tax audit entails, why it happens, and how to handle it effectively. By the end, you’ll have the tools and knowledge needed to tackle the audit with confidence.
What Is a Florida Sales Tax Audit?
A sales tax audit is an official review conducted by the FDOR to verify that a business is correctly collecting, reporting, and remitting sales tax. Auditors examine financial records to ensure compliance with Florida tax laws and to identify any discrepancies that could result in additional tax liabilities.
Why Was I Chosen for a Sales Tax Audit?
The FDOR selects businesses for audits based on several factors, including:
- Inconsistent Reporting
If your reported sales tax doesn’t align with your revenue or industry averages, it can raise a red flag. - Industry Risk
Certain industries, such as retail, food and beverage, and construction, are more prone to audits because of their heavy reliance on cash transactions or complex tax exemptions. - Random Selection
Sometimes, businesses are chosen randomly as part of routine compliance checks. - Consumer Complaints or Whistleblowers
If a customer, employee, or competitor files a complaint or reports suspicious activity, the FDOR may investigate. - Noncompliance by Related Parties
If one of your vendors or partners is audited and found noncompliant, the FDOR may review your records to ensure proper reporting.
What Happens During a Sales Tax Audit?
The sales tax audit process typically unfolds in several steps:
- Notification
The FDOR will send you an official audit notice. This document outlines the type of tax being audited, the period under review, and the records you need to provide.
- Initial Meeting
Auditors may schedule a preliminary meeting to explain the audit process, clarify their expectations, and discuss your business operations.
- Document Review
The auditor will request financial records such as:
- Sales tax returns
- General ledgers
- Sales invoices
- Bank statements
- Purchase receipts
- Exemption certificates (if applicable)
The FDOR typically reviews records for the past three to five years, depending on the circumstances.
- Field Visit (If Applicable)
For some businesses, auditors may visit your physical location to observe operations, review point-of-sale systems, and interview staff.
- Preliminary Findings
After reviewing your records, the auditor will present their initial findings. This report will detail any discrepancies and potential tax liabilities.
- Discussion and Clarification
You’ll have the chance to review the findings, provide additional information, or dispute any errors.
- Final Report
The FDOR will issue a final audit report summarizing the results. If additional taxes are due, they’ll provide instructions for payment.
What Are Common Issues Found in Sales Tax Audits?
- Underreported Sales
Failing to report all taxable sales is one of the most common findings in an audit. - Incorrect Application of Exemptions
Florida allows certain sales tax exemptions, but improper documentation or misuse of these exemptions can lead to penalties. - Use Tax Errors
Businesses must pay use tax on items purchased without sales tax when those items are used within Florida. - Failure to Collect Sales Tax
Not charging sales tax on taxable items or services can result in significant liabilities. - Recordkeeping Issues
Poorly maintained or incomplete records can make it difficult to verify compliance and often result in unfavorable audit outcomes.
How Can I Respond to a Sales Tax Audit?
- Stay Calm
Receiving an audit notice can be stressful, but staying composed will help you think clearly and act efficiently. - Gather Records
Collect all requested financial documents promptly and ensure they are well-organized. - Consult a Professional
A tax attorney, accountant, or audit specialist can guide you through the process, help you interpret findings, and represent you in discussions with the FDOR. - Be Transparent
Cooperate fully with auditors, but avoid volunteering information that isn’t directly requested. - Review the Findings
Scrutinize the auditor’s preliminary report carefully. If there are errors, provide evidence to correct them. - Appeal if Necessary
If you disagree with the final audit results, you have the right to challenge the findings through an appeal or administrative hearing.
What Are the Penalties for Noncompliance?
If the FDOR finds errors or omissions during your audit, the consequences can include:
- Back Taxes: Payment of taxes owed for the audited period.
- Interest: Charges on unpaid taxes from the date they were due.
- Penalties: Additional fines for late payments, underreporting, or failure to file returns.
- Legal Action: In severe cases, intentional fraud or tax evasion can lead to criminal charges.
How to Avoid Future Sales Tax Audits
While it’s impossible to guarantee immunity from audits, following best practices can significantly reduce your risk:
- Maintain Accurate Records: Keep thorough and organized financial records for at least five years.
- Understand Tax Rules: Familiarize yourself with Florida’s sales tax laws, including exemptions and reporting requirements.
- File Timely and Accurate Returns: Ensure your sales tax returns are error-free and submitted on time.
- Conduct Regular Reviews: Periodically audit your own records to catch and correct discrepancies before they escalate.
- Work with Professionals: Regularly consult with tax professionals to ensure ongoing compliance.
When to Seek Professional Help
A Florida sales tax audit is complex and time-consuming, and mistakes can be costly. Engaging a tax professional, such as an accountant or tax attorney, can be invaluable. They can help:
- Review and organize your records.
- Communicate directly with auditors.
- Identify and address discrepancies in the findings.
- Negotiate settlements or payment plans if necessary.
Conclusion: Don’t Panic—Get Help!
If you’re facing a Florida sales tax audit, know that you don’t have to go through it alone. Understanding the process, preparing your records, and seeking professional guidance can help you navigate the audit smoothly and minimize its impact on your business.
The key to success is preparation and cooperation. By staying organized and informed, you can address any challenges that arise and emerge from the audit with your business intact. Remember, help is available—don’t hesitate to seek it!
Additional Articles from the SALTy Orange Newsletter:
Motor Vehicle Sales Tax Rates by State – 2024
Florida Department of Revenue Issues Notice on Taxability of Holiday Decor
Florida Department of Revenue and IRS Relief for Florida Taxpayers Affected by Recent Hurricanes
Jeanette Moffa, Esq.
Phone: (954) 800-4138
Email: [email protected]
Jeanette Moffa is a Partner in the Fort Lauderdale office of Moffa, Sutton, & Donnini. She focuses her practice in Florida state and local tax. Jeanette provides SALT planning and consulting as part of her practice, addressing issues such as nexus and taxability, including exemptions, inclusions, and exclusions of transactions from the tax base. In addition, she handles tax controversy, working with state and local agencies in resolution of assessment and refund cases. She also litigates state and local tax and administrative law issues.
