How DHSMV Reports Are Used in Auto Dealer Sales Tax Audits

If you’re an auto dealer operating in Florida—or any state that ties title and registration to tax enforcement—you need to understand the role of Department of Highway Safety and Motor Vehicles (DHSMV) reports in sales tax audits. In recent years, state tax agencies have increasingly relied on vehicle registration data to identify underreported sales, unpaid taxes, and even potential fraud.

This article explains how DHSMV reports are used in sales tax audits of car dealerships, what types of discrepancies auditors look for, and how dealers can proactively defend their businesses.

What Is the DHSMV Report?

In Florida, the DHSMV maintains a comprehensive database of motor vehicle titles, registrations, and lien information. Other states have similar motor vehicle departments. The Florida Department of Revenue (FDOR) frequently pulls data from the DHSMV to match against dealer records during a sales tax audit.

The DHSMV report includes:

• VIN (Vehicle Identification Number)
• Title issue date
• Purchase/sale price declared at the time of title transfer
• Dealer number and name
• Purchaser’s name
• Date of sale
• Vehicle type and class

How State Tax Agencies Use DHSMV Reports in Sales Tax Audits

During a sales tax audit, the state compares the DHSMV report data against:

• Dealer sales tax returns (e.g., Florida DR-15s)
• Internal dealer books and records
• Deal jackets and buyer’s orders
• Finance and insurance (F&I) documents
• Bank deposit records

If the DHSMV report shows a vehicle was sold, but the dealer’s records or tax returns don’t reflect that sale—or if the reported sale price seems suspiciously low—auditors may assert underreported taxable sales and assess additional tax, penalties, and interest.

Common Audit Triggers from DHSMV Discrepancies

• Missing Transactions: A vehicle is titled through the DHSMV, but the dealer never reported the sale.
• Underreported Sales Price: The sale price reported to DHSMV is lower than what was actually paid.
• Uncollected Tax: The sale occurred, but no tax was collected—often flagged in wholesale, out-of-state, or exempt transactions.
• Incorrect Exemption Claims: The dealer claims the sale was exempt, but the DHSMV record doesn’t support it.
• Title Transfers Without Reported Sales: A dealership transfers a car to a related entity without reporting it as a sale.

Hypothetical Example: DHSMV Audit of a Florida Used Car Dealer

Imagine a Florida used car dealership that sells around 300 vehicles annually. During a routine sales tax audit, the state reviews DHSMV title records and discovers that 48 vehicles were titled through the dealer’s license but were not included on the dealer’s DR-15 returns.

The auditor flags the transactions and assumes they represent unreported retail sales. The dealer claims many were wholesale sales to other licensed dealers—but cannot provide valid resale certificates for most of them. Based on the discrepancy, the Department proposes an assessment of over $80,000 in back taxes, penalties, and interest.

Had the dealer properly maintained resale certificates and reconciled monthly with DHSMV records, this hypothetical audit could have been resolved with little or no liability.

How Moffa Tax Law Defends Auto Dealers in DHSMV-Based Audits

At Moffa Tax Law, we help auto dealers throughout Florida and other states defend against aggressive sales tax audits based on DHSMV data.

• Matching DHSMV records to internal sales logs
• Explaining wholesale, exempt, or repo-related transactions
• Assembling proper resale and exemption documentation
• Challenging estimated assessments and flawed sampling
• Filing administrative protests and litigating improper audit methods

Best Practices for Auto Dealers

• Reconcile sales monthly with DHSMV title records
• Keep copies of all resale and exemption certificates on file
• Ensure deal jackets are complete
• Avoid underreporting sale prices to reduce fees
• Retain proof of tax collected and remitted
• Contact legal counsel immediately if you receive a DR-840 or other audit notice

FAQ: DHSMV Reports in Auto Dealer Sales Tax Audits

What is a DHSMV report?

It’s a report from the Florida Department of Highway Safety and Motor Vehicles that lists vehicle title and registration data, including sale prices and purchaser names. It’s used by the DOR to verify auto dealer sales.

Why does the Florida Department of Revenue use DHSMV data in audits?

To detect unreported sales, underreported sale prices, and sales tax compliance issues. It’s a cross-check against what dealers report on tax returns.

Can I be audited if the DHSMV report doesn’t match my sales tax returns?

Yes. A mismatch often triggers an audit. If a car is titled but doesn’t appear in your DR-15 filings, FDOR will likely investigate.

What happens if I can’t explain discrepancies?

The DOR may issue a proposed assessment with back taxes, penalties, and interest. You can protest, but the burden is on you to justify any omissions.

How far back can the state audit DHSMV reports?

Most states, including Florida, audit back 3 years—but if fraud or substantial understatement is suspected, that can extend to 5 years or more.

What should I do if I receive an audit notice?

Contact Moffa Tax Law immediately. Early intervention can limit audit scope, correct misinterpretations, and reduce liability.