If you run a car dealership in Florida—whether you sell new, used, or both—you’re sitting in the Florida Department of Revenue’s crosshairs. Auto dealers are one of the most frequently audited industries in the state, and for good reason: high-dollar sales, complicated exemptions, and surtax confusion make it easy for even honest dealers to get it wrong.

When the Department of Revenue opens a sales tax audit, it’s not just a routine review. It’s a legal process with real financial consequences—and if mishandled, the results can be devastating. Here’s what every Florida auto dealer needs to know about how a sales tax audit unfolds, what records auditors examine, and how to respond at every stage—from the initial audit notice to the final assessment.

Why the FDOR Targets Auto Dealers for Audit

Florida car dealerships routinely make the Department’s audit list. The reasons are clear:

• Sales tax volume is high, with each vehicle subject to thousands of dollars in tax

• Many dealers handle cash, which increases the risk of unreported income

• Sales to out-of-state buyers, use of trade-ins, dealer fees, and warranty add-ons make transactions legally complex

• Surtax errors are common—especially in counties bordering multiple surtax jurisdictions

• Some dealers misapply or fail to document exemptions, triggering red flags

In short, dealerships present a perfect storm of audit risks. FDOR knows this, and that’s why car dealers are audited frequently and aggressively.

Step 1: It Starts with a DR-840 – Notice of Intent to Audit Books and Records

The first step in the audit process is a Form DR-840, the Notice of Intent to Audit Books and Records. This form signals the Department’s official decision to initiate a sales and use tax audit of your business.

Key points:

• The DR-840 typically covers a three-year audit period, unless extended due to suspected fraud or other red flags

• You must retain and make available all relevant books and records, including those maintained electronically

• The Department must give you at least 60 days’ notice before beginning the fieldwork phase

The audit doesn’t begin the day the auditor shows up—it begins the moment the DR-840 is issued. From that point forward, everything you say, share, or do can shape the outcome.

Step 2: Preparing for the Fieldwork Phase

Unlike individuals and some industries that may receive a DR-846 Limited Scope Audit Notice, car dealers are almost always subject to full-scope audits. The FDOR will request a wide range of documents in advance.

Typical requests include:

• Sales and use tax returns (DR-15)

• Vehicle deal jackets, including buyer’s orders, financing terms, trade-in documentation, and title paperwork

• Bank statements and reconciliations

• Inventory records and floor plan documents

• Dealer Management System (DMS) data exports

• Auction purchase documentation

• Copies of resale or exemption certificates

• Loaner/demo vehicle records and internal use logs

The auditor’s goal is to reconcile reported sales tax with actual transactions. Any inconsistency—especially between your DMS records, bank deposits, and filed returns—will raise concerns.

Step 3: Audit Methodology and Review Areas

During fieldwork, the auditor may review 100% of transactions or perform a sample-based audit using a block sample of several months. That sample is then used to estimate total underreporting over the entire audit period.

The most common problem areas for auto dealers include:

• Underreported sales, especially for cash transactions or dealer-to-dealer sales

• Incorrect application of trade-in credits

• Uncollected or misapplied discretionary surtax

• Improper documentation of exempt sales, such as to out-of-state buyers or resale purchasers

• Use tax issues, especially on loaner or demo vehicles, or vehicles pulled from inventory for personal use

• Discrepancies between DMS sales records and tax returns

Auditors are trained to look for “missing” deals, partial payments, and unusual deposits—so it’s critical that your documentation matches your reporting.

Step 4: The DR-1215 – Notice of Intent to Make Audit Changes

Once the auditor completes their fieldwork, they will issue a Form DR-1215, the Notice of Intent to Make Audit Changes. This is not the final bill—it’s a preliminary notice that outlines:

• Proposed adjustments to your reported sales or tax

• The basis for those changes

• Your right to respond within 30 days

This 30-day window is your opportunity to:

• Provide additional documentation

• Clarify or correct misunderstandings

• Make legal or factual arguments as to why the proposed changes are incorrect

Many audit assessments are significantly reduced—or avoided entirely—at this stage. But only if you act promptly and present your case clearly.

Step 5: The NOPA – Notice of Proposed Assessment

If the Department disagrees with your response to the DR-1215, they will issue a Notice of Proposed Assessment (NOPA). This is the official assessment of taxes, interest, and penalties owed.

The NOPA is binding unless challenged. It includes:

• The final amount of tax due

• Accrued interest, which increases the longer the liability remains unpaid

• Penalties, which can range from 10% for simple errors to 50% or more for negligence or fraud

You have 60 days from the date of the NOPA to file a protest under Florida’s informal or formal dispute process. If you do not protest, the NOPA becomes final and collectible.

Step 6: Challenging the Audit Results

If you disagree with the NOPA, you have several options:

1. Informal protest with the Department of Revenue, typically by letter brief and supporting documentation

2. Formal protest with the Department’s Office of Decision and Review (usually through legal counsel)

3. Litigation, either by petitioning the Division of Administrative Hearings (DOAH) or paying under protest and filing a refund action in circuit court

Many auto dealers resolve their audit issues in the informal protest phase, but only with the help of professionals who understand FDOR’s internal procedures.

Don’t Wait Until It’s Too Late

The biggest mistake auto dealers make is waiting until the final stages of an audit to seek help. By then, critical deadlines may have passed, and the Department has already hardened its position.

Sales tax is trust fund tax—money collected from customers and held for the state. When it’s not remitted properly, the Department treats it as a serious offense, and in some cases, audit findings can lead to referrals for criminal investigation.

How We Help

At Moffa Tax Law, we’ve defended hundreds of Florida businesses—especially car dealerships—in sales and use tax audits. We understand the audit process inside and out, and we know where auto dealers are most vulnerable.

From day one of the audit through the protest or litigation phase, we work to:

• Limit the scope of document production

• Protect you from overreaching audit methods

• Reduce or eliminate improper assessments

• Fight back against inflated penalties

If you’ve received a DR-840 or suspect your dealership is on the audit radar, call us now. A proactive defense is the best—and sometimes only—way to control the outcome.