For businesses operating in Florida, a tax audit can be a significant and stressful event. Understanding the process from the initial notice through potential litigation before the Division of Administrative Hearings (DOAH is essential for effectively managing risk and protecting your rights. Understanding the process is half the battle in getting prepared in the event of an audit notice.
The process begins when the Florida Department of Revenue (DOR) issues a Notice of Intent to Audit Books and Records. This notice identifies the tax types under review, the audit period, and the assigned auditor. This is the best time to consider engaging legal counsel or a tax professional to assist with the audit process. Early intervention and organization can significantly influence the audit outcome.
After initial contact, the auditor will issue Information Document Requests (IDRs). These requests seek a standardized set records based on the type of business under review. The business has 60 days from the initial notice to gather books and records. Generally, the auditor requests detailed financial statements, customer contracts, and invoices. The auditor may also conduct an opening conference to discuss the business operations, accounting systems, and internal controls. Setting the tone at this phase is critical. Incomplete or disorganized responses can lead auditors to higher proposed liabilities.
During the audit examination phase, as the name implies, the auditor examines the business’s records to determine compliance with Florida sales and use tax laws. This includes a review of the business’s sales and purchases to determine taxability, meaning the Department will confirm tax was properly paid on purchases and properly collected and remitted on any sales. If records are not sufficient, or the data is voluminous, auditors can rely on sampling. If errors are identified in the sample, those errors will be extrapolated across the entire audit period. This can result in an overstated assessment. Having a tax professional involved can help ensure the documentation is organized, and that the result will be equitable.
This review can take anywhere from just a few weeks, to several months. The amount of time it takes to complete this examination is based on several factors including the condition of the records provided, and the volume of sales and purchases. More complicated business models tend to take longer, and may require signing a statute extension, to give the auditor additional time to get to the right result.
Once the audit is complete, the auditor issues a DR-1215 notice of Intent to Make Tax Audit Changes. This is the auditor’s summary of amounts due, broken down into schedules. Thirty days from the issuance of the DR-1215, the Department will issue a Notice of Proposed Assessment (NOPA). The proposed assessment will become a final assessment 60 days after the NOPA is issued. Meaning, at this point, the business has an opportunity to respond before the file is closed. The response, called a Protest, will be assigned to someone in the Department’s Tallahassee service center. The business will be given the opportunity to have a conference to try and come to a resolution. If the parties do not resolve the remaining issued, a Notice of Decision will be issued, and the business has an opportunity to file another Protest and have another conference. This phase of the process moves more quickly than audit, since there are less documents to review and the issues have already been outlined. Once the case is assigned, conferees are efficient. A conference will be scheduled in 30 days, and the next notice is generally issued 30-60 days later. and turns serves as a bridge between audit and litigation and can often resolve disputes without the need for formal proceedings.
If the dispute is not resolved administratively, the business may file a petition for a formal administrative hearing with the Division of Administrative Hearings (DOAH). At DOAH, the business will have to demonstrate, before an Administrative Law Judge (ALJ), that tax was properly collected and remitted on sales, and tax was paid on expense items. This is done through evidence and witness testimony, as well as legal arguments regarding the taxability of transactions in question. After the hearing, the ALJ issues a Recommended Order, which is then submitted to the DOR for entry of a Final Order.
The Florida sales tax audit process is increasingly formal as it progresses. From the initial notice through potential litigation, each stage presents both risks and opportunities. Early engagement, careful documentation, and strategic legal guidance are critical to achieving a favorable outcome.
Businesses facing a Florida sales tax audit should take the process seriously from the outset. Proper handling at the audit stage can often prevent costly disputes later—and may eliminate the need for litigation altogether.
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