Florida Sales Tax Audit: A Step-by-Step Guide from Initial Audit Notice to Administrative Litigation

Receiving a Florida sales tax audit notice can feel overwhelming. For many business owners, the uncertainty is often more stressful than the audit itself. What happens next? What are my deadlines? Can I disagree with the auditor's conclusions? Do I still have opportunities to provide documentation?

The good news is that Florida has a structured administrative process that gives business multiple opportunities to resolve disagreements before litigation becomes necessary. Understanding each step can help you protect your rights and avoid missing critical deadlines.

Step 1: DR-840 – Notice of Intent to Audit Books and Records

The Florida sales tax audit process typically begins when the Florida Department of Revenue issues a DR-840, Notice of Intent to Audit Books and Records.

This notice identifies the type of tax under examination; the audit period; the assigned auditor; and the records the Department intends to review. The issuance of the DR-840 also starts the countdown for when the auditor must begin the audit, which is 120 days from the issue date listed on the notice. The business has 60 days to gather and produce books and records before fieldwork begins. This period allows businesses to organize documentation and identify any missing records before the auditor begins testing transactions.

Although many business owners view this stage as merely administrative, it is often the most important phase of the entire audit. The organization of records, identification of legal issues, and explanation of complex transactions frequently shape the auditor's conclusions long before any assessment is proposed.

Step 2: DR-1215 – Notice of Intent to Make Audit Changes

Once the auditor has finished reviewing the available books and records, the Department issues a DR-1215, Notice of Intent to Make Audit Changes. This notice is not a tax assessment. Instead, it is the Department's preliminary explanation of their findings. The business has 30 calendar days from the issue date the DR-1215 to request a conference with the Department, or provide additional documentation. The request must be submitted in writing to the office identified on the notice. Rule 12-6.002 also permits extensions of time if requested before the original deadline expires. The conference is an opportunity to:

• Present additional documentation;
• Explain transactions that may have been misunderstood;
• Clarify accounting methods;
• Raise legal issues affecting taxability; and
• Attempt to resolve disputed adjustments before they become assessments.

If the business agreed with the assessment amount, they sign the DR-1215 and close out the audit. If not, the audit proceeds to the next stage.

Step 3: Notice of Proposed Assessment

If issues remain unresolved, the Department issues a Notice of Proposed Assessment (NOPA). Unlike the DR-1215, the Notice of Proposed Assessment represents the Department's formal determination of the tax, interest, and penalties it believes are owed. The proposed assessment on the NOPA becomes a final assessment in 60 days from the issue date of the notice. Meaning, the business has 60 days to file a written protest.

At this point, the file has been routed from the field office where the audit was conducted to the Department’s Tallahassee service center. The Informal Dispute Resolution office will assign a conferee. The conferee reviews the protest and may request additional information from both the auditor and the business. If requested, the business is entitled to an informal conference in Tallahassee where the disputed issues may be discussed before a decision is issued.

This is often where significant audit adjustments are resolved. Additional documentation, legal authority, or clarification of the underlying facts can substantially reduce or even eliminate proposed assessments.

Step 4: Notice of Decision

After reviewing the protest, the Department issues a Notice of Decision (NOD). If the business disagrees with the Department's conclusions, there is still another administrative opportunity. A business has 30 consecutive calendar days to file a Petition for Reconsideration. Unlike earlier stages, the Department does not grant extensions for filing this petition. The petition must contain additional facts or legal arguments supporting the business's position. A Petition for Reconsideration is not simply an opportunity to repeat earlier arguments. It should identify legal authority, factual developments, or evidence demonstrating why the assessment should be adjusted.

Step 5: Notice of Reconsideration

After reviewing the petition, the Department issues a Notice of Reconsideration (NOR). Rule 12-6.003 provides that the NOR becomes the Department's final assessment for purposes of Chapter 72, Florida Statutes. At this point, the Department's informal administrative review process has concluded, and the next step will involve litigation.

Chapter 120 Administrative Litigation

If the business continues to dispute the assessment, the next step is no longer an informal protest. At this step of the process, the business may file a petition under Chapter 120, Florida Statutes, initiating formal administrative litigation. This filing goes to the Division of Administrative Hearings (DOAH), which is the Florida tax court. An Administrative Law Judge considers disputed legal and factual issues before issuing a recommended order. Unlike the earlier audit stages of the administrative process, Chapter 120 proceedings are governed by Florida's Administrative Procedure Act and follow formal litigation procedures, including pleadings, discovery, motions, evidentiary hearings, and legal briefing.

The Bottom Line

A Florida sales tax audit is not a single event, it is a series of administrative opportunities to resolve disagreements before litigation becomes necessary. From the initial DR-840 through a Chapter 120 petition, businesses are afforded multiple chances to present documentation, explain transactions, and challenge the Department's legal conclusions. Understanding the deadlines is critical. Missing a protest deadline or failing to provide supporting documentation at the appropriate stage can significantly limit a business's options. Businesses that approach the audit process strategically are often in the strongest position to achieve a fair and accurate result.

At Ribeiro Law, we have assisted hundreds of businesses, of all sizes, work through Florida sales and use tax audits. If you have received a Florida sales tax audit notice, reach out today for a free consultation to discuss your options.