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The Florida Department of Revenue does not rely on random selection alone. Most sales tax audits are triggered by specific signals: a mismatch between the sales reported on your DR-15 returns and the gross sales on your federal income tax return, an exempt-sales ratio out of line with your industry, 1099-K credit card data that does not match what you reported, bank deposits above reported sales, business events like a closure or ownership change, and tips. The audit formally begins with a Notice of Intent to Audit Books and Records (Form DR-840), which starts a 60-day clock before fieldwork.
Receiving a Florida sales tax audit notice raises an immediate question: why me? The answer is rarely bad luck. The Department of Revenue uses data to decide whom to audit, and knowing what it looks at tells you where your business stands and what to fix before a notice ever arrives. This article lays out the real triggers, how the Department selects, and what a DR-840 sets in motion. For the wider context, see our complete guide to Florida sales and use tax.
How the DOR Picks Targets
The Department’s audit selection is a mix of computer-driven analysis and human referral. Its systems compare your filed returns against outside data, federal income tax returns, credit card 1099-K reports, and information shared by other states, and they flag the accounts where the numbers do not line up. Some businesses are chosen at random, and some are referred through tips. But the largest share are selected because something in their reporting stands out.
Selection methods vary by tax, and the Department is not required to volunteer a detailed reason up front, though you can ask the auditor why you were chosen. What matters more is recognizing the patterns that draw attention, because most of them are visible in your own records. The data matching is continuous, not occasional; the Department receives federal and 1099-K information as a matter of course, so a gap on your returns is visible to it whether or not an audit has started.
What Actually Triggers an Audit
These are the signals that most often put a business on the list:
- A federal-to-state sales mismatch, where gross sales on the federal income tax return exceed the sales reported on the DR-15. This is the most common trigger; the auditor presumes the difference is unreported taxable sales, and the burden shifts to you.
- An exempt-sales ratio out of range, meaning a higher share of exempt or resale sales than is typical for your industry.
- A 1099-K mismatch, where the credit card sales on your 1099-K do not match what you reported.
- Bank deposits above reported sales, which can be treated as unreported sales unless you prove otherwise.
- Business events, such as closing a location, changing ownership, or filing for a large refund.
- Industry risk, since cash-heavy businesses such as restaurants, bars, and convenience stores are audited more often.
- Tips and referrals, from competitors, former employees, or business partners.
- Random selection, because a portion of audits are simply chosen at random.
| Lower audit risk | Higher audit risk | |
| Federal vs DR-15 sales | They line up | Federal sales exceed reported sales |
| Measurement (what the DOR compares) | Returns match the outside data | Returns diverge from the data |
| Exempt sales | In line with your industry | Out of the industry range |
| 1099-K credit card data | Matches your reported sales | Shows more than you reported |
What a DR-840 Sets in Motion
An audit formally begins when the Department issues a Notice of Intent to Audit Books and Records, Form DR-840. A narrower review may instead arrive as a DR-846, a limited scope audit. The notice names the tax types, the audit period, and the records you will need to provide.
The DR-840 starts a 60-day clock. By statute, the Department cannot begin reviewing your records for 60 days, must start the audit within 120 days, and generally must complete it within a year. That 60-day window is not a delay to waive away; it is your time to organize records and find problems before the auditor does. The standard look-back is three years, and longer if you did not file or filed substantially incorrect returns.
From there, the auditor requests records, often far more than is strictly relevant, and reviews them, frequently using a sample of months extrapolated across the whole period. Common focus areas include exempt sales and use tax on untaxed purchases. If your records are inadequate, the Department is authorized to estimate the tax, and in practice it may estimate even when records are provided. The findings arrive as a Notice of Intent to Make Audit Changes (Form DR-1215), which carries a 30-day window for an informal conference, followed by a Notice of Proposed Assessment that you have 60 days to protest. A single distorted sample month can skew the entire assessment, which is one reason the records you present, and how you present them, matter so much. You have the right to be represented throughout, and a representative can deal with the auditor and the records on your behalf once you file a power of attorney, Form DR-835.
High-Risk Industries: The Restaurant Example
Some industries draw audits far more than others, and restaurants are the clearest example. They are cash-heavy, they mix taxable and exempt items, they collect on alcohol and prepared food, and their 1099-K credit card data gives the Department a ready point of comparison. When records fall short, auditors often reconstruct sales using a markup method, applying a typical markup to food and beverage costs to estimate taxable sales. The same logic reaches other cash-heavy and exemption-heavy sectors, from convenience stores to contractors, but restaurants face the most consistent scrutiny.
Because this sub-niche has its own rules and defenses, we cover it separately. If you operate a restaurant or bar, start with our guide to the restaurant audit notice and the DR-840, and the one on the markup method auditors use to estimate restaurant sales. The triggers in this article apply across industries; the restaurant guides go deeper on that specific risk.
Why Audit Defense Is Not DIY
Naming the triggers is the easy part; defending the audit is where the outcome is decided. The burden shifts to you to prove that deposits or federal sales were not taxable, the auditor controls the sampling and the estimation, and over-sharing records can expand the assessment rather than reduce it. You also have rights that are easy to forfeit by accident, including the right to representation and the right to that full 60-day preparation period. There is also a sharper risk in the background: a civil audit can turn into a criminal matter if the Department concludes you collected tax and never remitted it, which Florida treats as theft of state funds.
If you have received a DR-840, or you can see your own business in the triggers above, the time to get help is before the fieldwork starts. A Business CPA Tax Resolution Case Analysis reviews where you stand and how the audit is likely to unfold. Reach out through the contact page to talk it through. And if you are behind but have not yet been contacted, voluntary disclosure may be the better path before an audit ever begins.
For official guidance, the Florida Department of Revenue’s sales and use tax pages and its overview of what to expect from a tax audit explain the process and your rights, though neither replaces advice on your own situation.
Facing a Florida Sales Tax Audit?
A DR-840 starts the clock, and what you do in the first 60 days shapes the result. Ed Parsons, CPA represents Florida businesses through sales tax audits, from the first notice to the final assessment.
Start with a Business CPA Tax Resolution Case Analysis, which explicitly covers sales tax audits and representation. Prefer to talk it through first? Book a Business IRS Tax Debt Coaching Call, or reach us through the contact page.
