by Fresh Start Tax | Nov 26, 2013 | Florida Sales Tax
Florida Sales Tax Audit Defense
Hire Former Sales Tax Agents who know the system.Frank Lamantia was a Former Agent with over 16 years of direct working experience with the Florida Department of Revenue.
Is your business being audited for Florida sales and use tax?
Has the Florida Department of Revenue contacted your company about a Florida sales and use tax audit or have you already received the Florida form DR 840 – Notice of Intent to Audit Books and Records?
Beware:
The Florida Department of revenue will use every effort to intimidate you in order to collect tax, penalty and interest from your business.
Do not be bullied by a Florida tax agent.
We are a full-service tax firm that specializes in everything from IRS bills and notices and state warrants to tax records.
We are comprised of tax attorneys, tax lawyers, certified public accountants, enrolled agents, former IRS agents, former state of Florida auditor, managers and tax instructor’s.
Businesses and individuals that the DOR suspects have avoided for tax payment are targeted, but any business with significant business activity can expect to be audited eventually.
Lately we’ve seen the DOR target entire industries such as convenience stores, restaurants and bars, hotels, and manufacturers.
But let it be known that audits are also randomly selected or could have been turned in by a former employee or customer for the tax issue.
The auditor will ask for all kinds of records that they are not necessarily entitled to have such as electronic copy of your whole accounting records.
The auditor will also ask you to sign certain documents that could wave your rights as a taxpayer, such as agreeing to the states sample method.
Most of the time the auditor is chasing a lead that may not prove to generate any revenue for the state but in the chase they usually find other tax issues.
Companies that have done everything they can to comply with the Florida tax laws can still end up with serious complications on a Florida sales and use tax audit just because the auditor’s job is to find deficiencies.
Insider Tips:
As a former Florida sales tax agent I can tell you in advance what type of questions the auditor will ask, how the auditor will conduct the audit, what the auditor will focus on and what types of documentation will be examined.
Remember that the auditor’s job is to find unreported or underreported revenue and use tax from purchases that did not have the proper sales tax paid and therefore the questions will be focused aggressively in the areas of high dollar recovery.
On sales expect the auditor to focus on these issues:
• review internal controls for a recorded/undocumented sales
• sales on the books as compared to sales per state tax returns
• sales per the federal income tax returns compared to sales per the state tax return
• deposits per bank statements compared to sales per sales tax return
• an analysis of the sales tax payable account to the sales tax actually remitted
• verify that tax being collected is at the correct rate for the locations
• review a representative test for each revenue account
On the use tax side the auditor will focus on these issues:
• purchases from out-of-state vendors of items that were not resold to customers
• review depreciation schedules and/or check register for assets purchased during the audit
• review County tangible personal property tax returns for asset acquisitions
• purchase of fixed assets and fixed asset additions
• Internet purchases
• verify and trace accruals from source documents to general ledgers and sales tax reports
• analyze consumables pulled from inventory
• analyze leases of tangible personal property for compliance
For commercial rent the auditor will focus on:
• rental income – ensure tax was collected on all components of the rent
• rental expense – ensure tax was paid on all components of rent
• on rent paid – ensure that the landlord is properly registered with the state of Florida
Our staff consists of tax attorneys, certified public accountants, Florida IRS agents and a former sales tax auditor with over 16 years of direct work experience with the Florida Department of Revenue.
Feel free to contact us for initial tax consulting for Florida sales tax audit defense.
We will completely review your case and give you a full assessment of your audit status so you can make an informed and confident decision on how to fully resolve your sales tax audit case.
Florida Sales Tax Audit Defense
by Fresh Start Tax | Oct 11, 2013 | Florida Sales Tax
Florida Sales Tax Audit Defense –Restaurants-Bars
Florida Sales Tax Auditors are Fishing for Revenue in Your Business
Florida Sales Tax Audit News – Bars and Restaurants
Insider Tips:
Beware: The Florida Department of Revenue knows the amount of Alcoholic Beverage and Tobacco Products you are purchasing from your distributor.
Frank Lamantia of FST should know, he was a Former Sales Tax Agent. He will tell you, Big Brother is watching.
Make sure you are truthful and accurate with Florida Sales Tax Auditors when revealing information to them because they already know about your purchases. You are not going to fool them.
The key insider tip is to understand that the Florida state sales tax auditor already knows your information before she/he even goes into your business.
It is critical that you give to them the exact records that are on file because they will know if you are trying disguise, hid, alter, or fail to give all the necessary documents and records.
Remember most of the Florida State tax auditors have audited hundreds of businesses in our experts in fishing for your business.
They know all the tricks of the trades for restaurants and bars. It is much better to pay the tax than to be involved in a criminal tax violation.
Reporting Requirements
Florida Department of Revenue – Reporting Requirement for Sellers of Alcoholic Beverage and Beverage and Tobacco Products to Florida Retailers
Every seller (manufacturer, wholesaler, or distributor of alcoholic beverage or tobacco products who sells to retail or in Florida) must submit a report electronically each year to the Department of revenue. This annual report is to on July 1 for the preceding reporting. It is late after September 30.
The report for state fiscal year 2012 – 13 must include sales to Florida retailers from July 1, 2012 to June 30, 2013. The report was due on July 1, 2013 and is late after September 30, 2013.
Sellers must submit the reports of electronically using the departments website. Each seller received a notice with their assigned user ID and password to access the system.
What are the reporting requirements?
Each report must contain:
· the seller’s name
· the sellers beverage license or tobacco permit number
· the retailer’s name
· the retailers beverage license or tobacco permit number
· the retailers address, including street address city, State, and ZIP Code
· the general item type, such as cigarettes, cigars, tobacco, beer, wine, spirits, or any combination of these items
· the net monthly sales total, in dollars sold to reach retail
Why Do Sellers Have to Report This Information
The Florida Department of revenue wants to find out if you are under reporting sales and use tax on alcoholic beverage and tobacco products sales.
Section 212.133, Florida statutes, imposes this annual reporting requirement on sellers of alcoholic beverage or tobacco products to Florida retailers. This information report will be used by the Department of revenue to identify Florida retailers who may be under reporting sales and use tax on alcoholic beverage and tobacco products sales.
For example the department will compare net wholesale sales of alcohol and tobacco products with the amount of sales and use tax reported and paid by the retailers.
Also as Stated in Florida Department of Revenue Tax Information Publication (TIP) No. 11A-01-04, dated June 17, 2011
Florida Department of Revenue Audit Representation for the Restaurant and Bar Industry
If you are going through a sales tax audit contact us today and speak to a former Florida sales tax agent, attorney, and Certified Public Accountants who could limit your exposure.
We are A+ rated by the Better Business Bureau and have been in practice in the State of Florida since 1982
With spending increases and cutting taxes there is only one way to balance the budget – Fishing for money through an Audit of Your Business.
The restaurant and bar industry, a major source of audit assessments will see an increase in audit activity to generate funds to cover the increased spending budget and the reduced taxes and fees.
Voluntary Disclosure:
If you have been under reporting or not reporting and you have not received a notice of audit, it is highly recommended that you contact our firm and we will assist your restaurant/bar in the process of going through a voluntary disclosure program to come clean now with the Florida Department of revenue, have most of the penalties waived and prevent it from becoming criminal.
Florida Tax Audit Help Provided to the Restaurant Industry
As An Insider – a former Florida State Sales Tax Agent – the following will explain to you some of the sales tax audit techniques used by the State of Florida Department of Revenue and the audit issues that will be targeted:
Methods of Operations for Restaurants and Bars
Restaurants
Restaurants range in size from small mom-and-pop operations to the national chains. All operate generally the same way, selling repaired food for consumption on or off the premises.
A large number of restaurants also operated lounges, in connection with the restaurant. These restaurants may operate in a number of different ways. Some serve alcoholic beverages with the food, as a part of the restaurant and some operated lounges that are completely separate operations from the restaurant. Some also offer entertainment and dancing, and a cover charge is sometimes imposed.
The primary statute related to restaurants is Section 212.08(1)(c), F.S., and the primary rule is Rule 12A-1.011 F.A.C.
Bar/Lounges/Package Stores
The operations of the bar will very they could sell prepared food and offer entertainment and dancing. They may also charge patrons a cover charge. The bar/lounge may also sell other items in addition to alcoholic beverages, such as picnic supplies, food, ice, T-shirts and a variety of party items.The bar/lounge and package store may be located in the same building but in different rooms. Separate cash registers may be used for the bar/lounge and package store, or sometimes the same register will be used for both operations.
Bars/Lounges
The dealer may record each sale and add the tax to the selling price. This results in the dealer reporting all taxes collected. The dealer may inform customers that the selling price includes the tax (putting them on notice). To do this, signs must be posted throughout the establishment that can be seen by all customers when ordering drinks. If the dealer selects this mess method, the tax to be reported will be calculated in the following manner:
Bars and/or cocktail lounge should divide their gross receipts by 1.0659, the result being the gross sales amount; the difference between the gross receipts amount in the gross sales tax amount should be reported as tax collected.
A combined bar and package store (operated as a single unit), which used the same method as bars and cocktail lounges.
An Example:
a bar has gross receipts of 32,585.50 including tax, and signs are posted. Therefore tax due would be computed as follows: 32,545.50÷1.0659 equals 30,533.35 gross sales… 32,545.50 less 30,533.35 = $2012.15 tax due.
The dealer may choose to set different prices that do not include tax and do not post signs to inform customers that tax is being collected, thus excluding tax from the price if this method is selected, the dealer would calculate and report the tax as follows:
· bars and or cocktail lounges should multiply their gross receipts by 0.0659 and report the results as tax due
· a combination bar and package store where the operations are not separated, which used the same method as the bar and cocktail lounge
· Example: no signs are posted in gross receipts are 32,545.50. Computation would be 32,505.50 x .0659 = 2144.75 tax due.
In this example, gross receipts are equivalent to gross sales because tax was not charged on the sale.
A bar or cocktail lounge may operate a packaged the bar/lounge offer drinks for consumption on the premises and the package store will offer package goods to take out.
Bars, Package Stores
Bars, package stores, and combinations that do not separately record the sales price and in tax are required to remit the tax on the percentage gross receipts. The applicable percentages are:
· 6.35% for package stores
· 6.59% for bars and bar/package store combinations
When the taxpayer can demonstrate that the customers had been informed that the price charged includes the tax, the gross receipts may be reduced by the amount of the tax (See Rule 12A-1.057, F.A.C.).
Package Stores
Facilities/Operations that do not sell by the drink for consumption on the premises will be considered a package store. These type operations offer only items to be taken out. In addition to alcoholic beverages, they will offer items such as picnic supplies, food, ice, T-shirts, hats and party items for sale.
The dealer may record each sale and add the tax to the selling price. This results and the dealer reporting all taxes collected
The dealer may inform his customers that the selling price includes the tax thereby putting them on notice. To do this, signed must be posted throughout the establishment that can be seen by all customers making purchases.
If the dealer selects this method, the tax to be reported will be calculated by dividing their gross receipts by 1.0635, the results being the gross sales amounted; the difference between the gross receipts amount in the gross sales about should be reported as tax collected.
The dealer may choose to set prices that do not include tax and not post signs informing customers that tax is being collected thus excluding tax from the price. If this method is selected, the dealer would multiply their gross receipts by 0.0635 and report result as tax due.
Florida Restaurants and Bars – Tax Audit Defense
We are a full-service tax firm that specializes in federal and State tax representation and are one of Florida’s most experienced for sales tax audit defense.
Our staff consists of tax attorneys, certified public accountants, former IRS agents and a former sales tax auditor with over 16 years of direct work experience with the Florida Department of revenue.
Feel free to contact us for initial tax consulting for Florida sales tax audit defense.
Florida Sales Tax Auditors are Fishing For Your Business – Restaurants ,Bars – Sales Tax Audits
by Fresh Start Tax | Oct 2, 2013 | Florida Sales Tax
Florida Sales Tax Audit Defense
- Is your business being audited for Florida sales and use tax?
- Has the Florida Department of Revenue contacted your company about a Florida sales and use tax audit or have you already received the Florida form DR 840 – Notice of Intent to Audit Books and Records?
Beware:
The Florida Department of revenue will use every effort to intimidate you in order to collect tax, penalty and interest from your business.Do not be bullied by a Florida tax agent. We know this because we were former government auditors.
Do not fear because of a Florida sales tax audit. Letter years of experience help you through this process.
We are a full-service tax firm that specializes in everything from IRS bills and notices and state warrants to tax records.
We are comprised of tax attorneys, tax lawyers, certified public accountants, enrolled agents, former IRS agents, former state of Florida auditor, managers and tax instructor’s.
Sales Tax Audit Targets
Businesses and individuals that the DOR suspects have avoided for tax payment are targeted, but any business with significant business activity can expect to be audited eventually. Many times it is through third parties, sometimes through tax tips and more than not to angry employees. So you better treat your parting employees very well.
Lately we’ve seen the DOR target entire industries such as convenience stores, restaurants and bars, hotels, and manufacturers.
But let it be known that audits are also randomly selected or could have been turned in by a former employee or customer for the tax issue.
The auditor will ask for all kinds of records that they are not necessarily entitled to have such as electronic copy of your whole accounting records.
The auditor will also ask you to sign certain documents that could wave your rights as a taxpayer, such as agreeing to the states sample method.
Most of the time the auditor is chasing a lead that may not prove to generate any revenue for the state but in the chase they usually find other tax issues.
Companies that have done everything they can to comply with the Florida tax laws can still end up with serious complications on a Florida sales and use tax audit just because the auditor’s job is to find deficiencies.
Remember that the Florida State tax auditor gets paid to find money missing from the state coffers so they will do everything in their power to find some area of compliance to collect something is a result of the hour spent during a Florida state sales tax audit. .
If your records are squeaky clean have absolutely nothing to worry about and you can represent yourself during the tax audit without fear or worry. There are those who do not need a professional tax form because the records are immaculate and impeccable.
Insider Tips:
As a former Florida sales tax agent I can tell you in advance what type of questions the auditor will ask, how the auditor will conduct the audit, what the auditor will focus on and what types of documentation will be examined.
Remember that the auditor’s job is to find unreported or under reported revenue and use tax from purchases that did not have the proper sales tax paid and therefore the questions will be focused aggressively in the areas of high dollar recovery.
On sales expect the auditor to focus on these issues:
- review internal controls for a recorded/undocumented sales
- sales on the books as compared to sales per state tax returns
- sales per the federal income tax returns compared to sales per the state tax return
- deposits per bank statements compared to sales per sales tax return
- an analysis of the sales tax payable account to the sales tax actually remitted
- verify that tax being collected is at the correct rate for the locations
- review a representative test for each revenue account
On the use tax side the auditor will focus on these issues:
- purchases from out-of-state vendors of items that were not resold to customers
- review depreciation schedules and/or check register for assets purchased during the audit
- review County tangible personal property tax returns for asset acquisitions
- purchase of fixed assets and fixed asset additions
- verify and trace accruals from source documents to general ledgers and sales tax reports
- analyze consumables pulled from inventory
- analyze leases of tangible personal property for compliance
For commercial rent the auditor will focus on:
- rental income – ensure tax was collected on all components of the rent
- rental expense – ensure tax was paid on all components of rent
- on rent paid – ensure that the landlord is properly registered with the state of Florida.
Our staff consists of tax attorneys, certified public accountants, Florida IRS agents and a former sales tax auditor with over 16 years of direct work experience with the Florida Department of Revenue.
Feel free to contact us for initial tax consulting for Florida sales tax audit defense.
We will completely review your case and give you a full assessment of your audit status so you can make an informed and confident decision on how to fully resolve your sales tax audit case.
Sales Tax – Florida Sales Tax Audit Representation – State of Florida Affordable Experts
by Fresh Start Tax | Sep 30, 2013 | Florida Sales Tax, Sales Tax, State of Florida
We are a tax defense firm that specializes in IRS and state tax representation.
We have over 206 years of professional tax experience, 60 years of working directly for the Internal Revenue Service, 16 years to working directly for the state of Florida Department of revenue.
We are a full service tax and accounting firm. Contact us today for free initial tax consultation.
Florida Sales Tax Audit Representation
Business who Repair Tangible Personal Property
We are a Florida Tax Firm that Focuses on Florida Sales Tax Audit Help.
You need to know and understand what to do and what not to do for Florida Sales Tax laws relating to your business.
Insider Tips
If you are being audited by the state of Florida, Department of revenue it is critical you understand the nature of the tax audit and what it will curtail.
You need to understand what issues the Florida sales tax auditor will be looking at and what to be prepared for.
The agents will be focusing there attention on:
- Unreported Sales (source info – Bank Statements, Federal Tax Returns, State Tax Returns)
- Exempt Sales without proper documentation
- Repairs made to Non-Florida residents that were not shipped into Florida by common carrier and returned immediately when repairs were completed
- Taxable Fees that were not taxed such as service charges, technical fees, minimum fee charges, service calls, truck charges, and standard repair charges
- Sales Invoices with labor only and no tax (without evidence of materials not used in the repair)
- Rent paid without sales tax for buildings and other real property
- Rental consideration without sales tax(real estate taxes and other considerations paid on behalf of the landlord)
- Purchase of Fixed Assets as listed on the Schedule of Depreciation
- Purchase of consumable supplies
Florida Department of Revenue – Repair of Tangible Personal Property Standard Industry
General Overview
Retail repair businesses provide labor and materials to repair tangible personal property and return it to proper operating condition the size of the repair business may vary from a one-man operation to a large factory service; they all share one central function.
The definition of sales price in Section 212.02 (16), F.S “… Includes the consideration for a transaction which requires both labor and materials to alter, remodel, maintain, adjust and repair tangible personal property.” Rule 12A-1.006(1), F.A.C., states in part that, where parts are furnished by the repair, the entire charge he makes to his customers for repairing tangible personal property is taxable.
Insider Tip from Former Sales Tax Agent – Beware of the Drop of Oil
Further analysis of the tax ability of most repair transactions emphasizes; where so much as a drop of oil for lubrication is added to the property repair or a minute amount of wire and solder is used to repair a circuit, the entire charge made to the owner of the property for such repair or service is taxable.
Repairs to Industrial Machinery and Equipment
Industrial equipment is classified as tangible personal property, see TIP 02A01-04. The operation of industrial equipment repair is basically the same as small appliance repair. The major differences occur in billing methods and type of equipment repair.
The legislative intent to tax every sale of tangible personal property, including the fabrication or processing of such property, also applies to large industrial repairs. Rule 12A-1.006(3), F.A.C., notes that “provisions of this rule do not apply to contracts covering a combination of work on both real and personal property.
Such contracts are governed by the provisions of Rule 12A-1.051, F.A.C.” . The most important determination in deciding the taxability of repairs is to determine whether the item being repaired Realty or tangible personal property.
In addition, sometimes repair shops generate separate invoices for labor and materials when they are actually part of the same repair.
Billings may also contain travel expenses incurred for repair crew. All expenses, including travel, motel, restaurant charges, are taxable as a part of the repair weather stated separately or as a lump sum.
Florida Sales Tax Audit Defense
Business who Repair Tangible Personal Property
We are a full-service tax firm that specializes in federal and State tax representation and are one of Florida’s most experienced for sales tax audit defense.
Our staff consists of tax attorneys, certified public accountants, former IRS agents and a former sales tax auditor with over 16 years of direct work experience with the Florida Department of revenue.
Feel free to contact us for initial tax consulting for Florida sales tax audit defense.
We will completely review your case and give you a full assessment of your audit status so you can make an informed and confident decision of how to fully resolve your sales tax audit case.
Florida Sales Tax Audit Representation – Former Agents – Affordable Experts
by Fresh Start Tax | Sep 24, 2013 | Florida Sales Tax
Owe Back Florida Sales Tax ? You can be Arrested
We are a Florida Tax firm that specializes in Florida Sales Tax Audits on all types of businesses, corporations and individuals.
Do not get caught owing back monies to Florida Sales Tax, Department of Revenue.
If you owe back Florida sales tax you should be aware that you may be arrested.
Please understand we are not telling you this to scare you, however, the department of revenue, state of Florida actively pursues individuals, companies, and businesses who flatly fail to pay back sales tax.
They use these taxpayers as examples for others to be compliant with Florida sales tax laws. Do not let this happen to you. Make sure you are represented and work out a payment plan or arrangement so you can live in peace and without stress from tax agents.
We are comprised of Tax Attorneys, CPA’s, and former IRS and State of Florida agents
We have over 78 years of governmental experience and 300 years professional tax experience.
Frank Lamantia of Fresh Start Tax LLC is one of our own seasoned tax professionals that can represent your best interest if you are about to be or are undergoing a Florida sales tax audit.
This expertise in Florida sales tax will help your company avoid a costly audit assessment.
Insider Tips from Former Sales Tax Agent
On September 10, 2013 (name omitted) the owner of American Security Enterprises, Inc. was arrested by the Leon County Sheriff’s Department on charges that he stole more than $15,000 in sales tax collected from customers, but failed to send in to the state, the Florida Department of Revenue.
Arrest in Florida Sales
The owner, who lives in Tallahassee, was arrested by the Leon County Sheriff’s Department on September 10, 2013 on felony charges relating to theft of state funds and failure to file sales and use tax returns. If convicted, he faces up to five years in prison and up to $5000 in fines, as well as possible repayment of stolen tax, interest, penalty and investigative costs.
According to Revenue Department investigators, the owner collected sales tax from the clients of his business.
However, during various periods beginning in July 2011 through May 2013, he failed to file tax returns and send in to the state all of the sales taxes that he collected from his customers.
Under state law, sales tax is the property of the state at the moment of collection.
Florida law requires business owners to act as an agent of the state and they must remit all sales tax collected to the state of Florida.
Sales tax is the most significant source of revenue for the state of Florida and many investigative resources have been developed to track sales tax being collected and not remitted.
Florida sales tax is required to be separately stated on the customers invoice and Florida law mandates that the taxes collected be the property of the state from the moment is collected from the customer.
The business may put these amounts in their checking account, however business owners must segregate sales tax collected and remitted to the state in a timely fashion.
Sales tax collected but not remitted is a crime under Florida law and must be taken very seriously.
Florida business owners are not aware of the fact that the Florida Department of revenue is more likely to arrest a business owner for tax fraud than the Internal Revenue Service. While both the IRS and the Florida Department of revenue will put tax liens on the business property, the Florida Department of revenue will also put the business owner in jail if the taxes and all associated penalties, interest, fines and costs are not remitted.
Voluntary Disclosure
If you have been under reporting or not reporting and you have not received a notice of audit, it is highly recommended that you contact our firm and we will assist your business on the details of going through a voluntary disclosure program to come clean now with the Florida Department of revenue, and have most of the penalties waived and prevent it from becoming criminal.
Florida Sales Tax Defense
We are a full-service tax firm that specializes in federal and state tax representation and are one of Florida’s most experienced for sales tax audit defense.
Our staff consists of tax attorneys, certified public accountants, former IRS agents and a former sales tax auditor with over 16 years of direct work experience with the Florida Department of revenue.
Feel free to contact us for initial tax consulting for Florida sales tax audit defense.
We will completely review your case and give you a full assessment of your audit status so that you can make an informed and confident decision of how to fully resolve your sales tax audit case.
Owe Back Florida Sales Tax? Remit or be Arrested – Get Representation
by Fresh Start Tax | Sep 9, 2013 | Florida Sales Tax, Sales Tax
Florida – Sales and Use Tax Audit Defense – With Former Agents Since 1982 + Affordable Sales Tax Experts + Free Consults with the Experts
Use former Agents to defend your Sales Tax Audits, since 1982.
We know the system.
Florida sales tax audit insider tips.
Being former Florida sales and use tax auditors there are many misconceptions that the public has about sales and use tax audits.
You should know that the auditor does not know the extent of your liability if any until the Florida state auditor examines your records.
The auditor simply will only know information about your company from State of Florida internal records.
Florida – Sales and Use Tax Audit – Insider Tips from Former Agents
The books and records that you provide the auditor will be the basis for any audit findings.
We can help with your defense in an audit by controlling the records that are released to the auditor.
If the Florida Department of revenue contacted your company about a pending Florida sales use tax audit or you have already received the Florida form DR 840 – Notice of Intent to Audit Books and Records.
We can be your defense to a large assessment for sales tax, interest and penalty.
ou can call us today to review your tax audit papers so we can let you know the scope of the audit and a way to conduct the audit that is most beneficial to your business.
The Audit Process used by Florida Sales and Use Tax
The auditor will conduct a preliminary preparation for the audit prior to the actual start of the audit.
The auditor will obtain information from:
• examination of sales tax records on file with the Department of revenue
• business structure and activities from websites
• profile the Florida Secretary of State corporate website
• review of prior audits and results
• review of possible issues from the Florida tax law library
• standard industrial guides
• research information available on the Internet
• review any information in the audit found which includes the reasons the audit was selected.
The auditor will also conduct an analysis your company which will include:
• taxable sales compared to exempt sales
• taxable sales percentage
• amount of assets owned by a business
• results of prior audits
• Florida sales per federal tax returns versus Florida sales tax returns
• method of business operation
• business industry
• credits and exemptions taken
• change in volume of Florida activity
• tax rates
• use tax accrued on past sales tax returns
As a Former Florida Sales and Use Tax Auditor
As a former sales tax auditor this research and analysis provided the basis to prepare an industry-specific audit plan and pre-audit interview questions.
The “audit plan” or should I say the auditor’s plan of attack will be the auditor’s guide for picking low hanging fruit.
Depending on the industry the Florida Department of revenue has a specific audit plan for auditors to follow in order to capture any sales tax not paid or remitted.
in order to limit the tax exposure, our former auditor will conduct the entrance interview with the Florida state tax auditor.
The auditor will conduct the audit entrance interview with the sole purpose of learning about the business’s operation and establish a rapport with the contact person of the business.
in order to learn more about the business operations during this interview, the auditor may want to ask some typical questions such as:
• what is the main business activity.
• where are your customers located – any out-of-state customers, if so how do you account for the sales
• are there any other sources of income
• who completes the sales and use tax returns
• what control documents are available, such as chart of accounts, general ledger, sales journals, payables Journal, etc.
• are there federal returns and depreciation schedules available
• do you own or lease the business property
• if leased who’s the landlord
Analyzing financial data
The auditor will want to begin the audit with an analysis of your financial data. The analysis may begin with a review of your chart accounts and your general ledger.
This enables the auditor to gain knowledge of your accounting system in your methodology for collecting and reporting tax.
Before any financial records are released to the auditor we will examine these records prior to releasing to the auditor to ensure a minimal tax exposure.
Auditing Techniques used by Florida Sales Tax, Department of Revenue
The auditor will select an audit technique which will enable the audit to be conducted amount of time.
The technique selected will be most representative of the business for the entire audit period. More than one technique may be required during the audit depending on the business activities and it may be appropriate to use different techniques on each activity.
The Detail Sales Tax audit
A detail audit is the basic audit technique used for sales and use tax. This type of audit requires an examination of all the records for the area sales and use tax being examined.
Sampling Audit Technique
Before sampling issues, the auditor must determine if the taxpayers records are adequate, but voluminous. Rule 12-3.0012(3), F.A.C., defines adequate the voluminous records. Adequate records are defined as, “books, accounts, and other records sufficient to permit a reliable determination of the tax deficiency or overpayment. Incomplete records can be determined to be adequate”.
Percentage of Error Audit Technique
As a former auditor the percentage of error method of projecting the sampling results has been proven to give the most reliable results and the most used by The Florida Department of Revenue.
The percentage of error method calculates tax based on the tax due in the sample period (not taxable amount).
It is well suited to projecting additional tax due on transactions in multiple counties that are entered into a single exhibit.
This is due to the fact that Florida is counties have many tax rates (when accounting surtax is added to the state sales tax rate) and most dealers transactions are affected by these sales tax rates.
It is not practical to stratify a dealer’s transaction by the many different rates and sample and project tax due by every rate.
Error Ratio Tax Audit Technique
The Error Ratio method is only used when the transactions entered into it are from a single County and that single County experienced a rate change during the audit period.
The Error ratio technique produces an approximation of the amount of tax not paid by the business.
This technique is based upon the assumption that the business makes errors at about the same frequency throughout the audit period.
Rate and Ratio Sales Tax Audit Technique
The rate and ratio technique is applicable in determining the amount of tax that has not been reported on sales.
This procedure is appropriate for use when auditing businesses with a high-volume and relatively low to moderately priced taxable or exempt sales (grocery/convenience stores, bars and restaurants) that do not have dependable sales records.
Rate (effective tax rate)
The bracket system, prescribed by Sections 212.12(9) and (10), F.S., used for computing the tax due on amounts less than one dollar, results in some cases in an effective tax rate in the process of or less than the basic rate.
One extreme is a taxable sale of $.10 with the tax of one cent the results in an effective tax rate of 10%. On the other hand, a sale of $1.09 results in an effective tax rate that is less than the basic rate. During the 6% tax.
A sale of $1.09 produces an effective rate of 5.5%. When the total taxable sales and told tax collections (the amounts that should have been collected) are considered, these extremes modify the basic tax collection rate.
The resulting tax rates are unique to that business because they are based on the businesses price structure and sales.
Ratio (taxable sales to total sales)
The ratio of taxable sales to total sales is usually easier to obtain than a tax collection rate. In the ideal situation for complete records are available, the taxable sales ratio can be obtained at the same time the tax collection rate is obtained.
After transactions are analyzed and recorded, the total taxable sales are divided by the total sales to obtain the taxable sales ratio.
In the absence of detailed records, the most popular technique in use is the extrapolation (create a new information from known information) of sales from the purchase records. This technique does not produce irrefutable figures and if used by the auditor can be subject to scrutiny.
Sales Tax audit Method – “Averaging”
This method is an audit technique that works well in an audit period where there is absence of sufficient records. When the averaging technique is used, a period is selected in which all the necessary records are available.
The records for the period are then examined in detail.
This detailed information is reviewed for errors. The total errors or tax collected on the heirs is that averaged.
The averaged amount is then scheduled over the period in which there were insufficient records.
Sales Tax Audit Methodist – Stratified Statistical Sampling
Stratified statistical sampling has been used by the Florida Department of revenue since July 2001, four businesses with adequate electronic records.
Items in the population are classified into separate subgroups or strata based on one or more important characteristics, such as a dollar value.
A sample is randomly selected and audited.
The sample results are then projected over the applicable period with precision calculated.
Non-Statistical Sampling Audit Technique
Historically, The Florida Department of Revenue has used judge mental block sampling was stratified statistical sampling could not be performed.
Non-statistical sampling utilizes random sampling to remove the auditor and the business bias from the sampling selection process.
The sample selection process is determined by the form of the taxpayer records and how those records are physically stored.
Florida – Sales and Use Tax Audit – Insider Tips from Former Agents
