For nearly a decade, the Florida Department of Revenue (FDOR) has been targeting convenience stores business with audits in a campaign to bolster tax revenue. A convenience store should expect a sales tax audit if it is underreporting its sales to the state, this is because the Department is able to determine your sales and purchases without the need for input from the Taxpayer. If you are underreporting your sales, you are already on borrowed time and should correct your errors quickly before an audit is commenced. If you can correct your books early enough before an audit is commenced, you may be able to mitigate a large portion of your tax liability. Once a notice of intent to audit is issued, the situation becomes dangerous as any information turned over to the auditor could show tax fraud and lead to criminal charges. If you already have a notice of intent to audit, you should stop reading this now and give me call at 954-399-1262
The FDOR uses the income reported to the IRS as well as alcohol, beer, and tobacco purchases reported to the state to determine if a convenience store has been reporting enough sales. It should be obvious, if the sales reported to the IRS is more than the sales reported to the state, the convenience store should expect an audit for the unreported amount. If the alcohol, beer, and tobacco purchases are more than or equal to the sales reported, the convenience store should expect an audit based upon purchases marked up using industry averages. But what is an industry average and why is it being applied?
An industry average is an average of industry metrics such as markup percentages and sales mix percentages, collected from other convenience store audits. More than 90% of the time, the industry metrics are grossly overstated by FDOR and cause the audit to be overstated when applied to the taxpayer’s purchases. 99% of the time, FDOR will use purchases and industry averages to estimate an audit assessment for a convenience store. Therefore, 99% of the time, taxpayers should not accept the estimated assessment as factual and hire a sales tax controversy specialist to file protest to contest the use of industry averages and assist the taxpayer in providing the correct information to reduce the assessment amount.
Taxpayers should not attempt to handle an audit on their own as many times the records provided by Taxpayers will show tax collected and not remitted, which based on the amount, ca scale all the way up to a first-degree felony, and 20+ years in prison for theft of state funds. In addition, the records provided can increase the assessment if the Taxpayer does not understand how the records will be reflected in the Department’s calculations. It is not advisable to turn over records or speak with Department auditors, as they do not need any information from you to issue the estimate and will only use your information to increase the assessment and never decrease it. An informal protest must be filed with supporting documentation asking for a specific revision to the audit, otherwise any oral requests for revision will be ignored by the auditors as it not their job to do a good job, only to do the job as quickly as they can.
As a dependable and technically skilled tax professional, I offer specialized tax services coupled with honesty and integrity to a wide range of clients varying from mom-and-pop restaurants to publicly traded conglomerates. I also write and manage informational blogs about tax issues to help small business owners who cannot afford the expense of professional consulting. In addition to tax services, I provide financial services to small businesses who do not have a dedicated financial planning role within their business. With over 7 years of experience in State and Local Tax controversy, with a heavy focus on Florida audits, I have the experience and knowledge needed to navigate tax issues with the Florida Department of Revenue, as well other states.
If you received a notice from a Department of Revenue, you have very little time to find help before your protest rights expire. Please feel free to contact me at DonovanNiles@Gmail.com or at 954-399-1262 for a free consultation. Please be prepared with a copy of your most recent notice from the Department of Revenue as well as the audit assessment.
Donovan Niles 