Every auditor develops a mental checklist within the first few years on the job. Mine came from Deloitte & Touche, the IRS, and finally the Florida Department of Revenue, where I spent years on the other side of the table before I ever represented a taxpayer.
That checklist doesn’t disappear once you stop being an auditor. If anything, it becomes more useful, because now I get to run it for clients instead of against them.
Here are ten of the things I look for first — the same things a Florida DOR auditor is trained to spot almost immediately.
1. Exemption Certificates That Are Missing, Expired, or Incomplete
This is the single most common issue I see, and it’s rarely intentional. A customer claims resale or exemption, the sale goes through untaxed, and the certificate either never gets collected or gets filed away and forgotten. An auditor doesn’t assume the sale was legitimate. They ask you to prove it, certificate by certificate.
2. Use Tax That Was Never Accrued on Fixed Assets
Businesses are usually diligent about charging sales tax on what they sell. They’re far less consistent about accruing use tax on what they buy — equipment, furniture, supplies purchased out of state or from a vendor who didn’t charge tax. This is one of the first things I check, because it’s one of the first things an auditor checks.
3. Resale Certificates on File for Customers Who Aren’t Actually Resellers
A resale certificate only protects you if the customer is genuinely buying to resell. I’ve seen certificates on file for customers who were clearly end users. When that mismatch surfaces in an audit, the exemption gets disallowed and the tax gets assessed retroactively.
4. Bundled Transactions Taxed as a Single Item
Selling a taxable product together with a nontaxable service, or vice versa, creates a taxability question most business owners have never thought to ask. Auditors look closely at bundled invoices because they’re a common source of underreported tax.
5. Independent Contractors Who Look a Lot Like Employees
For reemployment tax purposes, the label on the 1099 doesn’t control the outcome — the actual working relationship does. Set schedules, company equipment, ongoing exclusivity, and day-to-day supervision all push toward “employee” regardless of what the paperwork says. This is one of the fastest-growing audit areas I see.
6. Rental of Tangible Personal Property Handled Inconsistently
Equipment rentals, space rentals, and similar transactions have their own taxability rules that don’t always match what businesses assume. I regularly find rental income taxed correctly in some months and incorrectly in others, simply because there was never a consistent process.
7. A General Ledger That Doesn’t Reconcile to the Tax Returns Filed
Auditors don’t just look at your returns. They look at whether your books actually support the numbers on those returns. When the general ledger and the filed returns tell two different stories, that gap becomes the audit’s starting point.
8. No Documented Process for Determining Taxability
Plenty of businesses get the tax treatment right without ever having a written process for how they decided. That’s fine until an auditor asks how a specific determination was made. “We’ve always done it this way” is not documentation, and it doesn’t hold up well under review.
9. Drop Shipments With Unclear Sales Tax Responsibility
When a business sells a product it never physically handles — shipped directly from a third-party supplier to the customer — the sales tax responsibility can shift in ways that surprise people. This is a genuinely confusing area, and it’s one auditors know most businesses get wrong.
10. A Prior Audit With Findings That Were Never Actually Corrected
This is the one that surprises people most. If a business was audited before and the underlying process that caused the finding — a POS system, a certificate collection habit, a classification decision — was never fixed, the same issue is usually still there waiting for the next audit. The Florida DOR routinely comes back to businesses within two to three years, especially after a prior audit produced results.
Why This List Matters More Before the Notice Arrives
None of these ten items are exotic. They’re common, and that’s exactly the point — they show up in a large share of the audits I’ve worked, on both sides of the process.
The businesses that come through an audit with the least exposure are almost never the ones with perfect operations. They’re the ones who found these issues themselves, on their own schedule, instead of having an auditor find them first.
That’s the entire premise behind a Pre-Compliance Readiness Review: running this same checklist against your own records, while you still have time to fix what it finds.
This post is part of an ongoing series on Florida Department of Revenue audits, drawing on my experience as a former auditor for the IRS, the Florida Department of Revenue, and Deloitte & Touche.
About the Author
Orlando Monteagudo is a former CPA and compliance auditor with more than three decades of experience at Deloitte & Touche, the Florida Department of Revenue, and the Internal Revenue Service, where he audited businesses ranging from small family-owned operations to large organizations and high-net-worth individuals. Today, he represents Florida business owners before the Florida Department of Revenue — guiding them through pre-audit readiness reviews, active sales/use and reemployment tax audits, and post-audit follow-up.
Keywords
- Florida sales tax audit red flags
- signs your business might get audited by the Florida DOR
- common Florida sales tax audit findings
- what triggers a Florida DOR audit
- independent contractor vs employee Florida DOR
- bundled transaction sales tax rules
- drop shipment sales tax Florida
- unreconciled books sales tax audit risk