Our bank has been returning checks drawn on us written by our customers to the State tax revenue dept. for lack of endorsement, we have been told by that agency that it is okay without an endorsement. If we have documentation from them stating this it is ok?

I'd recommend you check our your state's version of UCC section 4-205.

While your customer may not understand that an endorsement isn't needed to negotiate the check, the UCC makes it perfectly acceptable.

If the revenue department ever disputes the receipt of such a check, the depository bank is on the hook.