The state of California has the highest state sales tax rate at 7.25%, and the eighth-highest average combined state and local tax rate at 8.68%, according to the Tax Foundation. This means sales tax mistakes in The Golden State are typically going to be much more costly than those made in others. Therefore, if you are audited, you want to ensure that you are prepared.
Why You Might be Under Audit
Generally, a state has a system for how they select taxpayers for a Sales and Use tax audit. This can be triggered by many different reasons such as having a large presence in the state, amending returns, making late filings and payments, or even red flags auditors identified when they came across your business while auditing one of your suppliers or customers.
It is important to understand why your company may be under a Sales and Use tax audit. If you can understand why, it can help you have a clearer understanding of what the auditor is expecting from you during the time of your audit.