Navigating A Sales Tax Audit: A Comprehensive Guide To Protecting Your Business

If you’re reading this, you’ve probably received a letter of audit from a government entity. You’ve also likely now gotten over your initial anxiety and are looking for help with the next steps. You’re in the right place – we’re here to tell you that there’s no need to panic.

So, what exactly is a sales tax audit? And what can you expect?

Definition Of A Sales Tax Audit

A sales tax audit is a rigorous examination conducted by state taxing authorities to review a business’s sales tax returns, financial records, and transactions. The primary objective is to ensure compliance with applicable tax laws and regulations regarding the collection, reporting, and remittance of sales tax.

We know, sounds scary. But we can help you navigate the process successfully. In this guide, we’ll unpack various aspects of sales tax audits, including triggers for audits, documentation requirements, strategies for responding to audit findings, the role of tax professionals, and the possible consequences of an unsuccessful audit.

Here’s what you can discover:

  1. Understanding Sales Tax Audits
  • Triggers for a Sales Tax Audit
  • Types of Sales Tax Audits
  • Common Misconceptions about Sales Tax Audits
  1. Responding to Audit Findings
  • The Audit Process: From Notification to Resolution: Gain insights into the audit process, from receiving a notification to resolving discrepancies and finalizing outcomes.
  • How to Handle Audit Findings: Explore strategies for addressing audit findings effectively, including reviewing and collaborating with tax professionals.
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The Sales Tax Audit Series- For California And Beyond

Over the next several weeks we will post five blogs that should interest any taxpayer who is in fear of a sales and use tax audit – especially an audit that results in a “huge, unexpected liability.” These five blogs will help prepare you for all aspects of a sales tax audit by a government agency (before, during and after) and, more importantly, will help to put you on a path to owe little or nothing (you might even get a refund) – particularly if you follow the second of the five blogs, where we’ll talk about shoring up your systems before an auditor even shows up.

The advice that we will provide in these five blogs will apply to a sales and use tax audit for any state, but we will focus many specifics on our home state: the Golden State of California. California’s sales and use tax department is called the CDTFA – California Tax and Fee Administration. (The CDTFA was established in January 2018 as the successor to the State Board of Equalization or SBE.) The CDTFA is an enormous governmental agency – the size and sophistication of the CDTFA almost single-handedly dwarfs many of the U.S. states’ entire governments. The CDTFA administers 37 tax and fee programs; employs thousands of auditors and generates more than $90 billion for California and its counties, cities, and special tax districts. The CDTFA’s audits result in over $600 million of unreported tax each year. So, what can we do to help you to not be one of those taxpayers that contribute to the $600 million in audit deficiencies? It’s simple – read this blog and the next four.
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