In this article we cover what to do when the Company receives a letter that it has been selected for a sales and use tax audit. We discuss everything that you should and should not do before the audit starts. We call this the Pre-Audit because the auditor’s letter is the first signal to “circle your wagons” and call a professional in asales and use tax, like Miles Consulting Group (“MCG”). In this blog we will discuss what the auditor wants you to do and what your representative will likely recommend you do. If you just received an audit letter then we recommend the following: stop, breathe, don’t talk to the auditor without representation, and call an expert in sales and use tax.

This is the third blog of the five we will cover in our “Sales Tax Audit Series” – this is the Pre-Audit blog. In each article, we will be making recommendations on what to do when informed by the State that you will be audited – our focus will be California’s CDTFA, but these recommendations will apply to every other state, too.

The Auditor

We want to remind our readers here that we respect the job that auditors do, and we always aim to engage with them respectfully and fairly. Unfortunately, the nature of an audit is that it’s easy to see it as adversarial. So, what should you expect from the auditor? The auditors’ general premise is that they have the law on their side so the taxpayer must comply with their requests. Those requests are going to be demanding and, in some cases, unreasonable. As a taxpayer, it’s OK to push back on some of these requests.

In California, and other states, initial contact is generally made via a letter informing the company about the audit and requesting books and records. In some cases, the company may receive a phone call from the auditor. We will talk about the books and records letter in a moment, but the trickier situation is when an auditor calls before the books and records letter is received. Consider these questions:
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