When you receive a sales and use tax audit notice in the mail, it sparks worry, concern and anxiety. Frequently, the first question that comes to mind is “What triggered this sales and use tax audit?” Understanding the sales and use tax audit triggers or cause of the audit can help companies both prepare for the audit by predicting what the auditor will be looking for, as well as take steps to avoid sales and use tax audits in the future.
Similar to the IRS with income tax audits, states have systems, policies and procedures in place that help them to identify businesses to select for a sales and use tax audit. While each state’s methodology is different, there are some common reasons taxpayers are flagged for a sales and use tax audit.
12 Common Sales and Use Tax Audit Triggers
Our analysis of common sales and use tax audit triggers is based upon Agile Consulting Group’s 15 years’ worth of sales and use tax audit defense and representation services that we have provided to hundreds of taxpayers across the U.S. We have arranged these reasons in order of the likelihood of triggering a sales and use tax audit.
Trigger #1. Prior Sales And Use Tax Audit Liabilities
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