State And Local Tax Audit Process

This article is the third part of a three-part series regarding the State and Local Tax consequences of doing business in multiple states.  This article will discuss a State Tax Audit. Part 1 discussed Nexus and Part 2 discussed Voluntary Disclosure.

Questions we get from companies regarding its multistate activities are:  “How will states find me?”  “How will states enforce these new economic standards for sales and use taxes and income, franchise or gross receipts taxes?”   The answer is “do you really want to find out!”  The cost of states finding you and then assessing tax, interest, and penalties versus being proactive and compliant with state tax laws, as discussed in Part 1 of this series, can be a lot of money, as tax, interest, and penalties multiply very quickly.

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