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7 Ways You Can Take Control of a Sales Tax Audit



TaxConnections Blogger Diane Yetter posts about sales tax auditsIt’s a fact of life that no one looks forward to being audited.  Undergoing an audit can be a scary proposition.  But just because your company is being audited, that doesn’t mean that you can’t take control of the situation and play a part in determining how the audit will progress.  One of the first steps in a sales tax audit is the opening conference with the auditor.  This is one of your first and best opportunities to take control of the audit and set the tone for how it will progress.  Here we’ll outline seven ways that you can set the ground rules for a sales tax audit during this opening conference.

1. Use a sign-in and sign-out sheet.  You’ll want to monitor the activities of the auditor.  Using a sign-in and sign-out sheet helps you to track the comings and goings of the auditor and ensure that they have left the premises.  And it is likely your company wants to know who is on the premises so use this as the explanation why it is required.

2. Only have one contact person.  Pick one person in your company through which all communications will take place with the auditor.  This ensures that potentially sensitive information won’t be leaked accidentally to the auditor by other employees.

3. Request the specific information needed to track a transaction. If the auditor is examining a transaction, ask the auditor for what specific records are needed for the questionable transaction.  This way you are providing the auditor with only the specific information they need and not any additional records that may expose a vulnerability.

4. Request the statute or rule that supports the auditor’s taxation.  Notify the auditor up front that you would like them to provide the statute or rule to back up their determination of taxation for any items that may be under question.

5. Deal with audit issues while the auditor is on premises.  If you are encountering any issues during the audit, it’s best to deal with those issues while the auditor is on premises.  Trying to resolve audit issues after the fact can be far more difficult and lead to complications.

6. Request a supervisor or manager’s involvement if there is a disagreement.  If you find yourself disagreeing with the auditor on an item, remember that the buck doesn’t necessarily stop with them.  You have the right to request a supervisor or manager’s involvement if there’s a disagreement with the auditor.  You may find that they agree with your view on the issue.  And it’s best to request this information at the opening conference so you have it when and if you ever need it.

7. One more item – the location for the auditor to work.  When you’re setting the ground rules for an audit, where the auditor will work is an important factor.  Only provide the auditor with what they’ll need to perform the audit and nothing more: desk, chair, light, heat and a/c, an electrical outlet, and the records that they’ve requested.  Keep them focused on the job at hand so they can complete their work and be on their way.  And make sure to keep the auditor’s work location away from the Accounting or Tax departments so they don’t accidentally overhear any sensitive information.

I’ll be covering the above topics and more at the Sales Tax Institute’s “Audit Defense Tips & Tricks” webinar on October 10, 2013.  I’ll be co-presenting the webinar with B.J. Pritchett of Pritchett Sales and Use Tax Consulting.  For more details, please click here.

Diane L. Yetter is a strategist, advisor, speaker, author and expert witness in the field of sales and use tax. She is president of YETTER, a firm that provides sales tax services including system analysis and strategy, transaction tax automation implementation assistance, training, transactional planning and general consulting to clients of all sizes in myriad industries. She is also the founder of The Sales Tax Institute, a premier think tank that offers live and online courses to educate business professionals about sales and use tax.

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2 comments

  1. Kevin Koller says:

    Diane- some good valid points. You may also want to get agreements and whose court the ball is in in writing even if these are just in emails. Audits take a good amount of time and auditors leave or are reassigned. These email can be helpful restart points with the new auditors, used to remind an auditor of items already signed off on, or be used to indicate undue delay in completion (a possible basis for some interest waiver).

  2. Diane Yetter says:

    Kevin – great additional suggestions. Confirming what the auditor has agreed to in writing is always a great idea.

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