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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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 Read More