The purpose of a State Sales and Use Tax Audit is to determine if your business follows all sales and use tax laws that govern your business.
If you are selected for an audit you need to be prepared.
- When you receive your notice of audit, don’t panic.
- Prepare and return the Audit Questionnaire in a timely manner.
- Ideally, you would have someone conduct a ‘pre-audit’ of the information to identify issues in advance of the auditor arriving.
Work with the Auditor
- Arrange an opening conference with the auditor: make sure they understand the business, the type of products and services provided.
- Bluntly, the auditor is not your friend!
- The auditor works for the State and the auditor’s job is to assess your business to determine if the business is paying the correct tax and purchases additionally collecting and remitting tax on the taxable sales.
During the Audit
- You want the auditor to have a good understanding of your business. This can prevent questions and wasted time on the part of the auditor.
- Designate a go to person as the auditor’ single point of contact during the audit.
- Take time to understand how the business records will be reviewed. The auditor may review the records 100% or use a sampling method.
- Always keep in touch with the auditor to monitor the audit’s progress.
Audit Completion
- After the auditor has performed the audit, the auditor will discuss and review the audit results with the taxpayer. Not all taxpayers agree with the auditor’s findings, and most states have procedures in place to appeal audit results. It is advisable to retain a sales tax professional to aid in determining what avenues of appeal are available to the taxpayer.
- It is your responsibility to know the law of your state with regard to post-audit measures regarding your outcome.
Conclusion
- If your business is ever selected for an audit, you need to be ready.
- Once you’ve been notified, the opportunity to make changes has passed and you will be judged on your activities as portrayed by your business records.
- Even the entry level state auditor has more experience in auditing than most business owners. This is what they do each and every day.
- If you have any questions on the audit procedure, retain a professional to put you on a level playing field with the state. As with the auditor, this is what we do daily.