Sales Tax Audit Defense

For any business, few things are more terrifying than a notice from a Department of Revenue informing you that you have been selected for a “routine” state sales tax audit. There is nothing “routine” about a state sales tax audit! They are time consuming and disruptive. If not handled correctly, they can also be very expensive. If you are not experienced in the art of managing a sales tax audit, this is no time for “on the job training”. Without assistance, you are at an automatic disadvantage when dealing with auditors who may have over 20 years of experience conducting sales tax audits.

In most cases, receiving this audit notice is just a matter of time. No longer is the question “what will we do if we get audited?” The question is “what will we do when we get audited?” In most cases, you have two choices for sales tax audit defense:

  • Go it alone and hope that everything goes well
  • Get experienced and seasoned sales tax audit defense help that can be scaled to your specific needs

Auditors view your business only as a source of additional state revenue. You need someone representing your interests during the entire sales tax audit. Don’t become the next victim of an overly zealous sales tax auditor. Let our 26 years of experience be used to level the playing field.

Sales Tax Audit Defense Services

Whether you are having a New York sales tax audit, a Texas sales tax audit, a California sales tax audit, or a Georgia sales tax audit, Interstate Tax Strategies (ITS) can help you at any stage of the audit. Most multistate businesses do not have sales tax audit procedures built into their business processes.

ITS provides the following sales tax audit defense services:

  • Pre-audit risk assessments
  • Audit notice responses
  • Audit sample selection and sample management
  • Complete audit management outsource
  • Audit finding analysis
  • Reverse sales tax audits
  • Audit protests
  • Settlement negotiations

Common Sales Tax Audit Issues

Although the specific audit issues vary by industry, there are two consistent errors that sales tax auditors attempt to identify during their audit. These are:

  • Uncollected sales tax on taxable sales (sales tax)
  • Unpaid tax on taxable purchases (use tax)

Your liability for uncollected sales tax can arise from several different reasons. The 3 most common reasons are:

  • Missing resale or other exemption certificate for the sales transaction
  • Failing to recognize that your company has nexus in the state and should be taxing sales
  • Out-of-date tax rules and failing to recognize that the sale is taxable

Your liability for unpaid use tax is commonly related to:

  • Failing to identify untaxed purchased made from out-of-state vendors
  • Withdrawal of inventory items for your own use and not for sale
  • Providing invalid exemption to your vendor for purchases made.

Statute of Limitations

For businesses that are currently registered for sales tax and routinely file sales tax returns, the audit look back period is normally 3 or 4 years depending on state law. If your business is not registered or has not consistently filed returns then the look back for sales tax can be much longer. Some states will go back 6 to 10 years for the audit period if the company is not registered. Knowing this look back period is critical to managing the sales tax audit properly.

Free Discussion

For a FREE discussion about your sales tax audit defense issues, please contact us at info@salestaxstrategies.com or 770-985-9573.

Let Us Help You

Our mission is to help your business understand and navigate the increasingly complicated interstate sales tax landscape. Regardless of your industry, if you operate in more than one state, you are an interstate business and you must evaluate the sales tax rules in each state where you conduct business. Even if you are only in one state, don’t assume your sales tax processes and procedures are correct. Each year, states collect millions of dollars in taxes, interest, and penalties on audit from businesses who thought they were handling their sales tax properly.

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