There’s a saying in the tax world, ‘It’s not if you’re going to get audited; it’s when!’ At Thompson Tax, we can attest to that. Most clients understand that their business will eventually get audited for sales and use tax compliance. Yet, only a handful understand the financial and material impact an audit can have on your business.
Thompson Tax understands the audit process intimately and we offer a broad range of services to help your business maneuver through the minefields. From conducting reverse audits that may help you determine overpayments and maximize refunds to guiding you through an external audit, our sales tax experts work hard to ensure your business succeeds, and we are always on your team.
We are your trusted tax advisors!
Our Sales and Use Tax Audit Services
The goal of state tax auditors isn’t to find companies that are managing their taxes correctly. Instead, they’re searching for those businesses that aren’t doing it right. The more mistakes a company makes, the greater its risk of penalties and assessments.
Thompson Tax specializes in multistate audits, and with a former Executive Director of the California Board of Equalization (now the CDTFA) on staff, we have an added advantage in California.
Audit and Reverse Audit FAQs
When do sales tax audits occur?
Let’s be clear; almost all companies will eventually undergo a sales tax audit. An audit can occur when a state tax agency has an indication that your business is misrepresenting its reported sales or if your sales tax return isn’t congruent with what you reported to the IRS. States are always looking for additional financial resources so it’s safe to assume that you will land on their radar at some point.
The state has already audited our business. Can they do it a second time?
A state can audit your business for additional periods following a previous audit. However, your previous audit results may help expedite other audits in the same jurisdiction.
Our business has made significant sales under our audit period – How can we avoid providing backup for every sale?
Many states offer solutions to reduce the backup documentation needed to complete an audit review. This can be accomplished in multiple ways, but some methods may be more beneficial for your business than others.
Our business audit has been finalized, but we disagree with the findings – what recourse is available?
Businesses can contest audit findings in a variety of ways. Some methods may be more beneficial than others for your business. Audits are not final until the business agrees with the outcome or a certain amount of time has passed.
Why does the auditor need federal income tax documents (copies of returns, depreciation schedules, apportionment workpapers)?
Federal income tax documents include information that may be found in sales tax workpapers. Auditors may review gross sales, purchases, and other information found in federal income documents to see how they correlate with sales tax workpapers.
How many invoices are usually needed for a statistical sample?
The number of invoices can vary based on the sample population size and dollar amounts included in the population. Generally, that number could be anywhere from 100 to 2,000 or more invoices. There are ways to negotiate these amounts under audit.
Why should I sign a waiver of the statute of limitations?
Refusing to sign the waiver can allow a state to estimate liabilities due and limit a business’s recourse if they disagree with the estimate.
Refunds (Reverse Audits):
Can our business request a refund review of sales or use tax overpayments while under audit?
Businesses can bring all sales and purchase refund opportunities to the auditor within the audit period. Even if they do not believe refund opportunities exist, it is always worth reviewing them.
Our business paid sales and use tax to a seller for a non-taxable sale – how can we claim a refund?
Some states require your business to seek a refund from the seller. Other states allow you to seek a refund directly from the state. Each state will have varying rules for this situation.
Let Thompson Tax Help You With Your Sales Tax Audit Needs
Whether your business has been selected for an audit or you feel that you may have prospective overpayments to uncover, we can help.
There isn’t a business out there that wants to be audited, but if you’re well prepared and have the Thompson Tax team in your corner, the process will be far less stressful.
We have dedicated analysts available nationwide, so regardless of where your business is located, Thompson Tax will be there for you.