Need help with a California sales tax audit defense?
Most states will often audit a business for sales tax. Let us explain in more detail how a sales tax audit defense in California works. The audit typically starts with a phone call or a letter from the Department of Revenue. However, you have been contacted, a Sales Tax Audit can audit 3 years of your business activity from when a return was filed and even farther back if sales and use tax returns have not been filed. The slightest error on a type of transaction, when multiplied over three years, can add up to a considerable amount of sales tax liabilities. Often times a sales tax audit can be driven purely by simply not having the correct paperwork can result in a huge assessment.
A sales tax audit begins with a notice from the Department. From there, an initial meeting is set to discuss the nature of the business that has been audited. After an audit plan is developed, the auditor will perform an examination by comparing the taxpayer’s books and records to the items reported on the sales tax returns. Upon completion of the examination, the Department will issue a report with adjustments. It is important to know that you have the right to have a consultant represent you during your audit by completing a power of consultant form. In general, the auditor can review the last 3 years during the tax audit. If you failed to file a return, it could be as long as 8 years.
During a sales tax audit, the auditor will request a wide range of documents. For example, on a sales tax audit, the auditor will first determine whether all sales, or gross sales, were reported on your sales tax return. Often times the auditor will compare your sales tax return to a control document like bank statements or your federal tax return. This will allow them to make sure all sales were reported. The tax auditor will also make sure you can provide proof of your exempt sales.
Use Tax Audit Process
On the tax side, the auditor generally checks to make sure you properly paid tax on items used by the business. Despite publications to the contrary, if a business buys an item online without paying tax, the business has an obligation to remit use tax. Along with untaxed purchases of equipment, this can result in shocking results for the unsuspecting taxpayer.
Upon completion of the audit, there will usually be an exit conference with the auditor. The purpose of the exit conference is to review the workpapers. It is advisable to have a tax professional present during this meeting. Eventually the audit will culminate in a Report of Field audit or a report of investigation that summarizes the findings.
Following the audit, if you disagree with the adjustments cannot be resolved with the auditor, a notice of proposed determination, or similar notice is issued. It is critical that if you wish to protest the notice of, you must do so within a short timeframe, often 30 to 60 days. After filing, the Department will review and either withdraw the assessment, request additional information, or schedule for an informal conference. If you do not agree with that decision you can generally file for reconsideration with the agency or appeal the decision to tax or administrative court. While it is not required, it is often advisable to have an attorney handle your case in administrative court. On the other hand, this is where you can seek help from a California sales tax audit defense consultant like California Sales Tax Helper to assist you with this process.
California Sales & Use Tax Consulting Services
At California Sales Tax Helper, our consulting firm’s work is focused on Multi-state Sales and Use Tax. With over 100 years of cumulative experience in Sales Tax representation, we are the right choice to represent your company. Since 1991, our professionals has defended companies in virtually every industry in a sales and use tax audit; giving us the experience and know how to not only analyze any areas of exposure you might have, but to also paint your company in the most favorable light. Even for companies with little or no exposure, a sales tax audit can be an unnerving and stressful experience.
Our team of attorneys, CPAs, and former auditors know what the state’s auditors are looking for in each particular industry and we will work with you or your accountant or other professional to analyze areas of potential exposure. Wouldn’t you rather the audit be performed at one of our offices, eliminating disruptions to your business?
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