Sales Tax Audits

Your Guide to State, Local, Federal, Estate + International Taxation

Unfortunately, we are all too familiar with the sales tax audits – or in Arizona, transaction privilege tax audits. The regulatory agency in question usually has an onerous list of records that they want to peruse, frequently covering a five year period, or sometimes more. Arizona has also been known to misplace filed sales tax returns and send requests for such reports – often as far back as six, seven or more years!

But sales tax audits are not just a factor of life here in Arizona – they happen everywhere. And they all have different quirks that apply to those states. I have a client in Nevada, and Nevada seems to get through the audits fairly quickly. I have had audits in Arizona that have been ongoing for more than three years. While this may not be the norm, if there is one thing an auditor is stuck on, they just keep going back and back to that issue. After three years and counting on one audit, I finally asked the client if I could make a deal and just end the entire thing – they agreed. Do you want to know how much we settled for? It was less than $200 – yes, an audit had been open for that long and there was not even substantial revenue to the city in question.

According to this great informational document from the Brotman Law Firm, California sales tax audits can also be somewhat of a nightmare. But there is really great information in here that can apply to every state – or audit type, for that matter. There is information on how to prepare for the audit – this is a great resource for any type of audit that you may be facing.

So – after the initial stomach drop when notified of a sales tax audit, notify your trusted tax advisor and just get to work pulling together the information requested. Yes, it is a pain. Yes, it takes away from your daily operations. But it is all about the cost of being in business – and this, too, can be survived!

By Donna H. Laubscher, CPA