Managing Sales Tax Audit Risk

1. Do we maintain a compliance checklist that we use to uniformly report trust taxes?
   
2. Are we sending employees or representatives into other states - for any reason?
   
3. Are we registered everywhere we send representatives - for any reason?
   
4. Do we maintain obtain resale certificates from our resellers, and exemption certificates from our customers?
   
5. Do we maintain detailed “ship to” reporting for our sales, demos, and promotional uses?
   
6. Do we routinely accrue use tax on purchases?
   
7. Do we periodically review our compliance records and reporting for accuracy and fitness for audit?

If you answer NO to any of these, or don’t know the answer, there is a HIGH probability you will be audited and/or have exposure. Click here to contact us.

• Do not ignore
• Call Your SALT Expert
• States use these for “fishing expeditions”
• You may simply misunderstand/misinterpret a question and give too much
• Some questions can be ignored – e.g., N/A
• NESTOA /SEATA – tax departments talk to one another
• If you determine nexus, a SALT expert may be able to negotiate resolution

• Do not ignore - verify that the Notice of Intent to Audit is for the right Taxpayer, Tax Type and Tax Periods
• Call Your SALT Expert
  • The auditor is basing their inquiry on little or no understanding of your business, so you will want a seasoned expert to represent you through the process, educate the audit, and manage /  lead the audit process
  • Understand the reason your business was selected for auditor 
  • Audit yourself - identify records, potential issues, 
  • Initial Meeting & Workplan: Set the Tone
    • Introduce auditor to your Company and record-keeping / compliance processes
    • Manage expectations
    • Discuss what information you can provide and if unavailable, suggest alternatives
    • Discuss timing of information
    • Set milestones and a date for the audit to conclude
    • Set site ground rules for when / where audit may work on-site
    • Discuss how to handle Missing or Insufficient Documentation
    • Discuss how to handle overpayments, then get to work
    • Document all communications and Request that the Auditor issue all Request for Information in Writing as well
    • Discuss Sampling Methods, Use of OVerpayments in Sample, Sample Periods
  • Based on Initial Conference, draft Audit Guidelines and provide to auditor
  • Request Updates and Review Workpapers at every step of process
  • Review Final Workpapers and Sampling Projections
  • Present Overpayments & Offsets
  • Request a Closing Conference - discuss open items to avoid further appeals
  • If further appeals are necessary, involve a Sales Tax Expert if not alredy invovled
  • REMEDIAL EFFORTS - Make sure to address the audit issues in your compliance processes to avoid future liabilities on these issues

Please contact me to discuss how I can optimize the outcome for your Company during an audit, and how we can proactively implement tax compliance protocol to minimize audit risk and exposure.