5 Tips for Successful Sales Tax Audit


Every day in sales is like the new opportunity of contacting leads, making deals, and also giving closure to the sales target. However, do you ever consider the sales tax very important? Did you pay sales tax at right time? Did you pay the right amount and shared suitable details & documents about the business sales with IRS? You need to consider this seriously and must take sales tax will help from the expert before getting dreaded notice from IRS for the sales tax audit. The sales tax audits can cause a lot of inconveniences & are costly.

1. Dedicate essential time 

This might appear like basic advice, however, defense on sales tax audit is the most time-consuming procedure when done in the right way. Before agreeing on the sample, study this to ensure it is representative. When an auditor sends audit assessment schedules, you need to take a little time to review invoices on taxes that are getting assessed. Find missing invoices and supporting the documentation that can help to argue the position. Research issues that are cited by an auditor and send back schedules with extra notes, citations, or questions you might have for the auditor. After getting the updated audit assessment back from the auditor, you need to make the second pass over them. 

2. Know what you pre-audit

No matter whether you’re the business owner or deal with accounting or tax issues for the small business, you must always know what it is that business is selling related to sales tax rules. At times what you think will be exempt, for instance, will be taxable, which depends on the jurisdiction. There are many tax things that you don’t know. On the other hand, if you offer the service all along with the sale of the goods, service will be included in the tax base, however, the same service will be exempt if provided alone. The main point will be to know what to sell and check out state taxability rules to avoid the audit assessments. 

3.Work upon offsetting refunds for decreasing liabilities

The sales tax refunds that are identified during the sales tax audit course will be valuable than at other times. It is true as these sales tax refunds can be used for offsetting, decrease or eliminate the audit liabilities and any penalties and interest that are assessed on such liabilities. Suppose the audit ends with the liability getting owed to a state, the likelihood of a state conducting the future audit on the company will be higher than if the audit ends with a state owing money. You have to do everything possible to end the audit in the net refund position. Making a proper schedule of the transactions on what sales tax refunds will be due to the company is the best and feasible way to make it happen.

4. Check deadline 

There’re a lot of deadlines throughout an audit process, some critical than others, however, auditors & state agencies are known for sticking to it. Suppose you miss the deadline by a day, it is possible you can lose out on an opportunity of protesting and appealing the audit results that can cost the business dearly.

Deadlines differ from one state to another, but, the business has 30 or 60 days after a dated notice got mailed and received to appeal the audit. This takes a little time to compile a requisite statement of the facts and legal reasoning behind the appeal, thus this is not much time, particularly if you haven’t engaged the sales tax professional for representing the business. Suppose you’re your deadline, assessment get final and results will not be appealed. 

5. Gather audit documents

You need to gather returns & related sales or purchase documents before the start of the audit. You need to review past notices & issues. Suppose there was a prior audit, it’s likely the similar issues that came in past can be a target of the new audit. Check out for the tax rate errors. Suppose the auditor finds out, you will need to pay for the expense. On the flip side, use the audit as the opportunity of reviewing the records for overpayments or refunds and look for reimbursement for those. Thus, these are some important things that you need to know for a successful sales tax audit.

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