Overview of the Sales Tax Audit Process

A sales tax audit is an investigation that verifies if a company and its consumers have paid the correct amount of sales tax. Being chosen to do an audit does not mean the Internal Revenue Service considers you dishonest. Having accurate, well-organized documents can help make the process of an audit go smoothly for both the company and the auditor. Here are some of the things that will be expected of you during the sales tax audit process.

Being Chosen

The Internal Revenue Service periodically chooses business to undergo a sales tax audit. You may be chosen because of incorrect data placed on a tax return or you can be randomly selected. When you are chosen, you will need to gather financial records and the information that can prove the amount of sales tax charged and paid by your customers. You will receive a call from a government appointed auditor who will determine the time and date they will perform the audit. You may be asked to go to the auditor’s office with copies of your documents and financial records. The auditor may also visit your company’s location.  

The Review Process

The review process takes place at the time of the sales tax audit. The auditor will ask to see copies of your excise tax returns. You will also need to show documentation for use tax, retail sales tax and even your business and occupational tax as well. Expect to share information and to show documentation of your purchases, income and exemptions and deductions as well. The auditor will also take a look around at your company. They may want to watch you in action to get a clear picture of how you operate and record your financial data.

After An Audit

Once the auditor is done with the tour and finished reviewing your financial records, you will receive information on what was found during the sales tax audit. The auditor will then show you what adjustments are needed before they are allowed to finalize the audit. You can agree to the adjustments and pay the assessments fees in advance. However, if you do not agree with the fees, you have the right to appeal the decision. This option will require you to meet with the auditor's supervisor where you can go over the information you would like to dispute. If you are going to appeal the decision, you will have to do so within thirty days of the date you receive the audit report in the mail. Though you are not required to pay the amount provided to you by the auditor, you will still be considered responsible for the amount until proven otherwise. There will, however, still be interest accumulating so be sure to carefully consider whether you have sufficient evidence to overturn your auditor's decisions before appealing the decision.

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