Surviving a Sales Tax Audit

For small to medium-sized businesses with fewer resources and smaller teams a sales tax audit can be a major distraction to their normal operations.  Audits can be extremely time-consuming.  The list of tasks is seemingly endless – pulling records, answering questions from the auditor, and potentially negotiating the outcome of the audit.  All of the above is time-consuming and potentially risky.  So what is the best way for you to manage a sales tax audit?  Here are a few things you can do. 

Check Your Records

If you are notified that you are being audited, one of the first things you’ll want to do is a self-audit.  You should look at your records and see if there are any gaps where you may have exposure.  If you are going to have weak spots, you want to know about all potential exposure before you go into the audit process.  You may be successful in steering the auditor away from these areas or having them excluded from any sample period. 

Set a Sample

Many sales tax audits are done using a sampling methodology – either statistical or block sample.  The method will vary from jurisdiction to jurisdiction.  What you need to do is to understand the historic cycles of your business and evaluate the proposed sampling method before accepting.

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