Protesting the Audit
Many auditors like to view themselves as the final arbiter of audit and push taxpayers to pay the tax assessment, interest, and penalties. In reality, the auditor is just the gatherer and processor of information. If you don’t believe that they have made an accurate tax determination, there are many levels of review and appeal that taxpayers can pursue. These vary by state. Don’t be afraid to offend the auditor if you don’t like what they did. It’s not personal, it’s just business! I once had an auditor tell a client that she had never had an audit protested and that it would make her look bad if they challenged the audit. I promptly protested the audit, requested an informal hearing, and had 90% of the auditor’s work thrown out because she relied on an administrative rule that was no longer valid.
Do not rely on what the auditor tells you about your protest rights. If the state law says you have 30 days and the auditor tells you that you have 45 days, you only have 30 days. The law determines your remedy not the auditor.
Many businesses may never have the pleasure of going through a sales tax audit. Only a small fraction of companies ever get audited. But, if your business is ever selected for an audit, you need to be ready. In fact, your need to build certain processes into your sales tax function that will prepared you for an audit even if one never occurs. Once you’ve been notified, the opportunity to make changes has passed and you will be judged on your activities as portrayed by your business records.
Most auditors have an appreciation for the position they are putting you in and do what they can to reduce the stress as much as they can. In most cases, you are at an automatic disadvantage. Even the most inexperienced auditor has more experience in auditing than you do. That’s all they do and they become pretty good at it. There is not an even playing field between you and the auditor. Get help as soon as you need to. Once the audit is complete is not the time to get help. By then it’s too late.
Have you ever been the subject of a sales tax audit? We’d love to hear your stories and even include you (anonymously if you’d like) in a case study on the TaxJar blog. Comment here with your story or email us at email@example.com if you are interested. In the meantime, leave any questions or comments about sales tax audits below!