What triggers a sales tax audit?
Sophia Bowman 
A sales tax audit occurs when the CDTFA suspects a business’s reported sales have been understated. Most commonly, this occurs in situations where there is a “mismatch” or an incongruency between the sales tax returns filed with CDTFA and what was reported to other agencies (like the IRS).
What do sales tax auditors look for?
The auditor looks for evidence of tax underpayment. The auditor typically takes a top-down approach: starting with the sales tax returns your company has filed and agreeing them to your books and records.
How do you survive a sales tax audit?
9 Tips for Retailers on Surviving a Sales Tax Audit
- Know your nexus.
- Maintain sales tax and business licenses.
- Know the tax rates.
- Understand product taxability rules.
- Recognize the difference between origin vs.
- Collect and maintain exemption certificates.
- Charge proper tax type.
- Know the risk on sales and use tax returns.
How to prepare for a sales tax audit?
If you have exempt sales based on receiving properly completed exemption certificates, then establish a process for storing these certificates and before any audit, make sure the certificates provided are ones your state will accept. If there are errors, reach out to your buyer (s) to correct the document before the audit begins.
What happens when a company is audited for sales tax?
This review may also include a review of sales tax returns sent to the agency by the company. Finding discrepancies is typically the purpose of the audit. The sales tax agency typically sends a notice to alert companies of upcoming audits.
What happens in the second stage of a tax audit?
The second audit stage may occur at the same time as the first or at a later date. The auditor uses this stage to review additional information relating to sales tax returns. Exemption certificates, state nexus agreements, resale certificates, sales tax licenses and similar information are under review.
What do you need to know about a sales audit?
A sales audit is a deep dive analysis into historical sales and marketing data to get a full look at the sales funnel from prospects to customers. Many organizations combine this quantitative audit work with qualitative audit work in the form of win/loss calls.
