A sales and use tax audit in California is initiated by the State Board of Equalization (SBE or BOE), and its purpose is to determine whether a business has properly collected sales and use taxes. It will examine if the business has accurately reported gross sales receipts, deductions and business purchases. A sales tax audit will also establish if the business is applying the correct rate of tax on sales of tangible property.
A California tax lawyer will be able to advise you on the types of records you will need to provide at a sales and use tax audit, since the documentation required will vary according to the type of business that is being audited. The records will generally include income statements, tax returns (state and federal), sales tax returns filed with BOE, customer and vendor invoices and resale certificates. Our tax law team can advise you based on your type of business and the nature of the audit exactly what records you will need to produce.
In a sales and use tax audit, your records will be reviewed going back as far as three years, in some cases even longer. One of the factors that can prompt an audit, in fact, is a significant change in figures from one year to the next, so multiple years will be involved in a sales and use tax audit.
As with other types of audits, the findings will be discussed with you and/or your tax representative at an exit conference if additional are due. You have the right to appeal the findings if you dispute them, and have the option of filing an Offer in Compromise if you are unable to pay the any amount owed. The Offer in Compromise, however, cannot be filed until after the amount of tax owed is agreed upon.
With expert representation from a California tax lawyer at the exit conference, you will have an experienced advocate who can work on your behalf with the sales tax auditor to negotiate an agreeable resolution. Timely filing of petitions and negotiations of any tax debt can also be handled by your tax attorney, saving you time and stress.
If your business is the subject of a sales and use tax audit in the State of California, contact the Brager Tax Law Group at our offices in Los Angeles. We will work to ensure that your tax records are complete and to reduce your tax liability. Meet Dennis Brager and find out more about us on YouTube by watching our videos.