State & Local Tax Blog

What (NOT) To Expect From a Sales Tax Audit

First, don’t be shocked that you’re being audited! You should expect a sales tax audit if you sell to customers in other states. You may even be audited by another state before you get audited by your own. In fact, the odds of getting audited by more than one state are pretty good. This is because of the expansion of “nexus”, especially in light of the Wayfair decision by the US Supreme Court in June, 2018. States are setting up audit offices all over the U.S. to conduct audits on companies that now have nexus in their state.

Data from the Texas Comptroller also supports this claim, as one-third of their audits are conducted on businesses located outside of Texas. Research also shows that Texas has a total of 595 auditors with 78 of those permanently based out of state.

Second, if/when you are audited, don’t be surprised… 

Don’t be surprised at how much it costs. According to information published by Avalara based on a survey of over 400 U.S. finance and accounting professionals across several industries, ranging from ecommerce, to retail to manufacturing, found that a sales tax audit costs on average $114,147.

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