What to do during the pre-audit process with the notification letter. When you should appoint your Sales Tax Audit Coordinator. Why it’s important to do a self-audit and how to do it. How long you should expect a sales tax audit to take.
You should expect a sales tax audit if you sell to customers in other states. Another state may even audit you before your own. In fact, the odds of getting audited by more than one state are high. 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, and 78 of them are permanently based out of state.
If/when you are audited, don’t be surprised at how much it costs.
Sales tax audit costs on average $114,147. This is based on information published by Avalara through a survey of over 400 U.S. finance and accounting professionals across several industries, ranging from e-commerce to retail to manufacturing.
The audit actually starts before the fieldwork begins. Let’s review the PRE-audit process, and what you can expect.
This will be your first contact with an auditor. The letter says you have been selected for an audit. Accompanying the letter will be a questionnaire requesting information about the company.
This is a standard part of the process. It will not do you any good to delay responding or to be incomplete in your answers.