AUDIT REPRESENTATION AND SUPPORT

Defend Your Business Like a Professional

What do you do when you receive a notification of a sales and use tax audit? Whether you respond directly to the audit notification or outsource it, it is important to be educated about the process.  Understanding the process will undoubtedly give you an advantage when it comes to developing a strategy. (Pro-tip, don't lock the auditor in a cold room with all your files.) Whatever strategy you develop will likely have to pivot at some point in the audit.  

Our team has decades of experience when it comes to audit representation.  We can step in and be your voice from the outset of the audit or we can be a strategic partner behind the scenes.  Our team is here to help your understand the questions and develop the answers to guide the audit down the path of least resistance.  Terms often have different definitions when used in a sales and use tax context.  It is important to realize the answers you provide will set the tone for the entire audit.  Be concise, honest, and mindful in your responses.


Here are some general tidbits to think about when defending your company during a sales and use tax audit"

1. The auditor doesn't know you and has no feelings against you (at first).  They are doing a job just like you are running your business.  

2. Know your position.  Perform a preliminary review of your sales and use tax position so you are aware of potential exposures and prepare to address them.

3. Be prepared to provide a lot of documentation.  Sales and use tax audits require a lot of invoice review - especially if you agree to a detail review.

5. Know your procedure for preparing and filing sales and use tax.  If you don't know what it is or aren't certain, then you need to know before speaking to the auditor.  Inconsistency or uncertainty about this will be a major red flag for the auditor.

5. Be respectful and informative.  The auditor doesn't know your business like you do.  Educate them and build rapport whenever possible.

6. Know what should be reviewed and what shouldn't be reviewed.  This may vary by industry, so it is important to understand the sales and use tax application for your specific business. 

7. Understand the difference between detailed approach, dollar-stratified samples, random sampling, and the like.  You may not want to take a shortcut that ends up burning you on the back-end.  Likewise, you don't want to waste time, money, and resources digging for unnecessary documentation.
8. Maintain control of the audit.  The auditor is there to do a job.  The best way to maintain control is to be available and responsive.  Be proactive and address concerns early.  Provide the requisite information and only provide explanations when defending scheduled items.

 

©2018 by The Sales Tax Team.