rs-california-sales-tax

In a sales tax audit, as I’ve mentioned before, sales tax audits are very cumbersome processes. They involve a lot of documents, they involve a lot of data and they take a while to get through and our firm efficiency is one of our key factors in the work that we do. We want to make sure that the work and the value that we’re providing for clients are in a line with their cost expectations. With that said, sales tax audits are a lot of work. There’s a lot of organization and presentation and the materials. There’s a lot of tendency for disagreements in sales tax audits, particularly when they’re using statistical samples. Oftentimes those statistical samples come out wrong on the CDTFA side and we have to correct them and it gets tough when you have an auditor and you get into a conflict with that auditor and the auditor won’t back down. So with that said, sales tax law does have the ability to drive cost. One of the things that we do to mitigate cost is by sticking and trying to minimize cost in three key areas.

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Unfortunately playing let’s make a deal with the Auditor is not really possible. It’s not possible to just throw out a number, let’s say $25,000, to make the auditor go away. However in the context of any sales tax audit, there’s a certain amount of horse trading that happens in order to get to a result from the CDTFA’s perspective. CDTFA would rather close the audit as agreed than have an audit going into appeals. The more cases they close out at the audit level,

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After you get a bill from the Auditor based on a disagreement, you file a petition for redetermination. Unfortunately CDTFA is often backed up with Appeals so petitions for redetermination can take a while to go through the system before you actually get to an appeals conference. Prior to the Appeals conference you have the option of going to CDTFA settlement. CDTFA settlement is a group of settlement officers that are designed to resolve cases before they reach CDTFA appeals. If there’s an opportunity for settlement it’s suggested that you go to see CDTFA settlement to try and resolve the case. CDTFA settlement process is much less time-consuming, much less expensive and particularly if you’re not looking for them to resolve

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If you owe money at the end of the CDTFA sales tax audit process, you have a decision to make. Can you pay the liability in full, do you want to pay the liability in full, do you want to go into collections or is it better to file petition and pay the liability over time? This is a strategic decision that we make depending on the taxpayer’s facts, circumstances and how much they owe. However if you don’t appeal the liability, you will proceed into CDTFA collections and then collections will start to negotiate with you. In our experience for taxpayers that don’t have immediate flexibility to pay

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Sales tax audits are notoriously tricky they consume a lot of resources both in time and energy, and money so the goal with us and with our clients is to get out of the process as quickly as possible for the least amount of damage. When we look at a CDTFA audit, we’re looking at the cost-benefit of the situation. What’s the cost to the client, what’s the benefit of a certain action and how best can we get out of the audit with minimizing our expenditure and being as efficient as possible with our resources? One of the best ways that we do this is prior to creating the audit plan will try and pre-audit.

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