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California Sales Tax Audits: Frequently Asked Questions

May 25, 2026July 2, 2020 by Brotman Law

FAQs

Key Takeaways

Yes, you can. If the CDTFA thinks you are willfully under-reporting sales tax and/or fraudulently filing returns, you can and will receive a criminal referral.
The goal with any potential criminal matter is to keep it civil and to minimize the damage as much as possible.
The CDTFA has a very rigid penalty scheme, particularly with respect to fraud penalties and sales tax that was collected but never paid to the state.

What is California Sales Tax Nexus?

July 12, 2026July 2, 2020 by Brotman Law

What is a Sales Tax Nexus and How Does it Affect My Business?

Key Takeaways

What is a Sales Tax Nexus and How Does it Affect My Business.
A state may create legislation requiring a seller with nexus in that state to pay tax on sales of tangible property within the state.
Most states declare your business has a nexus if you have any physical presence within the state.

Common California Sales Tax Mistakes (And How to Avoid Them)

May 25, 2026July 2, 2020 by Brotman Law

Sales Tax Mistakes to be Aware of and How to Avoid Them

Key Takeaways

As a retailer or other seller of products, you have a lot of details to attend to but one of the most important, often most complex, is your sales and use tax obligations.
Non-payment of sales and use tax comes with stiff fines, potential jail time and repayment requirements. Avoiding all that is essential to both your business and your well-being.
Here are some of the most common tax mistakes sellers make with regard to sales tax and how to mitigate your chances of making them yourself.

Common California Sales Tax Audit Triggers

May 25, 2026July 2, 2020 by Brotman Law

Key Takeaways

This one is pretty obvious, and it is not that hard for the CDTFA to find out.
Any time you are selling goods in the State of California or purchasing goods from out of state and bringing them into California (even if it is just passing through) without paying sales or use tax, you can be audited.
If you or your vendors are audited by the CDTFA, it can trigger follow-up investigations by other agencies.

Technical Issues in California Sales Tax Audits

May 25, 2026July 2, 2020 by Brotman Law

California Department of Tax and Fee Administration Audits — Short Tests and Sampling: Part One

Key Takeaways

The CDTFA uses short tests to come up with a decision as to whether to proceed or to accept as correct that item being tested. In fact, the CDTFA encourages its auditors to use short tests when a taxpayer’s records are in order.
A short test may be defined as the examination of any record, supplemental data, original detail, etc. for any purpose. A short test audit may be a combination of several short tests.
A short test might be, for example, the review of an income tax return to see if the markup over cost is acceptable for the type of business, a spot check of sales invoices for proper tax accrual, etc.

Two Main Issues in California Sales Tax Audits

May 26, 2026July 2, 2020 by Brotman Law

CDTFA Audits of Sales for Resale

Key Takeaways

A certificate will be considered timely if it is taken at any time before the seller bills the purchaser for the property, or any time within the seller’s normal billing and payment cycle, or any time at or prior to delivery of the property to the purchaser.
Other evidence of the validity of a claimed sale for resale may be accepted by the California Department of Tax and Fee Administration too in a CDTFA audit.
When it is appropriate to use the “XYZ” Letter process, the auditor will provide the taxpayer with a copy of forms CDTFA–504–A, B and C, or other type, if applicable. Various types of this letter are described on CDTFA’s website.

The Complete Guide to CDTFA Tax Liens

July 5, 2026July 2, 2020 by Brotman Law

How the California Department of Tax and Fee Administration Handles Tax Liens

Key Takeaways

In our continuing series about tax liens, we would like to talk about how the California California Department of Tax and Fee Administration handles them.
The California Department of Tax and Fee Administration administers the sales and use tax for the state of California.
Sales tax is imposed on individuals and businesses in exchange for the privilege of selling goods in California. It is measured by subtracting non-taxable sales from the business’s gross receipts. In general, sales tax is passed along to the consumer.

Amazon and California Sales Tax

May 25, 2026July 2, 2020 by Brotman Law

The Good and Bad News for Amazon Sellers That Have Received CDTFA Notices

Key Takeaways

Amazon disclosed Amazon seller information to the California tax authorities in response to a legal demand letter it received late last month.
This post includes important information for Amazon sellers that have recently received the notice that the California Department of Tax and Fee Administration (CDTFA) has issued a formal legal demand to Amazon.
Following the demand, Amazon sent an email to all of its sellers, notifying them of the demand.

The California Department of Tax and Fee Administration Appeals Process

July 5, 2026July 2, 2020 by Brotman Law

How to File an Appeal With the California California Department of Tax and Fee Administration

Key Takeaways

The California California Department of Tax and Fee Administration has audited you and found potential underpayment of taxes, fees or additional amounts the CDTFA determines you owe.
Your next step is to meet with the CDTFA supervisor and then the District Principal Auditor. If you do not convince them that the results are in error, you can file an appeal.
If you file a petition before the Notice of Determination is issued or beyond 30 days after it is mailed, your petition will not be considered valid. The liability will be considered final, due, and payable.

Taxpayer Rights and CDTFA

July 5, 2026July 2, 2020 by Brotman Law

Your Rights as a Taxpayer With the California Department of Tax and Fee Administration

Key Takeaways

The California Department of Tax and Fee Administration (CDTFA) administers the tax program for both business and property taxes for the State of California.
Business taxpayers may take up their concerns directly with the main office of the CDTFA while property tax concerns are addressed by the local county office.
When you deal with the tax agencies of California, you may feel like you do not have any rights. These agencies can be aggressive and overwhelming to most individuals not used to dealing with them.