How far back can the CDTFA audit?

The standard look-back period is three years from the due date of the return. However, for fraud, intent to evade, or non-filed returns, there is no statute of limitations. Voluntary disclosure agreements can limit the look-back period.

What is the penalty for not collecting sales tax?

The CDTFA can assess a 10% negligence penalty, a 25% fraud penalty, and interest on unpaid taxes. For willful failure to collect, criminal penalties including fines and imprisonment are also possible.

Do I need to collect sales tax on online sales?

Since the 2018 Wayfair decision, California requires remote sellers exceeding $500,000 in California sales to register and collect sales tax. If you're selling online to California customers, you likely have a collection obligation.

Can the CDTFA hold me personally liable?

Yes. As an officer or owner of a business that fails to remit collected sales tax, you can be held personally liable for the trust fund portion of the tax. This is a serious exposure that requires immediate legal attention.

What is a managed audit?

A managed audit allows your business to conduct its own review under CDTFA supervision. This can reduce audit costs and give you more control over the process. We advise clients on when managed audits are advantageous and how to conduct them properly.

How long does a CDTFA audit take?

CDTFA audits typically take 6-12 months, though complex cases can take longer. The audit process includes an opening conference, document requests, fieldwork, and a closing conference before any assessment is issued.

Tax Defense

California CDTFA Defense
Protect Your Business.

California sales tax audits can produce six- and seven-figure assessments that threaten your business. We defend against the CDTFA with the same intensity we bring to every case.

Sam Brotman, J.D., LL.M.|Last updated April 2026

Key Takeaway

A CDTFA sales tax audit can produce assessments large enough to threaten your business. The CDTFA uses statistical sampling and estimation methods that frequently overstate liability — and you have the right to challenge them.

A CDTFA Audit Can Shut Down Your Business.

The California Department of Tax and Fee Administration doesn't audit small. When they examine a business's sales tax records, they're looking at every transaction, every exemption certificate, and every reported deduction. The assessments they produce can be staggering.

CDTFA auditors use statistical sampling methods that can inflate assessments far beyond actual liability. They make assumptions about unreported sales, disallow exemptions on technicalities, and apply penalty rates that double or triple the base tax amount.

Most business owners don't realize they have the right to challenge sampling methodology, negotiate the audit scope, and dispute every proposed adjustment. We do — and we exercise those rights aggressively.

We've defended businesses across every industry against CDTFA audits. Whether you're a retailer, manufacturer, contractor, or restaurant, we know the rules that apply to your business and how to defend your position.

From Our Practice

In our experience defending CDTFA audits, we've seen sales tax assessments that would have bankrupted the business if left unchallenged. The CDTFA uses statistical sampling and estimation methods that frequently overstate liability — and most business owners don't know they can fight back.

What We Handle

California Sales Tax Services

CDTFA Audit Defense

Full representation during California sales tax audits. We manage document production, challenge sampling methods, and negotiate adjustments to minimize your assessment.

Sales Tax Exemptions

Exemption certificates, resale certificates, and manufacturing exemptions are common audit targets. We defend your legitimate exemptions with proper documentation and legal authority.

Use Tax Disputes

California's use tax catches purchases made without sales tax — including online purchases and out-of-state acquisitions. We defend against use tax assessments and establish proper compliance going forward.

CDTFA Appeals

We represent businesses before the CDTFA's appeals division and the Office of Tax Appeals to overturn incorrect assessments and reduce penalties.

Penalty Abatement

CDTFA penalties for non-compliance, late filing, and negligence can be substantial. We pursue abatement based on reasonable cause and statutory authority.

Voluntary Disclosure

If your business has uncollected sales tax exposure, we negotiate voluntary disclosure agreements that limit look-back periods and eliminate penalties.

Understanding the Process

California Sales Tax: What Business Owners Need to Know

How does the CDTFA select businesses for audit?

The CDTFA uses data analytics, industry comparisons, and tip referrals to select audit targets. Businesses with inconsistent filing patterns, high exemption rates, or returns that deviate from industry norms are flagged most frequently.

Certain industries — restaurants, auto dealers, contractors, and cannabis businesses — face higher audit rates due to historical compliance issues.

What is statistical sampling and why does it matter?

When a business has too many transactions to audit individually, the CDTFA selects a sample period and extrapolates results across the entire audit period. This can dramatically inflate assessments if the sample isn't representative.

We challenge sampling methodology, negotiate sample periods, and ensure the CDTFA's statistical projections are fair and accurate. This is often where the biggest adjustments are won.

What are the most common sales tax audit issues?

Resale certificates that are missing, incomplete, or invalid. Exemptions claimed without proper documentation. Unreported use tax on fixtures, equipment, and supplies. Cash sales underreporting. And misclassification of taxable vs. non-taxable transactions.

We review your records before the CDTFA does, identify vulnerabilities, and prepare defenses for each potential issue.

What happens after the CDTFA issues an assessment?

You have 30 days to file a petition for redetermination. If that's denied, you can appeal to the Office of Tax Appeals. You also have the option of paying the tax and filing a claim for refund, which opens a path to Superior Court.

Timing is critical — missing deadlines can eliminate your appeal rights.

Talk to a Tax Attorney

Not Sure Where You Stand?

Schedule a free 15-minute call. We'll assess your situation, outline your options, and tell you exactly what to expect — no obligation.

Book Your Free Call

or call (619) 378-3138

Why Brotman Law

Sales Tax Defense From Attorneys Who Know Your Business

Industry-Specific Knowledge

We've defended businesses in retail, manufacturing, construction, restaurants, cannabis, and tech. We know the rules that apply to your industry.

Sampling Challenges

Statistical sampling is where the biggest dollars are at stake. We have the expertise to challenge methodology and reduce inflated assessments.

Exemption Defense

We defend legitimate exemptions with proper legal authority and documentation, preventing the CDTFA from disallowing valid claims.

Appeals Experience

We regularly represent clients before both CDTFA appeals and the Office of Tax Appeals with proven results.

Compliance Solutions

After the audit, we help implement sales tax compliance systems that prevent future exposure.

Business-First Approach

We understand that a massive assessment threatens your livelihood. We fight accordingly — with urgency and intensity.

Learn More

Sales Tax Guides & Resources

Free Guide

California CDTFA Defense
Protect Your Business.

A CDTFA Audit Can Shut Down Your Business.