Sales Tax Audit

A sales tax audit determines whether a business has collected and paid the correct amount of sales tax owed to the state for taxable transactions. Auditors examine financial documents and compare total sales revenue with sales that resulted in the collection of sales tax. The process also involves a review of sales tax payable against the sales tax the company actually paid.

A sales tax audit often occurs when a state tax agency suspects a business of understating its reported sales or when the sales tax return filed with the state doesn’t match what was reported to the Internal Revenue Service (IRS). Indirect tax departments are under increasing pressure to stay on top of new sales tax laws and regulations, while reducing audit risks. Sales tax audits are distracting and come with the potential for costly penalties and fees that can have a negative effect on a company’s bottom line.