Receiving a notice from California’s Board of Equalization that you are being audited is a stressful experience for any business owner. Even if you believe that your business has acted appropriately regarding the collection of sales taxes, you still have to prove this fact to a tax auditor. If your business needs assistance dealing with a sales tax audit, you should consult with an experienced Folsom sales tax audit attorney.
The NewPoint Law Group is here to help you prepare your business for a sales tax audit. Our team of dedicated attorneys has served residents of Folsom, Roseville, Huntington Beach, and across California and we would be proud to represent your business. You do not have to deal with a sales tax audit alone, contact the NewPoint Law Group at 1-800 358-0305 for a confidential legal consultation.
What is a Sales Tax Audit?
California uses money generated from sales and use taxes to fund construction projects, school programs, the maintenance of public parks, and various other programs. This means that California has an interest in ensuring that these taxes are collected during a transaction that triggers the sales or use tax.
In California, sales tax must be collected on the sale of all tangible personal property. This means any object that can be observed, touched, or weighed, is subject to sales tax. While there are some exceptions to the collection of sales taxes, some businesses may mistakenly fail to charge a consumer sales taxes when it is required.
Use tax should be collected when a person or business purchases taxable goods from an out-of-state seller without paying California taxes on the product. The product must also be intended for use within the State of California.
The California State Board of Equalization (BOE) is responsible for the administration and enforcement of the sales tax and other provisions of the state’s tax laws. The BOE also frequently engages in audits regarding the collection of sales and use taxes.
Sales tax audits are used to investigate the non-payment or overpayment of sales taxes by a business. There are various reasons that a business may be subjected to a sales tax audit, even if their business records are impeccable:
- The business is operated in an industry that is dominated by cash transactions (bars or restaurants)
- Businesses that conduct a large number of sales that are exempt from sales taxes
- The tax laws of a certain industry have tax laws that are often misinterpreted
- One of the vendors you use for your business violated sales tax laws or similar regulations
- You are opening a new location for your business or closing an old location
To learn more about sales tax audits and to prepare for your audit, you should continue reading and speak with an experienced Folsom audit lawyer as soon as possible.
Preparing for a Sales Tax Audit
If the BOE chooses to conduct a sales tax audit of your business, you will likely receive an audit engagement letter. This letter will inform you of the terms and subject of the audit and will likely schedule a meeting with the tax auditor. A sales tax auditor will scrutinize your business records to determine whether you committed any violations of the tax code either intentionally or mistakenly.
Once you are aware of the subject of the audit, you will have an opportunity to prepare your records to be audited. You should gather the following documents before your meeting with the auditor:
- Financial statements
- General ledger of business transactions
- Sales and purchases invoices
- Resale and sales tax exemption certificates
- Business expenses
- Sales and use tax returns
- Bank statements
This is not an exhaustive list. Ensure that you comply with all of the auditor’s requests. You should also find a spacious and comfortable workspace to host the auditor while they complete the audit. Placing an auditor in undesirable work conditions is a bad start to a relationship with California’s Board of Equalization. The BOE will typically allow about two to three weeks for a business to prepare their business records; however, you may be able to request more time to gather necessary documents.
It is important to note that closing your business will not exempt you from being the subject of a sales tax audit. Additionally, any person involved in the collection of sales taxes may be held liable any actions that resulted in a violation of the tax code. Sales tax audits have a statute of limitations of three years, meaning the BOE can go back as far as three years to investigate your tax liability.
Our California Sales Tax Audit Lawyers are Ready to Work with You
If your business is being audited regarding the collection of sales taxes, you should contact an experienced California tax audit lawyer today. The legal team at the NewPoint Law Group possess decades of legal experience that we will utilize to provide you with the legal representation that your business deserves. To schedule a confidential consultation, call the NewPoint Law Group at 1-800 358-0305, or contact us online.