Transcript
Have you been selected for a sales tax audit? I’m Mansoor Ansari with Nexus Tax Defense.
The first step in a sales tax audit is the auditor either giving you a phone call, email, or visiting your place of business. Then, they will give you something called a document request list and you will need to provide all the documents on that list.
The most common question that we get is: What documents are normal to be demanded in a sales tax audit? This is when people start to get worried because they might not have kept the best records.
Commonly Requested Documents in a Sales Tax Audit
- Federal income tax returns
- Used to compare your gross sales.
- Sales tax returns
- Used to see what was qualified as exempt and how much you reported.
- Bank statements
- Used to determine your deposits.
- Fixed asset lists or depreciation schedules
- Show the auditor what you have purchased for your own business.
- Identify sales tax that must be collected on those items.
- General ledger
- Shows how much money was earned and at what time.
- Third-party network transactions
- Statements from merchant services companies.
- Show the origination of the revenue.
- Supporting schedules
- These were used to prepare the sales tax returns for the audit and are very important.
Final Advice
Call us if you have any questions about your sales tax audit. Thanks.
Frequently Asked Questions
What is a sales tax audit?
A sales tax audit is an examination conducted by a state or local tax authority to verify that a business has correctly reported and paid sales tax. It involves reviewing financial records, tax returns, and other documentation to ensure compliance.
How will I know if I’ve been selected for a sales tax audit?
The audit process typically begins with a phone call, email, or in-person visit from a tax auditor. They will provide a document request list that outlines the specific records you must submit.
What documents are commonly requested in a sales tax audit?
Auditors usually ask for federal income tax returns, sales tax returns, bank statements, general ledgers, fixed asset lists, third-party transaction reports, and supporting schedules used in tax preparation.
What happens if I can’t find some of the documents?
If you’re missing key documents, it could raise red flags and lead to penalties. It’s important to contact a tax professional as soon as possible to help fill in gaps or explain discrepancies to the auditor.
Should I get professional help for a sales tax audit?
Yes, seeking help from a tax defense firm can greatly reduce stress and potential liabilities. A professional can guide you through documentation, explain tax laws, and represent you during the audit process.