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Sales Tax Audit Prep: The Audit Notification Letter

author photo of Andrew H. Johnson

First of all, let’s review the pre-audit process – because the audit actually starts before it starts.

Your notification letter will be your first contact with an auditor. The letter basically says you have been selected for an audit. Accompanying the letter will be a questionnaire requesting information about the company. This is a standard part of the process.

Common Questions:

1) Do I need to respond to the notification letter – and/or how quickly do I need to respond to the notification letter?

It will not do you any good to delay responding or to be incomplete in your answers. We recommend you respond completely and accurately within a reasonable period of time. There is no need to rush, however.

2) How long will my audit take?

Depending upon the taxpayer and the level of activity in a particular jurisdiction, an audit can take anywhere from a few days to several months, or even years to complete. What are the factors?

  • Size of the taxpayer.
  • Relative size of operations in the state.
  • Scope of activities in the state.

The audit notification is just the beginning of the process. A sales/use tax audit doesn’t need to be approached with dread. You might consider seeing an audit as a ‘fitness test’ of your sales and use tax process. If everything is in order, it’s a great way for you to demonstrate value internally. If things need to be corrected, then you will have the opportunity to make those corrections.

In our next post, we will address best practices for dealing with the auditor.

Andrew H. Johnson, CPA - or Andy - is a widely published author, CPE presenter, radio and TV guest, and podcaster on SALT issues as they relate to accounting firms. In January, 2018 his book, “Start with Nexus - How Great CPA's Protect Their Clients From Devastating State Tax Audits”, was a #1 Amazon bestseller. Andy was the co-founder and managing partner of the CPA firm Peisner Johnson & Company, LLP. He is passionate about helping business grow while dealing with the complexities of state taxes.

Other recent “Audits and Sales Tax” posts by Andrew H. Johnson, CPA:

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