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Sales tax audits: how should you respond?

When we write about tax audits on this blog, it is usually in the context of income tax audits. That is of course an important topic, with a cluster of components and subtopics that we continue to explore.

But income tax audits are by no means the only type of tax audit. In this post, we will discuss California sales tax audits - and the positive role that an experienced tax lawyer can play in helping you respond to them.

First, reminders about a few basics. Sales and use taxes here in the Golden State are administered and collected by the California State Board of Equalization (BOE). In addition to sales and use taxes, the BOE also handles property taxes and certain other taxes.

The BOE does not, however, collect income or franchise taxes. Those taxes are the responsibility of the Franchise Tax Board.

As a business owner, you have probably become familiar with the BOE over the years. But what do you do when the board starts auditing you, calling your compliance with sales tax collection and payment duties into question?

At our firm, we caution you against trying to deal directly with the BOE in an audit context. Instead, let a seasoned tax attorney be your intermediary and advocate.

Perhaps the BOE auditors are asserting that the amount of sales you have reported in your own accounting books does not match up with what you reported on your sales tax returns. If this happens, we can roll up our sleeves and dig into the accounting records to make sure the facts are clear. We can then negotiate with the BOE to resolve the matter at hand in a way that protects your interests.

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