Sales Tax Audits

Texas sales tax audits will begin with a letter, notifying the taxpayer they have been selected for audit.  If you get one of these letters, you have the right to be represented through the audit, or you can represent yourself.  You should either contact the auditor or a representative who will contact the auditor on your behalf.  Next, you will set up a time for the initial interview.  This can take place at your place of business or at your representative's place of business.  Many of our clients prefer to have the auditor in our office rather than theirs, simply for convenience.  Once the initial interview is conducted, the auditor will proceed to review financial records. This can take more than one visit, and the length of time required depends on the amount of records you have provided, whether the auditor is utilizing a sampling method, and the auditor's schedule (an auditor may schedule a follow up date weeks after the initial meeting due to their workload). 

 

Once the audit concludes, the auditor issues a final report and schedules an exit conference.  The final report will show whether any penalties have been assessed.  You or your representative can bring up any items that you think are listed on the final report in error and have the right to speak with the audit manager if necessary.  There are also opportunities for redetermination and even review by an independent audit reviewer if you choose to do so. 

 

The AICPA posted a very good article on handling a state tax audit here.  While the AICPA is a national group, Texas is specifically mentioned under the "Managed Compliance Audit" section, and most of the article can apply to handling Texas state tax audits in general.