"Why me?!" The Criteria behind Sales and Use Tax Audits

Posted by James on July 26, 2018 at 4:54 PM
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The Criteria behind Sales and Use Tax AuditsWhy do states select some companies for audit while leaving others in peace? There are several factors, few of which will come as a surprise:

  • Past audit history
  • Volume of sales a company reports to the state
  • Volume of exempt sales claimed
  • Ratio of exempt sales to total sales
  • Industry

While most of these elements seem obvious, that last criterion can be puzzling: Industry. Yet this factor has started accounting for more and more audit activity across the United States, and it doesn’t show any signs of slowing down. So what exactly does a company's industry affiliation have to do with the chances of an audit, and what else should businesses know? Download this free white paper, compliments of the tax experts at Avalara, and find out.

Using data acquired from the Texas Department of Revenue and the California Board of Equalization (BOE), as well as sample audit outcomes across various industries, this report illuminates several aspects of audit selection, including the fact that nearly 60% of all audits are spread across companies belonging to just four industries:

Sales and Use Tax White Paper2

You'll also learn about these other key findings:

  • One-third of audits were aimed at companies that are headquartered out of state.
  • The two primary tax compliance errors are unsupported sales for resale and failure to pay use tax on purchases from out-of-state vendors.
  • The average cost of an audit is approximately $114,000, including penalties, fees, and professional counsel.

Download the Whitepaper

Don't keep working in the dark and just hoping to avoid an audit.
Download this free study today and find out what to expect about sales and use tax audits.

Topics: Taxes

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