Need help with a New York Sales Tax Audit Defense?
New York often audits business for state taxes including sales and use tax. The audits can range from several days to several months to complete. Under New York law, the state generally has a 3-year statute of limitations to audit your business. The New York State Department of Taxation and Finance conducts computer assisted audits, desk audits and field audits. New York allows for professional representation during a sales tax audit. You should take advantage of this right by hiring or at least consulting a sales tax professional to assist during the audit. By failing to do so, you may unknowingly turn over information to which the Department is not entitled.
New York starts the audit by sending a notice to your business that you have been lucky enough to be selected for a sales tax audit. Generally, the auditor will want to set up an initial meeting to review your records within 30 days of the letter or phone call. You should use this time to review your sales and use tax information, such as your sales and major purchases.
Following the audit review by the state auditor, two outcomes are likely. On rare occasions, the auditor will send a no-change letter, indicated no additional taxes are due. In most cases, however, the auditor will send a statement of proposed audit changes. This document will outline the issues and transactions that the auditor believes additional sales or use taxes are due. Our firm has experienced sales tax professionals, CPA’s, and former auditors that can review and attack the report from both the numbers and legal angles. If there is a documentation or calculation discrepancy, this can oftentimes be worked out with the auditor at this stage.
If you and the auditor cannot agree on the findings of the audit, a Notice of Determination or Notice of Deficiency is issued. If you have not consulted a state and local tax professional by now, this is a great opportunity to do so, to get professional assistance and review. If you determine it is worth contesting the audit, you can file a CMS-1, Request for Conciliation Conference, usually within 90 days of the Notice of Determination/Deficiency. In some situations, you may have to file a TA-100, Petition for a tax appeals hearing.
A conciliation conference is conducted more informally by a conferee and is generally a cheaper and quicker way to resolve your tax dispute. AT the end of the process, New York will send a proposed resolution that gives you 15 days to respond. Within 30 days, the conferee will issue an order concluding the procedure within 30 days.
Whether you are contesting the Notice of Determination or Deficiency, or the Conciliation Conference has concluded, the next step is a challenge in Tax Appeals. The hearing is an administrative court proceeding and you should have a sales tax professional represent you at this stage.
At Sales Tax Helper, our firm’s work is focused on New York Sales and Use Tax. With over 100 years of cumulative experience in Sales Tax representation, we are the right choice to represent your company. Since 1991, our firm has defended companies in virtually every industry in a sales and use tax audit; giving us the experience and know-how to not only analyze any areas of exposure you might have but to also paint your company in the most favorable light. Even for companies with little or no exposure, a sales tax audit can be an unnerving and stressful experience.
Our team of attorneys, CPAs, and former auditors know what the state’s auditors are looking for in each particular industry and we will work with you or your accountant or other professional to analyze areas of potential exposure. Wouldn’t you rather the audit be performed at one of our offices, eliminating disruptions to your business?
New York Sales Tax Audit FAQs
You inadvertently waived a red flag or your company landed in the small percentage selected for a random New York sales tax audit. These red flags include: cash-based businesses, prior audits that resulted in owed sales tax, your sales reported to the state didn’t match what you reported to IRS, a high volume of exempt sales, filing a refund claim or a high number of credits. There’s also a possibility that your business happens to be in an industry that your state suspects rampant under-reporting. Often times, they will target industries effected by complex sales tax laws. Learn More
1. RESPOND to the notice
2. Get organized
3. Identify/Hire your audit manager
4. Notify your auditor of who they will be corresponding with
5. Compare your sales tax returns against the federal tax return
6. Test at least one month of exempt sales
7. Reconcile your sales tax payable account versus your sales tax payments
8. Review your fixed assets purchased, did you pay sales tax on them?
9. Review your purchases on your key expense accounts to ensure tax was paid on your purchases
10. Look at our complete list that explains these steps in more detail: here
Audit duration can vary dramatically from state to state and from business to business. Waiver issues aside, an audit generally takes 3-7 months to complete. Surprisingly, some audits can drag on for a few years. Time factors usually swing on the size of the company, the ability to produce reliable and organized documentation, and the level of sophistication of the business.
We all enjoy the occasional DIY project especially when it saves us money, am I right? Before opting to go that route, consider the risk vs. rewards involved. Avalara recently conducted a study and found that the average sales tax audit costs around $115,000. When facing a sales tax audit it is beneficial to have the expertise of the financial implications on your side. That is where Sales Tax Professionals such as SalesTaxHelper can save you a lot of heartache and money by avoiding a few missteps. Learn More
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