California Sales Tax Audits

The California Department of Tax and Fee Administration is one of the most aggressive auditing agencies in California and it is critical for you to be prepared for the risks and pitfalls of the sales tax audit process. However, fear not. You have come to the right place for smart and strategic representation. 
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Overview

California sales tax audits present a danger for businesses because they are often imprecise. While the main components of an income tax audit can be easy to determine through a simple review your bank statements and expenses, California sales tax auditors rely on statistical sampling and other methods to determine your amount of liability. Yes, California auditors can assess you a liability based on nothing more than guesswork. 
 
The fundamental problem in a California sales tax audit is that the sales of a business over the standard three year audit period is often too many transactions for one person to reasonably verify. So, rather than count every single one, auditors rely on statistical sampling and other shortcuts to arrive at what you should owe the state of California. 
California sales tax audits are not random. Auditors go after certain types of businesses and industries that are viewed as low hanging fruit and isolate issues specific to those industries. Because sales tax audits are so time consuming, California has to ensure that the resources it devotes to them (auditors) are going to get the most yield and the most tax revenue possible. The system may not be designed for you to fail, but it certainly is not set up for your success. 
 
As the stakes are high, there is a lot of strategy that is necessary for dealing with a California sales tax audit. You need a tax team that understands the ins and outs of how sales tax audits work in order to maximize your success and minimize your risk during the process.

The Best California Sales Tax Audit Defense Starts Here.

Our strategy sessions dig deep into why you are being audited and create a roadmap to getting you out of harm's way once and for all.
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Who Needs This Service?

  • Small and midsize business, particularly those who may not have an understanding of how sales tax works.
  • Companies that don’t have internal financial people
  • Organizations whose internal financial people don’t have a clear understanding of tax law.

Our Approach

  • 1: Initial Strategy Session
  • 2: Pre-Audit Your Return
  • 3: Get the Audit Plan in Place
  • 4: The Audit Meeting

We provide every prospective California sales tax audit client with a 60-minute initial strategy session.

Our initial 60 minute consultation gives us a sense of who you are, what you have been doing, and what your risk exposure is in a sales tax audit.  You will sit down with Sam or our senior legal team and, based on your risk assessment, we will build a plan for dealing with your audit. At the end of the strategy session, you walk out with a complete strategy and step-by-step game plan. You receive the benefit of our analysis, which is yours regardless or not you retain our firm. If you choose to move forward, we will handle the entire audit on your behalf from start to finish. 

We pre-audit your return to minimize any surprises and maximize our results.

The purpose of the pre-audit is to "stress-test" our clients using the same methods and standards that the sales tax auditor will use when scrutinizing your return. We start with primary sources of information (the direct method of testing) and also analyze possible statistical analyses that the auditor may perform as well. This gives us the opportunity to not only test our hypothesis from the initial meeting, but to identify other risks and opportunities that may present themselves in the audit as well.

We attend your audit meeting and handle any necessary follow up.

The next step, often done in tandem with our pre-audit, is to reach out to the auditor and negotiate your audit plan. The audit plan is a critical and often overlooked step in the California sales tax audit process because it sets the boundaries for the scope of the audit. It is like defining the rules of engagement and sets the tone for the audit. Often, because we have become familiar with the client's data, we can steer the direction of the audit early to our client's benefit, which has a significant impact on the results that we are able to achieve.

We attend your audit meeting and handle any necessary follow up.

We present the audit on your behalf, walking the auditor through the process, from start to finish. Because of the pre-audit and the preparation that has been done in advance, we are able to anticipate any grievances or challenges that the auditor may have to the data that we are presenting and have put you into  a much more advantageous position.

Although we would like to tell you that every California sales tax audit goes smoothly, this is often not the case. You can expect California to fight back against a no-change assessment. If you have made a mistake in your reporting, we can help you get through the audit with as little pain as possible. Our goal is to mitigate your exposure and risk in order to provide the most streamlined and positive outcome possible.

After some measure of back and forth with the auditor, we will see a preliminary audit report and have the opportunity to decide where we go next. If we like the result, then we are done. If we do not, we can work with the auditor and/or management in the auditor's district office, pursue settlement options, or go through the appeals process and litigate the outcome. 

Through our experience in more than on hundred sales tax audits and 10+ years of experience in this area of law, we have learned that every audit follows a similar path, but with a slightly different approach based on who the client is. Our focus during the entire audit process though remains on what is best for you business. It is through our business-first approach though that we are able to achieve very beneficial results for our clients because we understand the 10,000 foot view of how the process works and how to navigate through it. 

Why We Designed This Service

Sales Tax Audits Office Building

We designed this service for our business clients because we want to transform something that is unpredictable, potentially damaging, and, at times, painfully unfair into something that is manageable and easy to get through. Part of that process is managing your resources and preventing the sales tax auditor from turning your audit into a fishing exhibition. An equitable outcome comes down to making sure your time, money, and resources are properly preserved.

Our Pricing

Cost is a difficult thing to provide in a sales tax audit because of all the variables. There are three main things that drive cost:
 
  • Decisions: the ability of the client to make clear decisions
  • Documents: to what extent the client can give us the information we need
  • Bureaucracy: who we need to deal with at the state and the level of friction we are getting.
 
Having said that, we always try to be as efficient as possible in respect to our resources and the costs to our clients. Our approach is to spread the work out to different team members to make your representation as cost-effective and efficient as possible (based on hourly rates ranging from $150.00 to $525.00 an hour, based on experience).
 
Ultimately, with our expertise and our ability to cut through bureaucracy, most sales audits run from $5,000 to $15,000 to cover the scope of representation through the sales audit process. 
Where you end up on that range goes back to steps 1, 2 and 3 listed in our process. It is difficult to put a clear figure on prices at the start of the matter, but once we work through the pre-audit process, we can give you a good sense of how the audit will go, including managing the cost.
 
However, examination of records can be fairly comprehensive depending on the auditor. Although it is always the goal to resolve issues at the lowest level possible, it may be cost advantageous to the client to take certain issues into the California Department of Tax and Fee Administration Appeals or Settlement Divisions. Cost conservation is one of many strategic decisions that needs to be examined in the course of an audit.
 

 

See Our Pricing Guide

Features & Benefits

  • We are a firm with more than ten years of experience in this area of law
  • We are able to provide you with a superior advantage through our representation.
  • We view each audit from a legal standpoint and from a view scope of not only what is in front of our clients, but how it could go.
  • We spend the time in preparation to control the outcome.
  • We are a well-respected law firm of knowledgeable attorneys and we know how to get what we want.
  • We know exactly what buttons to push with auditors to make the process go well for our clients.
  • We create an environment of collaboration.
  • We view our role with our clients as their quarterback, naming and strategizing the next move.
  • Preparation and presentation are the keys to success in any audit. IRS auditors may appear to wield a lot of power, but they are often no match for an attorney with a superior legal knowledge base and a keen understanding of IRS procedure.
  • We utilize our tremendous experience in audits for the benefit of our clients and to yield exceptional results. Our knowledge is your power.

Give Us a Call. You Have Everything to Gain and Nothing to Lose.

Our tax strategy sessions are the first step in making sure that you get the best sales tax audit defense possible. They are 100% risk free with a complete money back guarantee. 
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IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, I must inform you that any U.S. federal tax advice contained in this website is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter contained in this website.

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