California Sales Tax Audits

If you have received notice that your sales tax returns are being audited, do not panic. You have come to the right place for smart and strategic solutions. Let our legal team dig into the particulars of your situation and work to build a tax action plan that will protect your business.

What You Need to Know

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, sales tax audits do not work like that.

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.

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Five Key Points to Understand

Most organizations do not perform regular internal sales tax compliance checks, so often will make mistakes in their sales tax collecting and reporting.
Sales tax audits are not "random." Because California has limited resources, it tends to target businesses and industries.
Because sales tax audits rely principally on statistics, there are many methods that auditors can use to assess a liability.
Even if you have done everything properly, you can still be assessed for a sales tax liability.
Very few attorneys practice sales and use tax law because it is incredibly complex and they lack the requisite background in statistics.

Your Sales Tax Audit Action Plan: Step-By-Step

1. The Initial Diagnostic
2. Meet With Our Senior Legal Team
3. Our Plan Delivered to You
4. Execution: Where the Rubber Meets the Road

We scope you and your business to determine the best approach.

Your first step in the process is to meet with our concierge team, who is in charge of walking you through in the intake/conflicts process for our firm. Our team will collect some basic information and is trained to gather some facts that our senior legal team will use to sketch the four corners of your tax action plan. For any documents that you wish to submit to us, our team will provide you with a customized link for you to upload your documents utilizing bank level security.

The initial meeting with our team is completely complementary. It is our job to analyze your situation and to make a determination on whether or not you are a good candidate to take the next step in our process. The last thing we would want is for you to make the investment in the tax action plan process and for it not to provide maximum benefit for you.

After your initial diagnostic, our team will make an initial recommendation and connect you with our senior legal team or another resource to assist you.

Note: From the moment you speak with our team, even if you elect not to retain us, everything you tell us is completely confidential under California state bar rules.

It is called an action plan because your legal defense strategy gets built on the spot.

Let's get down to brass tacks. We start the meeting knowing that there is something about your situation that has caused the state to target you for a sales tax audit. The ultimate goal of our meeting is ascertain what put you on the radar and how to get you off it.

We usually begin our meeting by going through the basics: who you are, what you have been doing, and, based on this, what your risk exposure is in a sales tax audit. As long as we have been doing this, it always amazes us how the little things about a prospective client can really influence the audit process. As we listen to your answers, we are stress testing your business to see where the weak spots would be in an audit.

If you have submitted any documents to us, we will review them in advance of the meeting and provide feedback based on what we see. However, providing financial documents (tax returns, sales summaries) is not necessary at this point in the process.

We are happy to answer any questions that you may have about the sales tax audit process or about your individual risk and, armed with the information from our interview, we can go much deeper with you about your situation than we can on this website.

By the end of the meeting, we will outline a full plan for your sales tax audit defense and share our full recommendations with you.

You will receive your action in writing to take with you.

The action plan is our opportunity to deliver as much value to you as possible and for you to walk out of our office with a game plan for resolving your sales tax audit. After you sit down with Sam or our senior legal team, we work to finalize your plan in writing and deliver it to you. There is no further obligation to us at this point and your action plan comes with a full 100% money back guarantee. If we do not deliver value for you, you do not pay for your plan: plain and simple.

Our concierge team will put together and send you a summary of our notes from the meeting/call. You will have these for the benefit of your organization, you can share them with others, or we are happy to schedule a follow up meeting to discuss any points of the plan with others.

Keep in mind, our plan comes before we have an opportunity to do more than an initial examination of any supporting documentation. However, while not a substitute for full on legal representation, we have designed the plan as its own stand alone component.

We help you define the rules of engagement and sets the tone for the audit. Often, even with a base familiarity with the client's data, we can steer the direction of the audit early to our client's benefit. By having a plan, even without full representation, you will see a significant impact on the start of the audit, which will be critical in determining the outcome and maximizing your defense.

We measure twice and cut once and, with the green light, we can spring into action and put your plan in place.

With your approval, we can execute and begin implementing your customized plan by the end of your first meeting. In reality, by the end of having us deliver their plan, most clients will elect to retain us for some measure of services going forward toward implementation. We are happy to be a role player and to serve as a guide going forward, or we can take the audit completely off your plate and handle everything from start to finish. It is entirely up to you.

We like to say in the firm that we are not in the habit of making decisions for people, but rather we strive to provide enough information for organizations and business owners/officers to make their own decisions. That is not to say that we leave you to do the heavily lifting (quite the contrary, our recommendations are usually very precise and candid), but the control over the matter should always rest with the client. We strive to keep you in the loop and break things down step-by-step.

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

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.

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. CDTFA 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 CDTFA 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.