Sales tax audits have different types of penalties. Some penalties are more severe and some penalties are less severe. Generally penalties will range anywhere from 10 to 50 percent but the biggest kicker with sales tax penalties is that sales tax penalties can stack on top of one another. So let’s say for example that the client didn’t turn over all the sales tax that they collected and they failed to file a return. Well this client could be looking at a 40% penalty for the failure to turn over sales tax and a 10% penalty for each return that wasn’t filed. As you can see this can stack up pretty quickly and it leads to a lot of problems in the context of the audit. Usually CDTFA will reduce the penalties down to a manageable level. So for example, if you have 12 quarters of sales tax returns that you didn’t turn in, they’re not going to hit you with a hundred and twenty percent penalty but at the same point, sales tax penalties are pretty severe and the CDTFA often leans towards the stronger end of the penalties at least at the district level. One of the biggest areas for negotiation when we handle a sales tax audit is what the ultimate penalty structure is going to be for the client and we push on behalf of our clients for zero or very low penalties. This is contrary to a lot of the behavior that you see in a sales tax audit but if you play your cards right you can mitigate penalties or avoid them entirely during the course of the offer.