Unlike other forms of audits, serious errors on sales tax audits are usually pretty easily discoverable. One of the biggest mistakes that people make is they underreport their sales tax returns but their federal income tax returns show the true amount of sales. The auditors take what I call here big five data points: sales tax returns, your federal income tax returns, your internal accounting, your bank statements and your 1099Ks. They line up all that data together, that's a pretty good indicator out the gate of whether or not there's a discrepancy or whether or not your reported taxable sales are accurate. So anyway, this is a big problem because it's very easy to see serious errors out of the gate. So the first thing you need to do is understand how serious
the error is and understand whether or not there was any intent behind it. So if there was intent and potentially you fraudulently filed the sales tax return, that's a different issue. If there's a serious error and it's isolated in one particular quarter, you're better off highlighting it for the Auditor and isolating the error rather than letting them turn a molehill into a mountain. And go through the entire audit with the expectation that that error is going to continue so the best thing that you can do with errors is either admit them to the auditor flat-out or do damage control and mitigate the issue as much as possible. By mitigating the issue, you're going to reduce your liability and you're going to shorten the life of the sales tax audit.