What Is a Sales Tax Audit? On it a Sales Tax audit is kind of what it sounds like the sales tax audit? Is the government coming in and checking to make sure that sales tax was paid properly the biggest problem that we see in sales tax audits is that when you're auditing a business's sales it's not very reliable meaning yes you can go through a business's records over three years and audit every single transaction, but the problem with a lot of business is particularly lot of retail businesses is cash and so even if you were to go through and all and everything it doesn't necessarily mean that the records are going to align with the way that the auditor thinks that they're out of line so you can have differences of opinion where the auditor can claim that there's unreported cash sales or that there should have been additional tax charged and a variety of different issues and the problem with sales tax audits again is the size of them you're dealing with all of these transactions you're dealing with three years of individual transactions day in and day out.
For some businesses can have tens of thousands if not hundreds of thousands even millions of transactions over a three-year period how do we see businesses all the time particularly those with low margins and high frequency to just have a better insane amount of transactions and there's no way that anybody's going to take. The time to really go through every single one of those in detail and verify each in transaction so sales tax audits are a way of assessing the amount of sales tax liability that's moment so the auditor and the representative are working through this very large amount of data and trying to make conclusions on it to make sure the appropriate amount of taxes paid in statement and as a little talked about in future videos there's a lot of differences of opinion and there's a lot of problems when that process goes through because of the high degree of variance and because you're not always relying on direct methods of testing.