Sales Tax Audits & Disputes

If you have been notified of an impending sales tax audit or investigation, you need to take immediate steps to protect your business. The California Department of Tax and Fee Administration* (CDTFA) audit process is far from exact and taxpayers must be vigilant in disproving errors in its assessments – not only for sales tax purposes, but also because the IRS is likely to pick up on any sales tax deficiency.

For more than 30 years, the tax attorneys at Moskowitz, LLP have successfully assisted thousands of California taxpayers with sales tax audits, investigations and litigation. Our tax preparation team can also prepare delinquent sales tax returns on your behalf.

Audit Triggers

The State of California uses a variety of methods to select businesses for sales tax audits, including size, sales volume, type of industry, or a tip-off. Activities that may subject your business to additional scrutiny include a large number of exempt sales, new internet sales in the state, filing late, or large discrepancies in income and expenses identified in previous audits.

The most frequently audited industries are restaurants, bars, construction companies, technology companies, and out-of-state companies with a sales tax nexus in California.

California Department of Tax and Fee Administration penalties

The CDTFA imposes harsh penalties on businesses that do not comply with sales tax rules:

  • 10% if you file late and 10% if you pay late
  • Up to 25% if you fail to report as a result of fraud or an intent to evade the law
  • 40% if you collected the sales tax but did not pay it over to the State
  • 50% if your business is also operating without a valid license

Personal liability for failing to collect or pay over sales tax is not limited to the officers of the company. In most states, personal liability can attach to anyone who has responsibility for collecting and paying sales tax. In addition, if you close your business, the CDTFA is likely to assess as many people as it can with any sales tax debt —even if those who were never responsible for it to begin with.

California sales tax assistance

The CDTFA is not concerned with the effect that sales tax payments will have on your business, and is not inclined to offer you an easy settlement. However, it is possible to have penalties waived or abated under certain circumstances. Put the knowledge and experience of our sales tax defense attorneys to work for you by calling our San Francisco office today.

* formerly the California Board of Equalization (BOE)

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