What Does a Sales Tax Audit Consist Of? – Key Insights

Once a business is selected for a sales tax audit, it should be recognized that the state is not just asking for a few forms—they are actually digging into how the sales tax had been handled across the board. The audit process is simply designed to verify that the business accurately collected, reported, and paid the precise amount.

Within this context, the auditors generally review the following items:

• Filed sales tax returns for the audit period
• Invoices and receipts—both taxable and exempt
• Exemption certificates—making sure they are valid and current
• Bank statements and general ledger entries to confirm reported figures
• Point-of-sale (POS) system settings and sales records
• Shipping records, especially for interstate sales
• Payment timelines and filing frequencies

Sales Tax Audit Method

Instead of reviewing every transaction, auditors usually leverage a sampling method—they choose specific months or types of transactions to check the accuracy element. In the case of discrepancies being found, those could be applied to the rest of the period being audited.

In the sales tax audit process, collaborating with an accountant for tax audit can be considered a smart action, as they are experienced in terms of what auditors look for. Moreover, they can present assistance in making sure that the audit goes smoothly by organizing documents and locating potential gaps as well as communicating directly with the auditor on behalf of the business.

Why It Matters

Errors in reporting—even minor ones—can add up fast. The sales tax audit cost might cover not just unpaid tax but also penalty costs and interest payments the alongside professional fees needed to address any findings.

Want to be ready? Keeping a solid paper trail, staying fully consistent with filings, and not ignoring the warning signs like mismatched numbers between the tax forms should be your main actions. Running a self-check using a sales tax audit checklist can be leveraged. For any sales tax audit-related concerns, contact Dimov Audit today.