Frequently Asked Questions
What do I do when a Sales Tax Auditor calls? How will they notify me?
When the sales tax auditor notifies you by phone or mail it is important to keep a positive attitude, and to be fully prepared for their queries. Have all of your important documentation easily available for the sales tax auditor's review.
How was my business selected for a sales tax audit?
In some cases the Department of Taxation uses systematic approaches in determining which businesses are a possible risk for underpaying sales tax, and in other cases, it is just arbitrary bad luck to be chosen. In either case, a sales tax audit is just another challenge that businesses face.
Do I need professional representation for a sales tax audit?
While it is not necessary to have professional representation, it is often helpful to have the assistance of a sales tax expert. One is always able to represent themselves, but when you may only encounter one or two sales tax audits in your life, it would be prudent for you to get proper advice from a sales tax professional. If you want the sales tax auditor to be able to discuss your audit with a professional, you must provide a signed power of attorney for that professional. Be wary of people claiming to be sales tax experts. There are many nuances to properly handling a sales tax audit, and it is doubtful that someone can be an expert unless they have handled hundreds of sales tax audits.
How long should a sales tax audit take? Will the sales tax auditors be at my place of business for the duration of the audit?
You can expect the duration of the sales tax audit to last approximately six to eight months. The sales tax auditors may stop by your place of business but it is preferable to have the audit conducted at the sales tax professional's place of business. This helps to avoid the sales tax auditor snooping around your business.
How long should I keep my records for sales tax auditing purposes?
We recommend keeping records a minimum of four years and if at all possible keeping records for up to seven years.
What are my payment options for sales, use, or corporate tax audit liabilities?
If you and the auditor agree on the amount owed and you have the ability to pay, make a check payable to the Department of Taxation. If you agree to the amount but do not have the means to pay, you may request an installment payment plan ("IPA"). Many times the sales tax auditor will also issue a personal assessment against the corporate officers for the business's sales tax liability.
If you do not agree with the amount of sales tax, interest and/or penalties you are being assessed, you may choose to pay the sales tax audit under protest or not to pay at all. You only have a limited amount of time to appeal the assessment or file a refund claim.
How is the interest rate determined on the sales taxes that I owe?
The rate of tax is set by state statute. In New York, it is generally 15% of the outstanding sales tax. Penalties are imposed in addition to interest being charged. The interest is computed from the date the sales tax is due until the postmark date of the tax payment (or in some cases the date of the sales tax receipt by the government.)
What is a sales tax exemption certificate, and how often does it need to be updated?
There are many sales tax exemption forms. These forms are generally provided by your customers for many different reasons including resale, manufacturing, tax exempt status, capital improvement, etc.
What is sampling, and when do sales tax auditors use this approach?
Audit sampling reduces the time to complete the sales tax audit fieldwork by taking a representative sample of time, and applying it to the whole sales tax audit period. This will generally benefit both the business owner and the Department of Taxation by reducing both the time and effort needed in retrieving documents for sales tax audit purposes.
After the sales tax audit is complete, how do I apply for a tax refund?
You generally have up to two years after the date of overpayment or three years after the filing of a sales tax return, to apply for a refund on sales and use taxes.