Have
you recently been notified of a sales tax audit? Are you under audit
now? I have never seen so much sales tax audit activity in my 23 years of
tax consulting. Auditors are coming out of the woodwork and are
contacting companies who have been off the radar for years. Further, the
audit findings being proposed by these auditors are outlandish. I'm not
sure what type of instructions these folks are getting, but there must be some
moratorium on using logic and reason when conducting sales tax audits.
I've been dealing with several audits where the auditor is altering the facts
and the law to suit his own position. He is imposing his own
"judgment" in place of the contract, written responses from clients,
and a substantial body of other documentation that shows him to be flat out
wrong. His response, "if you don't like it, you can fight
it". I'm afraid that is the new auditor mantra!
So
why are audits so frustrating and how can you minimize this frustration?
Here are some thoughts based on the audits I have worked on over the
years. As you can see, the problem with audits may not always be with the
auditor. You may actually be the problem. If so, step out of the
way or get some training specific to dealing with auditors.
Common
issues leading to problematic audits:
1.
Bad
auditor: Auditor doesn’t know what they are doing, isn’t taking time
to understand the business, doesn’t listen to what client says, has own agenda,
overloaded and no time to do a good job.
2.
Company
not ready: person in charge of audits is too busy to attend to
the auditor unless it is at a critical point, Company not ready when auditor
arrives and is forced to quickly gather info for audit, company waits until
audit is complete before questioning the methodology, company constantly asks
for delays and is still not ready when auditor arrives, inexperienced person
assigned to handle audits, company takes adversarial position with auditor.
3.
Data: company
records are not clear, data is not accurate or is hard to understand, tax
systems not capable of developing clear audit trail, multiple data feeds make
it difficult for auditor to work.
4.
Business
Model: Company
does a variety of things, sells a variety of products and does not do a good
job at developing the tax rules, invoices, and support documents to present a
clear picture to the auditor.
In any audit situation, it is normally a combination of these items. They
tend to compound one another. A hurried auditor combined with bad data
and incompetent company personnel will lead to a really bad conclusion. A
good auditor who is treated like dirt will not be overly cooperative when
issues arise.
If
you have not been audited brace yourself. They are coming to get
you. Be ready and be on your defense. Know your issues before the
auditor arrives
.
