Sampling in Sales Tax Audits

Top Questions on
Sales Tax Audits and Sampling

We subscribe to some of the best resources available today when it comes to state and local tax research. Chances are, whatever question you could possibly have, we can find the answer. Today, we want to address some basic questions surrounding sales tax sample audits.

Sampling Questions

Questions arise frequently around what is allowed (or mandated) when it comes to sampling. Just about every state uses sampling in conducting audits. The question is, do the states use "statistical" or "non-statistical" (or both) audit methods. Some of the non-statistical methods that states use are actually different types of block sampling methods. Some states use a time period such as a month or several months or year(s) and then project what they find in the sampled time period to the whole population of transactions in the entire audit period. Other non-statistical block methods that some states use are the voucher, invoice or check sequence methods where they choose every nth voucher, invoice or check number for the sample. The least frequently used method is the alphabetical method.

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Lila Robbins on Why You Might Want to Hire Your Own Sales Tax Manager

It May Be Time To Hire A Multistate Tax Expert
by Lila Robbins, CPA

Are You Ready for More Aggressive Audits?

With the economy on the skids, every state is feeling the financial crunch. Consumers are spending less, resulting in less sales tax revenue to the states. Getting new laws passed to raise taxes, or create new ones, on already over taxed consumers, who are also voters, is not a popular idea. Many states have decided against new taxes, and have instead opted to more aggressively pursue taxes that are due, but have not been remitted.

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Sales/Use Tax Traps in a Merger

Recently a client asked us to comment on their proposed merger plans. Mergers are always happening, so I thought it would be worth your while for us to comment on this to our friends and clients at large.

The basic facts were that, for various reasons, our client planned to simplify their corporate structure. The old structure consisted of a number of limited partnerships, limited liability companies, corporations and even a US branch of a foreign corporation. They planned to get down to just a few legal entities in the US by contributing member interests in the LLCs and merging several corporations out of existence. The question for us to comment on revolved around what would be the sales/use tax impact of such a transaction.

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