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3 Must-Know Pre-Sales Tax Audit Steps

Updated: 2 days ago

Updated: April 22, 2024 This tax tip is about 3 things you should do before you or your client receives a Notification of Routine Sales and Use Tax audit letter. If you follow these guidelines, your life or at least the audit will be a lot simpler.

Key Takeaways:

  1. Document Retention Policy: Make a document retention place with the sales and use tax statute of limitations in mind. That also means making sure to retain any source documents relating to journal entries and asset additions, especially if those entries were booked within the statute of limitations. While the underlying transactions may have occurred outside the statute of limitations, the auditor may request proof of that if the entry was booked within the audit period.

  2. Confirm all sales are captured: Depending on the type of business, sales may be made through multiple sources including the company website, brick and mortar stores, multiple online marketplaces, including Amazon, Etsy, etc.  Make sure that all sales are captured in the accounting records. Also, make sure it is clear how total sales, taxable sales, and taxable purchases for each taxing jurisdiction where sales and use tax returns are filed.

  3. Review exemption, resale, reseller’s certificates, and other documentation substantiating tax-free or tax-exempt sales. Make sure they are properly completed in real time. Taxing jurisdictions have different rules. Make sure the substantiation complies with the taxing jurisdictions where business is conducted.

If a business makes these three things a priority before an audit, any sales and use tax audit will run a lot smoother for everyone involved.


Our mission to provide a resource so business owners, accountants and bookkeepers can understand sales & use tax compliance. We know that sales and use tax laws are not the easiest to understand. Our focus is on empowering you with a framework and general understanding, so you know what questions to ask and where to go to get the information you need to stay on the right side of sales and use tax compliance.

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