Preparing for an audit

Audits are a routine procedure used to determine whether state excise taxes are being reported and paid correctly. The majority of businesses audited by the Department are chosen using statistical methods. An audit period generally covers four years plus the current reporting period.

During the audit, the auditor reviews the business records to verify that taxes were properly reported. A review includes:

• Income reconciliation (amount and classification)
• Confirmation of any deductions or exemptions claimed
• Confirmation that sales or use tax was paid on purchases (assets and consumables)

Once the audit is complete, the auditor will discuss the results of the audit. If you agree with the results, the auditor then prepares the final audit report. A field audit manager reviews the audit before submitting it to the Audit Division’s audit review. This can take six to eight weeks.

If the audit results in additional taxes owed, you have 30 days from the date the audit is mailed to pay the tax and interest in full.

If you have overpaid your taxes, you will receive a credit notice to apply against amount due on future returns, unless you request a refund.

You are encouraged to schedule a conference with the field audit manager if you disagree with the audit adjustments. If you are unable to reach an agreement, you will be informed of how to file a formal appeal. You have 30 days from the date the audit report is mailed to file an appeal.