Audits are a routine procedure used to determine whether state excise taxes have been reported and paid correctly. The majority of businesses audited by the Department of Revenue (DOR) are chosen using statistical methods.
The period of time covered by an audit is generally four years plus the current reporting period. An audit by the DOR generally includes a review of the following reported on the Combined Excise Tax Return:
- Income – verification of proper amounts and classifications reported on the return;
- Deductions and exemptions – verification of proper amounts, classifications and documentation; and
- Purchases – verification of retail sales or use tax paid on capital assets and consumable supplies.
Records required during an audit include the following:
- Washington State Combined Excise Tax Returns and work papers;
- Federal income tax returns
- Summary accounting records – check register, general ledger, sales journal, general journal, cash receipts journal and any other records you use to record income and expenses;
- Purchase invoices;
- Depreciation schedule along with purchase invoices for the assets;
- Reseller permits; and
- Supporting documentation for all deductions and exemptions
After the Audit
After a review of the business records, the auditor will explain any problems found and adjustments made. If you agree with the audit adjustments, the audit will be processed and a copy of all applicable schedules, laws and rules will be provided to you. It generally takes about four to six weeks to receive the final audit copy. If the audit results in additional taxes owed, taxpayers have 30 days from the date the audit was mailed to pay the tax and interest in full. Overpayments or credits are either refunded or credited against amounts due on future returns.
Taxpayers who disagree with any audit findings may request a meeting with the audit supervisor. If agreement cannot be reached at that time, you will be provided with information on audit appeals procedures. You have 30 days from the date the audit report is mailed to appeal the audit.