How to Fight a New York State Sales Tax Audit
- 1). Review the auditor's documentation list. Sales tax auditors in New York send out lists with the audit notice. Contact the auditor. Verify exactly what documents and records the auditor needs. Gather the documents.
- 2). Locate all receipts, documents and records showing sales tax charges and payments. Include shipping and billing invoices. Find any certificates of tax exemption. Tax exemption certificates show the receiver of the goods does not have to pay sales tax. The certificates may relieve you of sales tax liability in New York even if the auditor finds the certificate invalid.
- 3). Ask buyers for statements for any exempt sales you cannot find certificates for. New York does not charge sales tax on exempt transactions, such as resales, but you need to prove the transaction is exempt.
- 4). Contact the buyers on transactions flagged on the audit. Ask if the buyer experienced a sales tax audit that covered the time period of the transactions. New York's "overlapping audit" rule allows you to have a transaction removed from your audit if the buyer already went through an audit. For example, if the auditor is questioning a transaction from March of 2008, and the purchaser had an audit that included March 2008, you can ask to have the transaction removed from your audit. Ask the auditor to remove all qualifying transactions.
- 5). Review the auditor's report. You will receive audit papers that detail all sales tax errors and questionable transactions. Gather evidence that clarifies questions and proves why sales tax is not due on a flagged transaction.
- 6). Gather proof the audit method used is unreasonable. For example, if the auditor used day sale figures from a prior year to calculate approximate sales for days you could not produce receipts for, but your business was in decline, gather proof of the decrease in business. Include receipts from around the same time period and other statements, such as the company bank account, to show the decrease in incoming cash.
- 7). Dispute the audit findings in the New York State Division of Tax Appeals. Visit the official website of the division to get the appeal petition.
- 8). Complete the petition. Type in the information. You need the amount the auditor assessed -- plus penalties and interest -- and the reason for the dispute. Indicate whether you want to go through small claims or in front of a judge. You can only use small claims if the disputed sales tax totals do not exceed $40,000 in each 12-month period the audit covers. Sign and date the petition.
- 9). Attach copies of all evidence that supports the audit dispute to the petition. Attach the notice of the sales tax due. Make three copies.
- 10
Mail the original petition and two copies to the Supervising Administrative Law Judge
of the Division of Tax Appeals. You can find the address on the petition.
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