Pitfalls of Markup Audits in Sales Tax Examinations

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Pitfalls of Markup Audits in Sales Tax Examinations In some sales tax examinations, auditors may use markup analysis to estimate taxable sales. These methods often arise during California sales tax audit examinations. Rather than relying exclusively on transaction records, the auditor calculates expected sales based on cost of goods sold and an assumed markup percentage. … Read more

Common Resale Certificate Issues Identified During CDTFA Audits

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Common Resale Certificate Issues Identified During CDTFA Audits Resale certificates play an important role in documenting sales for resale that are not subject to California sales tax. During CDTFA audits, however, resale certificate documentation is frequently reviewed in detail, and deficiencies may result in transactions being reclassified as taxable retail sales. Resale certificates play an … Read more

When Economic Nexus Triggers Sales Tax Registration

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When Economic Nexus Triggers Sales Tax Registration Businesses expanding across state lines may trigger sales tax obligations in jurisdictions where they maintain no physical presence. Economic nexus standards adopted by many states require businesses exceeding certain revenue or transaction thresholds to register and collect sales tax. Businesses expanding across state lines may trigger multi-state sales … Read more

Understanding CDTFA Audit Sampling Methodology

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Understanding CDTFA Audit Sampling Methodology Sales tax audits conducted by the California Department of Tax and Fee Administration (CDTFA) frequently rely on statistical sampling techniques to evaluate compliance. Rather than reviewing every transaction, auditors may select a representative sample of records and project any identified errors across the audit period. Sampling methodology can significantly influence … Read more

Disallowed Interstate Commerce Sales in CDTFA Audits

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Disallowed Interstate Commerce Sales in CDTFA Audits Businesses audited by the California Department of Tax and Fee Administration (CDTFA) frequently encounter adjustments involving transactions claimed as sales in interstate commerce. These issues frequently arise in the context of CDTFA audits where documentation supporting shipment outside California is incomplete or inconsistent with statutory requirements. Under California … Read more