What CFOs Need to Know About Weathering a Sales and Use Tax Audit

Time to Take Action in the Face of Aggressive Sales Tax Audits

When it comes to sales and use tax audits, state and local jurisdictions are getting more aggressive, which means that CFOs and finance teams must be prepared for the inevitable audit. The number of audits in this area is increasing, so it’s no longer a matter of if, but when, your company will face an audit.

With all of these sales tax issues weighing on corporations, it is imperative for finance chiefs to get ahead of sales and use tax compliance issues before they have a serious impact on the company’s bottom line and reputation.

Start by Avoiding the Audit

To borrow a sports analogy, the best offense is a good defense when it comes to sales tax audits. While auditors are becoming more aggressive in enforcing sales and use tax compliance, the best strategy is to put the people, processes, and systems in place to minimize your chances of an audit.

While there are a number of challenges for finance chiefs when it comes to sales tax compliance, they can take steps to minimize the risk of an audit. The finance team should have a detailed understanding of where their company is doing business. It is critical to determine your company’s nexus — or “sufficient physical presence” — a legal term that refers to the requirement for companies doing business in a state to collect and pay tax on sales in that state. Fully understanding your company’s nexus footprint determines where you need to register and collect sales or sellers use tax

Topics explored in this ebook on sales and use tax include:

  • Assessing the benefits of working with a third-party provider to help navigate sales tax compliance at the state and local levels
  • Considering cloud-based technology that integrates directly with ERPs
  • Determining the appropriate response when your company is audited for sales tax compliance, including establishing a central point of contact, streamlining information gathering, and having a plan for quickly remediating problems