Level of Access to Give Sales Tax Auditor

We are going through our first sales tax audit (California) and I would like to know what is the appropriate level of access to give the auditor to the
Quickbooks accounting system. I would strongly prefer to have the auditor produce a list of the items that they want to review and give us the time to figure out how to create those reports. I certainly don't want someone touching our accounting system nor do I want them to be able to ask endless questions that take a long time to answer and unnecessarily extend the audit.
What is considered an appropriate level of access to the system? What does the law say about the auditor's right to demand console level access to the accounting software?
--
Will



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None. Do not let them touvh your hardware. Print out all the reports they want to see, but don't give tehm the opportunity to touch your computers.

They don't, in any state.
But they generally will want to see other supporting data to your reports. They will be starting with the sales tax report and verifying that. So bank statements are going to be asked for, as well as other items that may be generated by sales. Register tapes, credit card slips or statements, your "Z" totals, etc and so on - mostly for a selected month or three of any given year. They should spend a good bit of time diging down into one to three months and if no serious problems arise, just tally the remaining months using some basic data from the bank statements. They'll also look long and hard at your sales (if any) to other businesses, so have those sales tax exemption certificates all in order, as well as any shipments to out-of-state buyers if you do any mail order business.
Everyone knows the QB reports can be manipulated, so they probably won't put much weight on them. I wouldn't anyway.
Oh, don't be surprised to have to supply purchase data as well, if you sell at retail, because if you are buying $300,000 worth of goods, and reporting only $120,000 in sales, then the jig is up.
--
Paul A. Thomas, CPA
Athens, Georgia
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they
So you don't think the auditor will have a problem with my keeping them out of the room with the computer and just asking them to give us a list of items to report? I have asked that pointed question by phone five times now and the auditor simply refuses to commit to anything. I think that is really bad planning on the auditor's part because some request might take a long time to fulfill and in the meantime the auditor has nothing to do.

For out of state businesses that are not California resellers, is there some specific document they will want to see on file?

sell
reporting
Actually use tax on purchases is the only part of this audit I find at all difficult since the accounting system does not by itself support a concept of use tax that it can automatically apply to each purchase. We had to develop a business process for that and then go in and record transactions in the system to make it clear.
--
Will




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You use Quickbooks. How hard can it be to reun a report?

Shipping documents, purchase orders, among others.

Well, maybe it'll make sense to them as well.
--
Paul A. Thomas, CPA
Athens, Georgia
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Having just completed two full sales & use tax audits in the last four years, the Texas auditors spent more time looking at the invoices than they did on the sales/revenues. If there is renovations and new construction then they will find opportunity for sales taxes that might not have been charged. They looked at purchases from out of state to see if sales taxes were paid to the vendor or accrued and paid to the state.
In the DFW area, different cities may have slightly different tax rates. As a business located in Dallas where the sales tax rate is 8.25% if we bought something from Arlington where the tax rate is 7.75%. The auditor expects the 1/2% to be accrued and paid to Texas. If you have a major vendor, their systems should be able to accommodate your local tax rate. If you have contracts that are tax inclusive, make sure that the invoices clearly state it, if not have the contracts handy.
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Having just completed two full sales & use tax audits in the last four years, the Texas auditors spent more time looking at the invoices than they did on the sales/revenues. If there is renovations and new construction then they will find opportunity for sales taxes that might not have been charged. They looked at purchases from out of state to see if sales taxes were paid to the vendor or accrued and paid to the state.
In the DFW area, different cities may have slightly different tax rates. As a business located in Dallas where the sales tax rate is 8.25% if we bought something from Arlington where the tax rate is 7.75%. The auditor expects the 1/2% to be accrued and paid to Texas. If you have a major vendor, their systems should be able to accommodate your local tax rate. If you have contracts that are tax inclusive, make sure that the invoices clearly state it, if not have the contracts handy.
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Having just completed two full sales & use tax audits in the last four years, the Texas auditors spent more time looking at the invoices than they did on the sales/revenues. If there is renovations and new construction then they will find opportunity for sales taxes that might not have been charged. They looked at purchases from out of state to see if sales taxes were paid to the vendor or accrued and paid to the state.
In the DFW area, different cities may have slightly different tax rates. As a business located in Dallas where the sales tax rate is 8.25% if we bought something from Arlington where the tax rate is 7.75%. The auditor expects the 1/2% to be accrued and paid to Texas. If you have a major vendor, their systems should be able to accommodate your local tax rate. If you have contracts that are tax inclusive, make sure that the invoices clearly state it, if not have the contracts handy.
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Having just completed two full sales & use tax audits in the last four years, the Texas auditors spent more time looking at the invoices than they did on the sales/revenues. If there is renovations and new construction then they will find opportunity for sales taxes that might not have been charged. They looked at purchases from out of state to see if sales taxes were paid to the vendor or accrued and paid to the state.
In the DFW area, different cities may have slightly different tax rates. As a business located in Dallas where the sales tax rate is 8.25% if we bought something from Arlington where the tax rate is 7.75%. The auditor expects the 1/2% to be accrued and paid to Texas. If you have a major vendor, their systems should be able to accommodate your local tax rate. If you have contracts that are tax inclusive, make sure that the invoices clearly state it, if not have the contracts handy.
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Having just completed two full sales & use tax audits in the last four years, the Texas auditors spent more time looking at the invoices than they did on the sales/revenues. If there is renovations and new construction then they will find opportunity for sales taxes that might not have been charged. They looked at purchases from out of state to see if sales taxes were paid to the vendor or accrued and paid to the state.
In the DFW area, different cities may have slightly different tax rates. As a business located in Dallas where the sales tax rate is 8.25% if we bought something from Arlington where the tax rate is 7.75%. The auditor expects the 1/2% to be accrued and paid to Texas. If you have a major vendor, their systems should be able to accommodate your local tax rate. If you have contracts that are tax inclusive, make sure that the invoices clearly state it, if not have the contracts handy.
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Why would they ever look at invoices that are out of state and audit payment of sales tax to other states?
--
Will







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Will wrote:

Use tax, no?
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In Texas the thought is if you buy an ITEM from where ever you want, it is taxable to 8.25% or whatever the local rate is. If the invoice from out of state has no sales tax or only 6% as an example, then the state of Texas wants the 2.25%.
Internet purchases most likely do not have sales tax. The auditor caught this on an expense report where the General Manager bought some training books via the internet, from out of state, no sales tax. He collected 8.25% sales tax.
For clarity use tax is something a purchaser has to add on items purchased for resale but are used in house and not sold.
In the hotel restaurants we buy food for purposes of resale, no sales taxes. When we comp for for our guests, or a sales manager picks up the tab in the restaurant, that food was used in house, use tax is due. The example given in the state's brochure is a furniture store buys stock for resale (no sales tax). They pull a couch out to put in the reception area of the office. They owe use tax to the state for this.
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In Texas the thought is if you buy an ITEM from where ever you want, it is taxable to 8.25% or whatever the local rate is. If the invoice from out of state has no sales tax or only 6% as an example, then the state of Texas wants the 2.25%.
Internet purchases most likely do not have sales tax. The auditor caught this on an expense report where the General Manager bought some training books via the internet, from out of state, no sales tax. He collected 8.25% sales tax.
For clarity use tax is something a purchaser has to add on items purchased for resale but are used in house and not sold.
In the hotel restaurants we buy food for purposes of resale, no sales taxes. When we comp for for our guests, or a sales manager picks up the tab in the restaurant, that food was used in house, use tax is due. The example given in the state's brochure is a furniture store buys stock for resale (no sales tax). They pull a couch out to put in the reception area of the office. They owe use tax to the state for this.
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In Texas the thought is if you buy an ITEM from where ever you want, it is taxable to 8.25% or whatever the local rate is. If the invoice from out of state has no sales tax or only 6% as an example, then the state of Texas wants the 2.25%.
Internet purchases most likely do not have sales tax. The auditor caught this on an expense report where the General Manager bought some training books via the internet, from out of state, no sales tax. He collected 8.25% sales tax.
For clarity use tax is something a purchaser has to add on items purchased for resale but are used in house and not sold.
In the hotel restaurants we buy food for purposes of resale, no sales taxes. When we comp for for our guests, or a sales manager picks up the tab in the restaurant, that food was used in house, use tax is due. The example given in the state's brochure is a furniture store buys stock for resale (no sales tax). They pull a couch out to put in the reception area of the office. They owe use tax to the state for this.
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In Texas the thought is if you buy an ITEM from where ever you want, it is taxable to 8.25% or whatever the local rate is. If the invoice from out of state has no sales tax or only 6% as an example, then the state of Texas wants the 2.25%.
Internet purchases most likely do not have sales tax. The auditor caught this on an expense report where the General Manager bought some training books via the internet, from out of state, no sales tax. He collected 8.25% sales tax.
For clarity use tax is something a purchaser has to add on items purchased for resale but are used in house and not sold.
In the hotel restaurants we buy food for purposes of resale, no sales taxes. When we comp for for our guests, or a sales manager picks up the tab in the restaurant, that food was used in house, use tax is due. The example given in the state's brochure is a furniture store buys stock for resale (no sales tax). They pull a couch out to put in the reception area of the office. They owe use tax to the state for this.
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In Texas the thought is if you buy an ITEM from where ever you want, it is taxable to 8.25% or whatever the local rate is. If the invoice from out of state has no sales tax or only 6% as an example, then the state of Texas wants the 2.25%.
Internet purchases most likely do not have sales tax. The auditor caught this on an expense report where the General Manager bought some training books via the internet, from out of state, no sales tax. He collected 8.25% sales tax.
For clarity use tax is something a purchaser has to add on items purchased for resale but are used in house and not sold.
In the hotel restaurants we buy food for purposes of resale, no sales taxes. When we comp for for our guests, or a sales manager picks up the tab in the restaurant, that food was used in house, use tax is due. The example given in the state's brochure is a furniture store buys stock for resale (no sales tax). They pull a couch out to put in the reception area of the office. They owe use tax to the state for this.
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