Although businesses of any size can find themselves the subject of a sales and use tax audit, some are at a higher risk than others. Common targets often include large businesses or those with complicated tax filings.
What else can trigger a sales and use tax audit? The New York Department of Taxation and Finance states that a failure to file a return, a failure to properly report sales, discrepancies when compared to federal filings and a history of audits are common reasons that trigger a state audit.
It is also important to note that recent changes in the rules used to determine if a nexus is present could trigger an increase in sales and use tax audits. This could lead to a unique surge in sales and use tax cases involving online marketplaces. We will watch for this development and provide updates as they become available.
What happens if my business is the subject of a sales and use tax audit? The New York Department of Taxation and Finance will likely request documentation to support your returns. In many cases the process will involve a review of multiple years of returns.
The agency also notes it often uses a computer assisted audit process when auditing businesses. As such, before the agency begins the audit it will likely provide your business with two questionnaires. The agency claims use of the computer assisted process results in a more efficient audit.
How long does the state have to conduct an audit? New York State Tax law generally applies a three-year statute of limitations. There are some situations when the state could conduct an audit beyond this time limit. Examples include failing to file tax returns or fraudulent filings.
What should I do if NY audits my business? State law requires you cooperate during the audit. State law also allows you to retain counsel to represent your interests. The attorneys at Goldburd McCone can provide experienced representation during a sales and use tax audit to better ensure your interests are protected.