New York sales tax audits are challenging for business because of the complexity of the sales tax laws and stringent audit standards. The New York State Department of Taxation and Finance (DTF) has the authority to audit any business that sells taxable products or services in New York. DTF auditors are trained to look for specific red flags that indicate a business may be incorrectly reporting sales tax.
The DTF is also authorized to audit businesses with high-risk characteristics, such as businesses with high sales volumes and businesses that sell products or services at a discount. Businesses that have a history of non-compliance are also more likely to be audited by the DTF.
The DTF audits many types of businesses, including:
- Retail stores
- Gas stations
- Grocery stores
The DTF also audits businesses that sell taxable products and services over the internet, including:
Online retailers and Internet auction sites, as well as service companies (landscapers and plumbers).
New York Sales Tax Audit Process
The DTF has a specific audit process that it follows when auditing businesses. The DTF will typically send a letter to the business stating that it is being audited and what the audit will cover. The letter will also include information about how to contact the auditor assigned to the case.
The auditor will then contact the business owner or manager and schedule an appointment to review records at the business location. During this meeting, the auditor will ask questions about sales and purchases, as well as any discounts or other deductions from gross receipts that may have been taken on sales tax returns. The auditor may also ask for copies of invoices, receipts, canceled checks and bank statements, among other documents.
If additional information is needed after this meeting, the auditor may request additional documentation from you or schedule another appointment with you at your place of business. Auditors are often required to meet with multiple employees during their audits because each employee may have different responsibilities in regards to sales tax reporting. For example, one employee may be responsible for making purchases while another employee is responsible for recording sales tax collected from customers on receipts and invoices. If an issue arises during an audit that requires further investigation by a different department within DTF, auditors are required by law to inform you of this before proceeding with their audit work so that you can provide them with any additional information they need before proceeding further with their audit work (i.e., information that is needed by the other department).
After the audit is complete, the auditor will prepare a report that documents his or her findings. This report will be sent to you and your sales tax permit agent. If you have any questions about this report, please contact your sales tax permit agent.
Audit results are generally available within 30 days after completion of the audit. You may request an extension of time to review the audit results if more time is needed to understand and respond to the findings in the auditor’s report. If you do not agree with any of the findings in the auditor’s report, we encourage you to submit a written protest within 30 days of receiving this report.
What happens if I do not comply with the sales tax laws?
If you do not comply with the sales tax laws, you may be subject to audit, penalties and interest. If you are found to have underpaid your sales tax, you will be required to pay the amount due plus interest and penalties. If you are found to have overpaid your sales tax, we will refund the amount due to you.
If you need help navigating your tax issues, please feel free to contact us.