by April Tanner, CCE, Kimball Equipment
The Ugly (but they don't have to be!) - Audits
It is January 2020 - if the sales tax auditor showed up today - are you ready?
Have you been through a sales tax audit? A sales tax audit will look at sales tax in relation to customer purchases and your company purchases (use tax.) Because sales tax effects customers, it effects the credit department. This article will focus on sale tax in relation to customers, it will not focus on sales tax reporting or use tax as those are often a function of a different area of the accounting department.
When the auditor is in your office, they will review sales for a set period of time. Depending on the audit type and size of your company they may look at all sales for the given time period or take a selection/sample. They will look at all sales, not just sales that were not charged sales tax. It is the auditor's duty to review invoices to make sure your company is charging tax for all the appropriate items on an invoice and that the correct rate is charged. They will also review invoices that were not charged sales tax and check your paperwork. Auditors have a knack for finding errors - it is their job. They may review documents you may not expect. For example, auditors have checked to make sure we have shipping documents that match the ship to on invoices. They may review G/L accounts you were not expecting.