What is Sales Tax Audit?
A sales tax audit is when a state government checks your business's sales tax records. It's a normal process and doesn't always mean you've done something wrong. This guide will help you understand audits and how to be prepared.
Why Might My Business Get Audited?
States audit businesses for a variety of reasons. An audit doesn’t necessarily mean you’ve done something wrong—it’s often routine. Common triggers include:
Random Selection: Your business might be chosen randomly.
Filing Issues: Late or missing tax filings can trigger an audit.
Inconsistencies: Mistakes or changes in your tax reports.
Business Type: Certain industries are audited more often.
Tips: Information from other businesses or people.
What Happens During an Audit?
Here’s a general overview of how sales tax audits unfold:
You Get a Notice: You'll receive an official letter or email from the state Department of Revenue.
Audit Details: The state tells you which records and time period they are checking.
Submit Documents: You'll need to provide records like sales reports and tax returns.
Auditor Review: The state reviews your records and may ask questions.
Audit Results: You'll receive a report showing if everything is correct or if there are issues.
What Documents Will I Need?
Every state is a bit different, but auditors often ask for:
Filed sales tax returns and confirmation of payments
Detailed sales reports showing taxable vs. exempt sales
Customer exemption certificates (e.g., resale certificates)
Copies of invoices and receipts
Nexus documentation (proof of physical or economic presence)
Marketplace facilitator data (if applicable)
Shipping and fulfillment information
How Long Does an Audit Take?
Audits can vary in length. Simple audits might take a few weeks, while more complex ones can take months. Providing organized documents quickly helps.
Common Audit Outcomes
After reviewing your records, the auditor will issue findings. These can include:
✅ Clean audit: No issues found—you're all set.
⚠️ Underpayment: You may owe back taxes, interest, or penalties.
💰 Overpayment: Businesses may be entitled to a sales tax refund..
🔁 Follow-up monitoring: The state might monitor you more closely in the future.
How Kintsugi Helps You Prepare
Kintsugi gives you the tools you need to stay compliant and ready for audits:
Centralized data: All your sales and tax data is stored in one place.
Audit-ready reports: Downloadable summaries that match state filing formats.
Exemption certificate tracking: Manage and validate resale or exemption certificates.
Filing history at your fingertips: Easily access your return submissions and payment confirmations.
Support when you need it: Our team can help you locate records or understand filing history if you’re audited.
Tips to Stay Audit-Ready
Keep exemption certificates updated and valid.
Regularly reconcile your sales and tax data.
File and pay on time across all active states.
Maintain organized records for at least 3–5 years (most states audit within that window).
Monitor for new nexus thresholds or registration needs.
If You Get an Audit Notice
Here’s what to do if you’re contacted by a state:
Read the notice carefully to understand what’s being asked.
Notify your finance or tax team (if applicable).
Gather the requested documentation—most of it can be pulled from your Kintsugi account.
Contact Kintsugi support if you need help retrieving reports or understanding filings.
Final Thoughts
Sales tax audits are manageable with good organization and the right tools. Keeping accurate records and filing on time will help you handle any audit with confidence. Kintsugi is here to help you stay compliant, organized, and ready—every step of the way.