Sales Tax Audit Management

Receiving a CDTFA audit notice is stressful — but how you respond in the first days and weeks can make an enormous difference in the final outcome. At Sales Tax Solutions, we take over the entire audit process so you can focus on running your business.

We begin with a thorough review of your records before the CDTFA auditor ever sees them. We identify vulnerabilities, prepare documentation to support your positions, and manage every interaction with the auditor — from initial information requests through the closing conference.

What audit management includes

• Review of CDTFA audit notice and scope of examination
• Pre-audit records analysis to identify and address exposure
• Drafting and managing all correspondence with the CDTFA
• Accompanying or representing you at all auditor meetings
• Negotiation of audit sampling methodology and error rates
• Analysis of statute of limitations issues and extension agreements
• Closing conference representation and assessment review
• Evaluation of appeal options after audit determination

Who needs this service

Any California business that has received a CDTFA audit notice — whether for sales and use tax, fuel tax, or other administered taxes. Early intervention is critical: the decisions made at the start of an audit directly affect the final assessment.

Why it matters

CDTFA auditors are experienced professionals following established procedures. Without representation, businesses often accept audit results that significantly overstate actual liability. Our clients typically see meaningful reductions in proposed assessments — we have reduced audit liabilities by more than $10 million over the past decade.

Sales Tax Audit Appeals

When a CDTFA audit produces an assessment you believe is incorrect, excessive, or based on flawed methodology, you have the right to appeal. The appeals process is formal and procedurally demanding — experienced representation significantly improves outcomes.

We represent clients at every level of the California sales tax appeals process, from informal appeals conferences through formal proceedings before the Office of Tax Appeals (OTA).

Levels of appeal we handle

• Exit conferences with audit supervisors prior to final assessment
• CDTFA Appeals Bureau — informal appeal conferences
• Office of Tax Appeals (OTA) — formal hearing representation
• Petition for rehearing and reconsideration at OTA

How we build your appeal

A strong appeal is built on facts, records, and legal authority — not just disagreement with the auditor's conclusions. We analyze the audit workpapers in detail, identify errors in sampling methodology, incorrect application of law, and factual mischaracterizations. We draft the formal appeal brief, gather supporting documentation, and present your case persuasively.

Common grounds for appeal

• Flawed statistical sampling that overstates the error rate
• Incorrect taxability determinations on specific transactions
• Failure to account for valid exemption certificates
• Improper use-tax assessments on exempt purchases
• Misapplication of California sales and use tax law
• Procedural errors that affected the audit outcome

Compliance & Collection Matters

Outstanding sales tax liabilities and CDTFA collection actions can have serious consequences — liens on property, bank levies, permit revocations, and personal liability for responsible parties. We help businesses get into compliance and resolve collection matters before they spiral.

Collection matters we handle

• Installment agreement negotiation with the CDTFA
• Offer in compromise applications for eligible taxpayers
• Lien subordination and withdrawal requests
• Bank levy and asset seizure response
• Permit suspension and revocation proceedings
• Responsible person liability defense
• Voluntary disclosure to minimize prior period exposure

Compliance consulting

Proactive compliance is far less costly than reactive remediation. We help businesses establish correct tax collection procedures, evaluate nexus and registration obligations, and implement systems that reduce audit risk going forward.

Refunds & Overpayments

California businesses frequently overpay sales tax — collecting and remitting tax on transactions that are actually exempt, or paying use tax on purchases that don't require it. These overpayments often go unclaimed simply because businesses don't know to look for them.

We conduct systematic refund analyses across your transaction history to identify overpayments and file refund claims with the CDTFA to recover money you're owed. In many cases, refund recoveries significantly exceed consulting fees.

Common sources of overpayment

• Sales to exempt purchasers without proper documentation at time of audit
• Sales of exempt products or services incorrectly taxed
• Manufacturing and research equipment exemptions not claimed
• Resale transactions incorrectly treated as taxable
• Interstate and export sales taxed in error
• Use tax self-assessed on exempt purchases
• Tax collected in error from customers and remitted to the state

The refund claim process

Refund claims must be filed within the statute of limitations — generally three years from the due date of the overpaid return. We identify eligible periods, prepare and file the claim, and represent you through any CDTFA review or examination of the refund.

California Excise Tax

The CDTFA administers California's excise taxes in addition to sales and use tax. Excise taxes on cannabis, fuel, alcohol, and tobacco products carry their own compliance requirements, reporting obligations, and audit procedures — and the consequences of non-compliance can be severe.

Excise tax areas we cover

• Cannabis excise tax — cultivation tax and retail excise tax
• Fuel taxes — motor vehicle fuel, diesel, jet fuel, and alternative fuels
• Alcohol and spirits excise tax obligations
• Cigarette and tobacco products tax
• Electronic cigarette excise tax (ECET)

How we help

We advise on proper excise tax classification, registration, and reporting; represent businesses in CDTFA excise tax audits; assist with refund claims; and help businesses that have fallen behind come into compliance efficiently. Excise tax audits require specialized knowledge of CDTFA procedures that differ meaningfully from sales tax examinations.

Sales Tax Return Preparation

Accurate California sales tax return preparation is more than just adding up taxable sales. Proper deductions, correct application of exemptions, and consistent reporting methodology all affect both your tax liability and your audit exposure. We prepare CDTFA returns that are accurate, well-documented, and defensible.

What we provide

• Monthly, quarterly, and annual CDTFA return preparation
• Review and analysis of taxable vs. exempt sales by category
• Proper documentation of deductions and exclusions
• Multi-location and consolidated return filing
• Amended return preparation to correct prior-period errors
• Review of existing return preparation processes for accuracy

Beyond filing

We don't just prepare your return — we help you understand what's in it. For businesses that manage their own returns, we also offer periodic compliance reviews to identify issues before the CDTFA does, and staff training to improve internal processes.