Did you know that auditors are not only in your business’ home state? While most companies dread being audited by their home department of revenue, they don’t expect that state tax authorities will send auditors to (or hire auditors from) other states to capture unreported sales and use tax revenue. Some states even have remote offices.
One example is California which has field audit offices in Houston, New York, and Chicago. The Texas Comptroller has offices in New York City, Los Angeles, and Tulsa, OK. Field auditors from Washington state may audit in multiple other states! These auditors examine sales by companies headquartered in other states that have nexus (a connection strong enough to trigger a tax collection obligation) in their states; it is especially surprising to companies who aren’t registered to the collecting state and are targeted by that state’s audit division.
Not only do state departments of revenue send auditors to other states, the state tax administrators frequently work together. Regional information-sharing agreements between states, such as the following, can greatly help facilitate audits:
- NESTOA, North Eastern States Tax Officials Association (Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont)
- SEATA, Southeastern Association of Tax Administrators (Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia)
- MSATA, Midwestern States Association of Tax Administrators (Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, Oklahoma, South Dakota, Wisconsin)
- WSATA, Western States Association of Tax Administrators (Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Texas, Utah, Washington, and Wyoming)
How would your company stack up during an audit?
Get your free copy of the Sales and Use Tax Audits Uncovered report to learn more about audit triggers, how to avoid them, and how to protect your business against unnecessary tax compliance risk.
About Avalara
Avalara helps businesses of all sizes achieve compliance with transactional taxes, including sales and use, VAT, excise, communications, and other tax types. The company delivers comprehensive, automated, cloud-based solutions that are designed to be fast, accurate, and easy to use. Contact us today at microsoft@avalara.com to learn more, or visit www.avalara.com.
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