How an auditor arrives at a number
Auditors usually begin by requesting sales records, purchase invoices, exemption certificates, and bank statements for the audit period. When records are complete, the review tends to focus on specific transactions, such as sales treated as exempt or purchases on which no tax was paid. When records are incomplete, New York permits estimated methods, and auditors may extrapolate from a test period, apply markups to purchases, or use other indirect measures. An estimate built on a few unrepresentative weeks can overstate liability considerably, which is why the method and the sample period often deserve more attention than any single invoice. Businesses are sometimes asked to sign an agreement on the test period, and that document should be reviewed before it is signed.
Personal exposure and the paper trail
Sales tax is collected on the state's behalf, and New York can hold certain owners, officers, and employees personally responsible for unpaid amounts. Whether someone counts as a responsible person depends on their actual role in the business, not only their title. Resale and exempt-use certificates are often the most recoverable items if they were properly obtained, so gather them early. Keep copies of returns, workpapers, and correspondence with your bookkeeper, and preserve old system data rather than discarding it during an upgrade. If the auditor asks for a consent extending the time to assess, discuss it with us before signing.
What we sort out at the start
Our first step is to understand what has been requested, what has been produced, and what the auditor has said about method. We then look for gaps the business may still be able to close, such as missing certificates that customers can still provide, and for categories of sales that may have been taxed or left untaxed by mistake. If the audit closes with a determination you disagree with, the options include a conciliation conference with the Bureau of Conciliation and Mediation Services or a petition to the Division of Tax Appeals, both with short filing deadlines. We also discuss how to adjust collection practices going forward so the next period does not repeat the same problem.
