Challenging how the number was built
Sales tax audits frequently rely on samples and projections rather than a review of every transaction. The choice of test period, whether it reflects seasonal swings or one-time events, and how errors are extrapolated can move the result substantially. When an auditor concludes that records are inadequate, New York permits estimates based on outside indicators such as industry markups or on-site observation, and those estimates can be challenged as unreasonable for your particular business. Agreeing to a test-period audit is often efficient, but its terms should be understood before you sign.
Exemptions and the paper behind them
Many assessments rest on sales that were not taxed because they were for resale or otherwise exempt, where the supporting certificates are missing or incomplete. Certificates obtained after the audit begins may still be considered within limits, so the effort to collect them should start immediately. Purchases on which you paid no tax to your vendors can also be assessed as use tax. Whether a particular service is taxable in New York is a frequent source of dispute, and the answer often depends on how the service is actually delivered and billed.
Personal exposure for owners and officers
Sales tax collected from customers is treated as the state's money, and in New York certain owners, officers, and employees responsible for collecting it can be held personally liable for unpaid amounts. That exposure can follow a person after a business closes; for corporate officers it usually turns on actual authority and duties, while partners and LLC members can be reached more directly. Bring the audit workpapers and correspondence, filed returns, any consent forms you have signed, and records of who signed checks and filed returns. If the business has been sold or closed, records held by a former partner or bookkeeper may need to be requested early. We review the auditor's method, identify sales that can be documented as exempt, and consider whether a conciliation conference or a petition will be needed once findings issue.
