Should we just handle the audit ourselves?

You can, and for a very small, simple, well-documented business it is sometimes reasonable. The places it goes wrong are technical: agreeing to a sampling method that is unrepresentative of your business, conceding an issue that was arguable, or providing records that expand the audit's scope beyond where it started. Those decisions get made in the first two weeks, often without the taxpayer realising a decision was being made.

How far back can they go?

Three years where returns were filed, eight years where they were not, and without limit in cases of fraud. That asymmetry is the reason unregistered periods matter so much more than under-reported ones, and the reason voluntary disclosure, which can limit the lookback, is worth considering before the CDTFA makes contact.

What is the most common finding?

Unsupported resale and exemption claims. If you accepted a resale certificate that was incomplete, expired or taken in bad faith, the sale can be reassessed as taxable, and you owe the tax you did not collect. Second is unaccrued use tax on out-of-state purchases. Both are found by examining records you supplied yourself, which is why organisation matters.

Can an assessment be reduced or appealed?

Yes. There is a formal petition for redetermination process with strict deadlines, and before that there is often room to correct errors in the auditor's methodology at the preliminary findings stage, which is cheaper and faster than appealing. Where the liability is genuine but cannot be paid, instalment agreements and offers in compromise exist.

We think we owe tax but have not been contacted. What should we do?

Talk to someone now, before they contact you. California's voluntary disclosure programme can limit the lookback period and abate penalties, and that option generally closes once the CDTFA initiates contact. This is the single clearest case in tax where acting early is worth real money.

Book a scoping call using the form on this page, or call us. We will ask what you need, who is asking you for it, and what condition your records are in, then tell you what the engagement involves and what it will cost before anything begins.

CDTFA Sales Tax Audit Representation | Los Angeles

If a letter has just arrived

Do not send records or answer detailed questions before speaking to someone who handles these engagements.

California requires a Power of Attorney on file before anyone can represent you before the CDTFA. That is the first practical step, and it is quick.

Auditors are not adversaries, but the audit is shaped by what you provide and how it is organised. Volunteering a disorganised box of records is the most expensive thing you can do at this stage.

Enforcement is increasing

The CDTFA identified $745.3 million in sales and use tax deficiencies in FY2024-25, up around 19% on the prior year. Its compliance programmes generated over $1 billion at a benefit-to-cost ratio of roughly 7.5 to 1.

Historically the audit programme touches about 1% of active accounts annually. That is small until it is you.

What commonly triggers an audit

A large gap between gross receipts reported to the CDTFA and revenue reported on your income tax return
Consistently high claimed exempt or resale sales relative to your industry
Being a cash-intensive business: restaurants, bars, convenience retail
A supplier or customer's own audit that names you
No use tax ever accrued, which is visible in your own purchase records
A Statewide Compliance and Outreach Program field visit that escalates to a referral
Industry sweeps, which the CDTFA runs periodically by sector

How an audit runs, and where we help

Notice and Power of Attorney
We get the POA filed so contact routes through us, then establish scope, periods and the auditor's initial focus.
Records assessment
We look at what you have before the auditor does, and identify the weak points. Knowing where the exposure sits is what allows it to be managed rather than discovered.
The sampling method
Most audits use statistical sampling rather than examining every transaction. The method chosen materially affects the result, and it is negotiable. This is where representation earns its fee.
Fieldwork and information requests
Everything goes through us, organised and complete. Partial or inconsistent responses extend audits and invite wider sampling.
Preliminary findings
The point at which errors in the auditor's analysis are challenged: before anything is finalised.
Assessment, appeal, or settlement
If a Notice of Determination issues, there is a petition process with real deadlines. Payment plans and offers in compromise exist where the liability is genuine but unpayable.

The lookback period

CDTFA statute of limitations

Three years where returns were filed. Eight years where a return was not filed for a period.

There is no limitation at all in cases of fraud.

This is why unregistered periods are so much more dangerous than under-reported ones, and why a voluntary disclosure, made before contact, is usually worth far more than it costs.

Take this with you

What to do in the first two weeks of a CDTFA audit

The early decisions in a sales tax audit set the shape of the whole thing: the period, the sample method, and what leaves your office. This is the sequence we follow.

What to send in response to the first letter, and what to hold
How the sample period is chosen and where you get a say
Records to assemble before the opening conference
Statute of limitations and waiver requests, in plain terms

CDTFA sales tax audit representation

If a letter has just arrived

Enforcement is increasing

What commonly triggers an audit

How an audit runs, and where we help

Notice and Power of Attorney

Records assessment

The sampling method

Fieldwork and information requests

Preliminary findings

Assessment, appeal, or settlement

The lookback period

What to do in the first two weeks of a CDTFA audit

Keep reading

Sales Tax

California nexus

District tax

Restaurants & retail

Common questions

Book a scoping call