Sampling Strategies in Sales Tax Audits

The sample of invoices is the primary factor in whether a state sales or use tax audit turns out favorably for your company.

The size and makeup of that sample comes down to hard-nosed negotiations between your tax staff and the revenue department. To make your best case, you must thoroughly understand the state’s guidelines to detect vulnerabilities in its block or sampling methodology.

Don’t sit back and wait for the state to stipulate the audit sample. Improve your chances to win big-dollar refunds on audit with your own, well-planned sample proposal as an alternative to the revenue department's usually less favorable plan.

Listen as sampling gurus and veteran corporate tax pros prepare you to seize the initiative on establishing audit samples.

Our panel included:

Kenneth Helms, Transactional Tax Planning Manager, United Technologies Corp., Farmington, Conn. He previously was Director of the Sales and Property Tax Group for InterContinental Hotels Group in Alpharetta, Ga. He speaks frequently on sampling issues.

Roger Pfaffenberger, Director of Audit Sampling Practice, Ryan & Co., Dallas. He is responsible for design and implementation of audit sampling methodologies for the tax consulting firm. He previously was on the Texas Christian University faculty for 24 years.

Lynn Monsalvatge, Sales and Use Tax Director, Home Depot Inc., Atlanta. She is responsible for tax planning, compliance, audit and systems at Home Depot. Lynn is a member of the IPT Board of Governors and the IPT Sales Tax Academy.

Keith Simeral, Manager of Sales and Property Tax Planning, IBM Corp., Southbury, Conn. He previously worked in sales tax compliance at Tandem Computer and with the California Board of Equalization. He has taught sampling courses at the IPT Sales Tax School for several years.

The panel offered new tactics and insights regarding these and other key topics that included:

• Making smart decisions about sample size: Will a small sample work and reduce staff time chasing invoices, or will a big sample boost your case?
• Fighting back if the revenue department either tries to keep out data that could land your company a credit or insists on an overly large sample.
• Reacting when the auditor clearly doesn’t understand your company’s compliance system or overlooks accounts that favor your position.
• Crafting a proposal to sample data for a refund claim.
• Learning what you need to know about a state’s sampling methodology and whether it’s truly “statistical.”

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