Louisiana Sales Tax Audit Readiness Checklist
Sales tax compliance is a core responsibility for Louisiana businesses that collect tax from customers. The Louisiana Department of Revenue conducts audits to verify that companies have correctly calculated, reported, and paid sales tax in accordance with state law. An audit may be triggered by a state notice, random selection, or patterns identified during routine reviews.
Understanding what a sales tax audit involves, what documentation is expected, and how to prepare will help reduce stress and ensure a smoother process. Ignoring an audit notice or failing to provide requested records can result in penalties, interest charges, and additional enforcement actions. This checklist explains what a sales tax audit is, why the state conducts them, and the practical steps to follow if your business is selected for an audit.
What This Issue Means
A sales tax audit is an official examination by the Louisiana Department of Revenue to verify that a business has accurately reported and paid the correct amount of sales tax over a specific period. The state may review your sales records, tax returns, exemption certificates, and accounting documentation to confirm compliance with Louisiana sales tax law. An audit notice typically specifies the tax period under review, the records required, and a deadline for providing them.
You may receive written correspondence in the mail, and in some cases, an auditor may call first to verify your contact information.
Why the State Issued This or Requires This
The Louisiana Department of Revenue conducts sales tax audits as part of routine tax administration and compliance oversight. Common triggers include random selection, examination of filed returns that show unusual patterns, referrals from other investigations, or changes in business operations. The state uses audits to ensure businesses are collecting tax on taxable sales, properly issuing and handling exemption certificates, and remitting the correct tax liability.
Audits help maintain fairness in the tax system by verifying that all businesses comply with the same rules.
What Happens If This Is Ignored
If an audit notice is ignored or records are not provided by the stated deadline, the
Louisiana Department of Revenue typically moves toward enforcement action. The state may assess tax, penalties, and interest based on available information or estimates. Follow-up notices, liens, or collection actions may follow.
Failing to respond can also result in additional penalties for noncompliance and make resolution more difficult and costly.
What This Does NOT Mean
Receiving an audit notice does not mean the state has already determined you owe back taxes or that penalties are automatic. An audit is an examination process, not a
conclusion. The state has not yet made a final determination of your tax liability. An audit does not automatically result in changes to your return, though it may.
Checklist: What to Do After Receiving an Audit Notice
Follow these steps to respond to a sales tax audit from the Louisiana Department of
Revenue
Step 1: Read the audit notice carefully.
Identify the tax period under review, the specific records requested, and the response deadline. Note the name and contact information of the auditor assigned to your case.
Step 2: Gather all requested documentation.
Collect sales invoices, purchase records, exemption certificates, point-of-sale system reports, general ledger entries, and bank statements for the period specified. Organize documents by month or category as applicable.
Step 3: Review your sales tax returns.
Pull copies of all sales tax returns filed for the audit period. Compare the amounts reported on returns to your supporting books and records to identify any discrepancies before submission.
Step 4: Prepare a summary document.
Create a cover letter or summary that lists all enclosed documents and briefly explains your business operations, the products or services you sell, and any significant changes during the audit period.
Step 5: Make copies of all documents.
Copy everything you plan to provide. Keep one complete set of your files before sending anything to the state.
Step 6: Submit records by the deadline.
Mail or deliver the complete package to the auditor by the date listed in the notice. Use a delivery method that provides proof of receipt, such as certified mail or a courier service.
Step 7: Document your submission.
Keep a record of what you sent, when you sent it, and the proof of delivery. This establishes that you met the deadline.
Step 8: Wait for initial findings.
The auditor will review the records and may contact you with questions or request additional documentation. Respond promptly to any follow-up inquiries.
Step 9: Address discrepancies if identified.
If the auditor finds errors or differences, listen to the explanation and gather any supporting documentation that clarifies your position or corrects the record. Be aware that once you receive a notice of assessment, you have specific legal deadlines: 30 days to file a written protest for proposed assessments, or 60 days to either pay or appeal to the Louisiana Board of Tax Appeals for state tax assessments.
- Missing the response deadline: Failing to provide records by the date stated in
- Providing incomplete records: Submitting partial documentation or records
- Disorganizing documents: Sending records in random order or without
- Failing to respond to follow-up requests: If the auditor asks for clarification or
- Altering or modifying records: Do not change, white-out, or recreate original
- Ignoring the final audit report: If the state issues an assessment, do not ignore
- Not keeping copies: Always keep a copy of everything you submit to the state.
- State enforcement notices and responses
- Sales tax audits, assessments, and collections
- Payroll & trust fund tax enforcement issues
- Penalty and interest reduction options
- Payment plans and state tax relief eligibility
- Representation before state tax agencies
Step 10: Request clarification if needed.
If you do not understand what the auditor is asking for or what discrepancies they have found, ask for a clear explanation before responding.
What Happens After This Is Completed
After you provide records and the auditor completes the examination, the Louisiana
Department of Revenue typically issues a formal audit report. The report will detail any adjustments to your reported sales or tax liability, explain the reasons for changes, and calculate any additional tax owed, plus interest and applicable penalties. If no changes are identified, the state may issue a letter confirming that the audit is complete.
You will be provided with information about your rights to protest or appeal the findings if you disagree. Remember that strict deadlines apply: 30 days for protests and 60 days for appeals.
Common Mistakes to Avoid the notice can trigger enforcement action. If you cannot meet the deadline, contact the auditor in advance to request an extension. with gaps can slow the audit process and raise questions about missing sales or unreported transactions. explanation wastes auditor time and may result in follow-up requests. Label and organize materials clearly. additional documents, respond promptly. Ignoring follow-up inquiries is a common escalation trigger. documents. Provide records as they exist in your business files. Altered documents can create serious compliance problems. it. Review the findings, understand what was adjusted and why, and consider your response options within the required timeframes.
You may need to reference these materials later if questions arise.
Frequently Asked Questions
How long does a sales tax audit typically take?
The duration varies depending on the complexity of your business, the number of years under review, and the speed at which records are provided. Timelines can range significantly.
Can I have a representative help me with the audit?
Yes. You may work with a tax professional, accountant, or attorney to help gather and organize records or to communicate with the auditor. You must submit Form R-7006,
Power of Attorney and Declaration of Representative, before the auditor can disclose information to your representative.
What if I cannot locate some of the records the auditor requested?
Contact the auditor as soon as possible to explain what records are missing and why.
The auditor may accept alternative documentation or explain how missing records will affect the audit. Do not ignore the request.
Can the audit period be extended?
The Louisiana Constitution establishes that the prescription period for assessment of all state and local sales taxes is three years from December 31st of the year in which the taxes became due. This period may be interrupted or suspended under certain circumstances as outlined in Louisiana Revised Statutes 47:337.67.
What happens if the audit finds errors in my favor?
If the examination shows you overpaid sales tax during the period, you must file a formal claim for refund or credit. Claims must be filed within three years from December
31st of the year the tax became due or one year from the date the tax was paid, whichever is later. The Department will then determine whether to issue a refund or credit.
Will the audit affect my sales tax registration or license?
An audit examination alone does not automatically suspend or revoke your sales tax permit. However, if the audit uncovers serious noncompliance or fraud, additional enforcement actions may be taken.
Do I have to agree with the auditor's findings?
No. If you disagree with the audit results, the state provides a formal process to protest or appeal the findings within specific deadlines. Instructions are typically included in the final audit report.
What records should I keep going forward to prepare for future audits?
Louisiana sales tax records must be retained until the taxes to which they relate have expired. Since the prescription is three years from December 31st of the year taxes became due, you should keep all sales invoices, purchase records, exemption certificates, point-of-sale reports, general ledger entries, and bank statements for at least three years.
Facing State Tax Enforcement Action?
If you’ve received a notice related to sales tax or payroll tax enforcement and are unsure how to respond, our team can help you understand your options and next steps.
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