Mississippi Sales Tax Audit Readiness Checklist

Mississippi Sales Tax Audit Readiness Checklist

Mississippi sales tax audits are formal reviews conducted by the Mississippi Department of

Revenue to verify that businesses have correctly reported and paid sales tax. An audit can be triggered by filing discrepancies, random selection, or specific compliance concerns.

Sales tax represents a significant revenue stream for the state, and audits help ensure that all businesses follow the same reporting rules fairly. Understanding what an audit is and how it works can reduce stress and help prepare accurate responses.

Ignoring audit communications or missing deadlines can result in penalties, interest assessments, and potential enforcement actions. This checklist explains what a Mississippi sales tax audit means, what happens during and after the process, and the steps to take if the state contacts your business about a sales tax examination.

What This Issue Means

A Mississippi sales tax audit is an official request from the state asking your business to provide documentation and records related to your sales tax filings. The Mississippi Department of

Revenue reviews your records to verify that the sales tax you reported matches your actual sales, exemptions, and deductions during the audit period.

Why the State Issued This or Requires This

The state conducts sales tax audits for several common reasons. These include discrepancies between reported sales and filed returns, random selection as part of regular compliance monitoring, or patterns flagged by automated systems.

What Happens If This Is Ignored

If a Mississippi sales tax audit request is ignored or a response deadline is missed, the state typically issues a follow-up notice. When communication continues to go unanswered, the

Mississippi Department of Revenue may assess taxes based on available information without input from the business.

What This Does NOT Mean

An audit notice does not mean the state has found wrongdoing or that penalties will automatically be assessed. A sales and use tax audit is an information-gathering process, not a criminal investigation or automatic penalty notice at the outset.

Checklist: What to Do After Receiving an Audit Notice

1. Read the entire audit notice carefully, and identify the tax periods being reviewed, the contact person's name and phone number, and the deadline for your response.

2. Locate your sales tax records for the periods under review, and gather sales invoices, purchase orders, exemption certificates, point-of-sale system reports, general ledger records, and bank statements.

3. Review your original sales tax returns for accuracy, and compare what you reported on your returns to your underlying records.

4. Prepare a summary document that includes a brief cover letter or summary explaining your sales tax reporting method, how you tracked exempt sales, and any significant transactions or changes during the audit period.

5. Determine if any records are missing, identify gaps in your documentation, and prepare a brief written explanation if records no longer exist or were destroyed.

6. Make copies of all records, do not send original documents, and keep originals in your files.

7. Contact the auditor listed in the notice if you have questions about the scope or deadlines. Call the phone number provided in the audit notice to clarify what records are needed and whether the deadline can be extended.

8. Submit your response before the deadline, and mail or deliver copies of your records and summary according to the instructions in the audit notice.

9. Keep all communications from the state, and save copies of the audit notice, any follow-up letters, and records of what you submitted.

10. Wait for the state's next communication while the auditor reviews your submitted materials, which may take several weeks or months.

What Happens After This Is Completed

After the state receives your response, an auditor reviews the submitted records and compares them to your filed returns. The auditor may request additional information or clarification on specific items through a follow-up request that typically includes specific questions or document categories.

If no additional information is needed, the auditor will complete the examination and issue an audit report. According to state procedures, this can take anywhere from several weeks to several months, depending on complexity.

Common Mistakes to Avoid

Missing the deadline in the audit notice can result in assessments without your input. The state may not grant automatic extensions, so contact the auditor early if more time is needed.

Submitting incomplete records delays the process and may result in assessments based on incomplete information. Ignoring follow-up requests is one of the most common reasons audits escalate, so respond promptly if the auditor sends a second request for additional documents or information.

Sending original documents can result in loss or damage. Always send copies because originals are harder to organize in the state’s files.

Making assumptions about what records the state wants wastes time. If the audit notice or follow-up request is unclear, call the auditor to clarify the scope before submitting materials.

Not keeping copies of what you sent creates problems if the state needs to verify receipt or you need to reference what was submitted. Waiting until the last day to respond can cause missed deadlines due to mail delays or missing documents discovered at the last minute.

Frequently Asked Questions

How long does a Mississippi sales tax audit typically take?

Mississippi Department of Revenue audits vary in length depending on complexity. Simple audits may be completed in two to three months, while complex audits involving multiple locations or significant discrepancies may take six months or longer.

What if I disagree with the auditor’s findings?

Mississippi provides administrative appeal procedures for taxpayers who disagree with audit assessments. You have 60 days from the mailing or hand delivery of the Notice of Assessment to appeal that assessment and request a hearing before the Review Board.

Can the state assess penalties during a sales tax audit?

Yes, if the audit identifies underpayment of taxes, the state may assess a penalty of ten percent of the total amount of deficiency or delinquency in the tax due, or interest at the rate of one-half percent per month, or both, from the date the tax was due until paid.

What happens if I cannot find records from the audit period?

Contact the auditor and explain what records are missing and why. In some cases, the state may accept reconstructed records or alternative documentation, and the auditor will advise on what is acceptable. Mississippi law requires businesses to keep and preserve for a period of three years adequate records of the gross income, gross receipts, or gross proceeds of sales.

Is there a limit to how far back the state can audit?

Yes, Mississippi has a 36-month statute of limitations for sales tax audits, restricting the

Mississippi Department of Revenue in its review of your returns to a period of 36 months past the date the return was due or the date the return was filed. Important exceptions exist where there is no statute of limitations for periods for which a return has not been filed or in the case of a false or fraudulent return filed with the intent to evade tax.

Conclusion

A sales tax audit is a standard compliance review, not a penalty or accusation. Understanding what the state is asking for and responding with organized, complete records helps move the process forward.

Facing State Enforcement or Payroll Tax Issues?

If you’ve received a state tax notice and aren’t sure how to respond, we can help you review your options and next steps.