Nevada Sales Tax Audit Readiness Checklist

Nevada Sales Tax Audit Readiness Checklist

Introduction

The Nevada Department of Taxation conducts sales tax audits to verify that your company has collected, reported, and paid the correct amount during a specific period. An audit can occur based on routine selection, a change in your business status, or patterns in your filings that trigger a review. Understanding what this process involves and how to prepare helps you respond promptly and provide accurate documentation.

What This Issue Means

A Nevada sales tax audit is a formal review by the Nevada Department of Taxation to examine your records, returns, and supporting documents. The state uses audits to confirm that you collected tax from customers correctly and reported those amounts accurately on your returns.

Why the State Issued This or Requires This

Nevada conducts sales tax audits as part of routine tax administration and compliance verification. The state may select an audit business based on factors such as industry type, filing frequency, reported tax amounts, changes in ownership or location, or random selection.

Audits help ensure all businesses comply with sales tax laws and that revenue collected for the state and local governments is accurate. Some audits are triggered when a company reports significant year-over-year changes in sales or tax liability, or when the state identifies potential errors in filed returns.

What Happens If This Is Ignored

When you ignore an audit notice or do not respond within the timeframe specified in the notice, the Nevada Department of Taxation may proceed without your input. Non-cooperation can lead to additional penalties and interest charges on any assessed amount.

Nevada may pursue collection through liens on property, summary judgment procedures, warrants for collection, seizure and sale of property, and orders to lock and seal businesses.

Responding to an audit notice, even if you need time to gather documents, is essential to protect your interests.

What This Does NOT Mean

An audit notice does not mean your business has committed fraud or intentionally violated tax law. The notice does not automatically mean the state has found errors or that you will owe additional taxes.

Checklist: What to Do After Receiving a Sales Tax Audit

Notice

• Step 1: Read the Notice Carefully

Review the entire audit notice from the Nevada Department of Taxation. Identify the business name, tax account number, period covered, specific records requested, and the deadline for response.

• Step 2: Identify the Audit Period

Confirm the exact date range the audit covers. Mark this period clearly so you do not gather documents from the wrong years.

• Step 3: Check the Requested Documents List

Review the specific records the state is asking for, which typically include sales tax returns filed during the audit period, bank statements or sales records, invoices or receipts, exemption certificates, and records of tax-exempt purchases or sales. Contact the auditor listed on the notice to ask for clarification before the deadline if the notice is unclear.

• Step 4: Gather Sales and Revenue Records

Collect all documents showing sales or revenue during the audit period. Organize these records by month or quarter to match the periods on your filed tax returns.

• Step 5: Organize Tax Return Copies

Gather copies of all Nevada sales tax returns filed during the audit period. Include any amended returns filed during or after the audit period.

• Step 6: Collect Tax Payment Records

Find evidence of all tax payments made during the audit period. Include payment confirmation numbers if available.

• Step 7: Identify Tax-Exempt Sales or Purchases

Gather documentation supporting any sales made without collecting tax, such as sales to nonprofit organizations or government agencies. This includes signed exemption certificates, resale certificates, and letters confirming exempt status.

• Step 8: Review Deductions or Credits Claimed

Gather supporting documents if your filed returns claimed any deductions or credits.

Have documentation ready to explain why each adjustment was claimed.

• Step 9: Contact the Auditor if You Need Time

Contact the auditor immediately if you cannot locate all the requested documents by the deadline listed in the notice. The state may grant reasonable extensions if you respond before the original deadline passes.

• Step 10: Prepare Documents for Submission

Organize all gathered documents in a logical order. Send copies instead of original documents unless specifically requested.

• Step 11: Submit Documents by the Deadline

Mail or deliver the documents to the address and person listed in the notice. Keep a copy of everything you send.

• Step 12: Follow Up After Submission

Follow up by phone or email to confirm receipt of your documents if the auditor does not contact you within two to three weeks of submission. Ask if additional information is needed or if there are any questions about what you submitted.

What Happens After This Is Completed

After you submit the requested documents, the auditor will review them and compare your records to your filed returns. This process typically takes several weeks to several months, depending on the complexity of your business and the audit period.

The auditor may contact you with questions about specific transactions, deductions, or discrepancies between your records and reported figures. You will eventually receive an audit report or a determination letter explaining the auditor’s findings.

Common Mistakes to Avoid

Missing the response deadline can result in an assessment without your input. Submitting your only copies of essential records leaves you without documentation for your own records or for future disputes.

Submitting records without clear organization, page numbers, or explanations makes the auditor's job more difficult and may result in follow-up questions or delays. Respond promptly if the auditor contacts you with questions after your initial submission.

Frequently Asked Questions

How long does a sales tax audit typically take?

The timeline varies depending on the audit period, complexity of your business, and how quickly you provide requested documents. A typical audit may take two to six months from notice to final determination, though more complex cases can take longer.

Can I represent myself during an audit, or do I need a tax professional?

You can represent yourself. The state does not require you to have professional representation.

What if I cannot find certain records the auditor requested?

Contact the auditor and explain which records are missing and why. The auditor may accept other evidence, such as bank statements or third-party records, to verify the information.

Will an audit result in penalties?

Not necessarily. Whether penalties are assessed depends on the nature and severity of the error, as well as whether it appears to be negligence or intentional.

Can I appeal the audit results if I disagree?

Yes, you must file a Petition for Redetermination within 30 days of being served with notice of the determination.

What happens if the auditor finds I owe additional tax?

The state will issue an assessment notice with the additional tax amount, applicable interest, and any penalties. This notice will include information about payment options and your right to appeal or dispute the assessment.

Do I have to pay the assessed amount while I appeal?

During the administrative appeal process, payment is not required. Payment or a payment agreement is only required as a prerequisite to judicial review after the Nevada Tax

Commission’s decision.

Can the audit go back more than one year?

Yes, registered businesses are subject to a standard three-year audit period. Unregistered businesses may be audited for up to eight years.

Closing

Receiving an audit notice can feel stressful, but it is a manageable administrative process. By understanding the request, organizing your records, responding promptly, and communicating clearly with the auditor, you can participate effectively in the review.

Nevada law requires registered businesses to keep records for four years, or eight years if unregistered. Staying informed and responsive throughout the audit process protects your business interests and helps bring the review to a timely conclusion.

Facing State Tax Enforcement Action?

If you’ve received a notice related to sales tax or payroll tax enforcement, and aren’t sure how to respond, our team can help you understand your options and next steps.