CDTFA - California Department of Fee and Tax Administration Sales Tax Audit
If you do not agree with the sales tax audit proposal by the California Department of Tax and Fee Administration, there are several procedural and constitutional safeguards to help protect and resolve sales tax problems. At the conclusion of the audit, a CDTFA sales tax auditor will hold an exit conference to discuss and explain their audit findings.
If a sales tax audit finds that you have underpaid sales taxes or if the CDTFA determines that you owe additional sales tax based on the audit results, taxpayers will be sent a sales tax bill titled Notice of Determination. Notice of Determination will state the amount of sales tax, interest and penalty due. You may appeal the Notice of Determination by filing a petition for redetermination or you pay the amount due in full and file a claim for refund with the California Department of Tax and Fee Administration.
Petition for Redetermination:
You must wait for the Notice of Determination to be issued before you file a petition for redetermination. An appeal filed before CDTFA issues the Notice of Determination is deemed invalid and provides no legal protection.
You have 30 days from the date that a Notice of Determination has been issued to you to file a CDTFA petition for redetermination. If you do not timely file your appeal before the filing deadline, your liability will be final and due and payable based on the amount stated in the Notice of Determination.
If you are filing a petition to dispute a Notice of Determination for sales and use tax the petition must be sent to the following:
MIC:38State California Department of Tax and Fee Administration,
PO Box 942879,
Sacramento, CA 94279-0038
Late Filed Petition:
An appeal filed after the filing deadline is deemed an invalid petition. However, if you miss the filing deadline, you may still appeal the liability by paying all the tax or fee determined to be due and then filing a claim for refund.
California CDTFA Appeals Conference:
If your tax dispute cannot be resolved with CDTFA through the administrative process, CDTFA will refer your case to the CDTFA Appeals Division for conference with a CDTFA Appeals Division attorney or auditor who has had no prior involvement with your case.
CDTFA must notify you that your case has been referred to the CDTFA Appeals Division. CDTFA will provide you with a Verification of Appeals Conference form which you are required to complete and return within 15 days.
The CDTFA sales tax appeals conference will be held in the CDTFA field office that audited you unless you request otherwise.
Expediting Your Appeal:
CDTFA Case Management Section may fast track your sales tax appeal if you agree to one of the following:
- Attend an appeals conference at the CDTFA's Headquarters office in Sacramento.
- Attend a video conference from certain field offices.
- Participate in a telephone conference.
If the taxpayer agrees to one of these types of appeal conferences, then your case will be scheduled for an appeals conference within 60 days of receipt of your request.
CDTFA Case Management Section will send you a Notice of Appeals Conference with the following information: date, time, and location set for the appeals conference. Notice of Appeals Conference also requires you to return confirmation of your participation and attendance at the conference within 15 days. Taxpayer may also submit supplemental arguments and supporting evidence along with the response form.
After the appeals conference, CDTFA Appeals Division will issue a written Decision and Recommendation in your sales tax appeal based on all relevant arguments and information presented at the hearing. Even if you decide to waive appearance at your sales tax appeals conference, you should submit to the Appeals Division any documentation or arguments so that they are part of the record which you can reference in any future proceedings.
The CDTFA appeals conference is designed to be an informal discussion of your case and relevant law as it applies to your case. A CDTFA representative will also be present at the conference to present its position on your case. Rules of evidence are not strictly followed.
After the CDTFA appeals conference, CDTFA will prepare a Decision and Recommendation which provide analysis and recommendation in your case.
If you do not agree with the CDTFA’s Decision and Recommendation in your case, taxpayer may request for a hearing before the full Board.
The Board Hearing:
California Department of Tax and Fee Administration “Board” hearing is made up of five Members and quorum can be established with three Members present. The Board hearing allows taxpayers to present oral arguments to the Board regarding conflicting issues of fact or law in your appeal. However, keep in mind that Board members are not judges and most of them are not lawyers.
The Board holds regular meetings in Sacramento each month and also periodically holds meetings in the Los Angeles, San Diego and San Francisco.
The Board scope of review is limited to evidence and information already contained in the file and generally discourage new arguments or information presented at the hearing. However, if new evidence is introduced at the hearing, the Board may order that the new evidence be shared with the Appeals Division for its review, and then reaches its decision after Appeals Division has an opportunity to review and lays out recommendation based on the new evidence on hand. It is in taxpayers’ best interest to create a complete evidentiary file and argue the case based on information already contained in the file.
55 days before the Board hearing taxpayer may file their board brief with the Chief lf Board Proceeding.
CDTFA is required to file a reply brief with the Chief of Board Proceedings no later than 35 days before the Board hearing.
If the reply brief raises a new issue, the opposing party may file a response brief with the Chief of Board Proceedings at least 20 days before the Board hearing date.
At the Board hearing, CDTFA representative will introduce the issues in your sales tax appeal. Taxpayer will then be asked to present oral arguments on the issues that remain in dispute. Your oral argument is typically limited to ten minutes with additional five minutes for rebuttal.
After oral arguments and review of case, the Board Members will make a final decision called Notice of Redetermination. You will be sent a Notice of Redetermination within about 45days from the date of the Board's decision. The Notice of Redetermination will become final 30 days after it is issued unless you file a timely petition for rehearing.
If a timely petition for rehearing is filed, the Notice of Redetermination will become final:
- 30 days after the mailing of the official notice of Board action to deny the petition for rehearing; or
- if the Board grants a rehearing, 30 days after the mailing of the official notice of the Board decision on the rehearing.
If you do not pay the amount due by the time, the Notice of Redetermination becomes final, you will be charged an additional ten percent penalty.