A Sales and Use Tax audit is a review of your business records by the Department of Revenue to determine if you are correctly reporting this tax. One of our auditors will:
- review your records;
- explain any errors you’ve made and how to correct them; and
- make recommendations to help you eliminate similar errors in the future.
If you have questions – during or after our review – please contact the department auditor working with you.
Note: If you want an attorney or accountant to represent you during an audit, you must complete Form REV184, Power of Attorney.
At the Start
We’ll contact you to discuss the types of records you’ll need to provide. We’ll also check for missing records. Items that cannot be accounted for will be considered taxable unless you can provide information to show otherwise.
We may request the following records:
- general ledgers, chart of accounts and financial statements
- business returns and supporting worksheets for Sales and Use Tax filings
- depreciation schedules and supporting invoices
- sales invoices and accounts receivable journals
- vendor invoices and accounts payable journals
- cash journals and check registers
- other records that are relevant to the audit
Reviewing Your Records
We’ll verify that you correctly charged, collected and paid state and local taxes. Sales tax must be charged on all taxable items and services unless you have documentation showing why they are exempt.
We’ll also verify that you correctly paid sales or use tax on taxable items you purchased. Most Minnesota vendors charge sales tax.
You owe use tax when:
- you bought items from by a Minnesota vendor who did not charge sales tax;
- you bought exempt for resale (such as from a wholesaler) and later use it in your home or business; or
- you bought items from an out-of-state vendor who did not charge sales tax.
If you have overpaid your sales and/or use tax liability, you’re entitled to a credit. The auditor will explain how you can receive your refund.
We may choose to sample your records to complete the audit as quickly and efficiently as possible while still maintaining accuracy. This involves reviewing representative records and projecting the result to the entire audit period. We’ll explain our sampling methods to you and make sure you understand the method used.
After the Review
After our initial review of your records, we’ll discuss the results with you. We’ll explain any errors found, how to avoid making the same errors again and the adjustments made to your tax liability.
You’ll have time to gather additional documentation to support adjustments to our findings. Once the audit is complete, we’ll send you a final report that explains any tax, penalty, and interest.
You will have 60 days from the date of the report to respond in one of the following ways:
- Pay what you owe without additional late penalties or interest being added.
- File a written informal appeal with the department’s Appeals Unit.
- File a formal appeal with the Minnesota Tax Court.
If you have questions or need more information, please contact the tax specialist who conducted the audit.
Taxpayer Rights Advocate
Despite our best efforts, problems occasionally arise that may not be resolved by the audit and appeal process. If you feel you’ve been treated unfairly, you may contact the department’s Taxpayer Rights Advocate. For more information, see Taxpayer Rights Advocate.