Resolve issues during the audit
Before the final report, you can explain why you disagree and provide documentation. The auditor may adjust the results, ask for more information, or send the issue to the supervisor. (Pub. 76)
A CDTFA sales and use tax audit usually covers three years of your California business records. The auditor compares the sales in your books with your sales tax and income tax returns, and checks tax collected and resale claims. If you disagree with the resulting Notice of Determination, you generally have 30 days from its mailing date to petition.
Sources: CDTFA Publication 76, Audits · CDTFA Publication 17, Appeals Procedures
Co-Founder Shawn Zali spent more than seven years at the CDTFA auditing businesses. Today he and our team of Enrolled Agents, CPAs and former state auditors work on the taxpayer's side of the table.
Two quick questions. Our team will call you within one business day.
Tell us where the audit stands: a first call from the auditor, fieldwork under way, a proposed result, or a Notice of Determination. We explain the next steps and deadlines.
You sign a CDTFA-392 authorization form so we can speak with the CDTFA about your account. CDTFA's guide says to tell the auditor at the first contact if you want the audit handled by an authorized representative.
We help organize your records before fieldwork, review the auditor's tests and working papers, and present documents that support your position through the review and appeal steps if you disagree.
| Step | What happens | Key point |
|---|---|---|
| 1 | Initial contact and scheduling | Usually by phone, rarely without prior notice. Audit period usually three years. (Pub. 76) |
| 2 | Examination and testing | Books vs. sales tax returns and income tax returns, tax collected vs. reported, resale claims, purchase invoices and markup. The review may be on an actual basis or a sample, often statistical. (Pub. 76) |
| 3 | Exit conference | The auditor explains proposed changes. You receive copies of the working papers. CDTFA suggests attending even if you have a representative. (Pub. 76) |
| 4 | If you disagree | Provide more information to the auditor, then meet the audit supervisor. If you still disagree, a letter gives you 10 days to make an appointment with a CDTFA representative. (Pub. 76) |
| 5 | Notice of Determination | Within 30 days of its date, pay or file a petition for redetermination. Otherwise a 10% penalty applies to the unpaid amount, and liens or levies may follow. (Pub. 76, Pub. 17) |
| 6 | Appeal | Review by the Business Tax and Fee Division, then an appeals conference with the Appeals Bureau if requested, then the Office of Tax Appeals, an independent state agency. (Pub. 17) |
How far back? The statute of limitations is generally three years for businesses that file returns and eight years for those that don't. (Pub. 76)
More detail: CDTFA sales tax audit guide · What is the CDTFA? · CDTFA final sales tax: what you need to know
Before the final report, you can explain why you disagree and provide documentation. The auditor may adjust the results, ask for more information, or send the issue to the supervisor. (Pub. 76)
The petition must be in writing, identify the amounts you dispute and why, and be signed. You can use form CDTFA-416 or file online, and you can request an appeals conference. Disputed liabilities may also be considered under CDTFA's Administrative Settlement Program, which is confidential and doesn't affect your appeal rights. (Pub. 17)
If you miss the petition deadline, the liability becomes final. You can still pay and then file a timely claim for refund. (Pub. 17) If you paid tax you didn't owe, see CDTFA sales tax refund claims.
Interest keeps accruing while you appeal, so CDTFA suggests considering paying at least the undisputed portion. Payment plans are available. (Pub. 76 · Pub. 54, Collection Procedures)
For taxpayers who don't have, and won't have in the foreseeable future, the means to pay a final, undisputed liability in full. Applicants must not be disputing the liability or be in bankruptcy. (Pub. 17 · Pub. 56)
See also audit representation · audit representation in California · California tax help.
A CDTFA audit usually covers three years. The statute of limitations is generally three years if you filed returns and eight years if you didn't. If you sign a Waiver of Limitation, the CDTFA has more time to determine tax for the periods it covers.
The auditor tells you at the first contact. Expect sales records, sales tax returns, federal income tax returns, purchase invoices and resale certificates. The auditor compares your books with your returns, checks tax collected and resale claims, and may test your markup. Keep records at least four years.
Tell the auditor and provide documents that support your position. You can then meet with the audit supervisor, and after that with a CDTFA representative. If a Notice of Determination is still issued, you can file a petition for redetermination and request an appeals conference.
Generally 30 days from the date the Notice of Determination was mailed. If you don't pay or petition within that time, a 10% penalty applies to the unpaid amount and the liability becomes final. You can still pay and file a timely claim for refund.
Yes. CDTFA's audit guide says to tell the auditor at the first contact if you want an authorized representative to handle the audit. You authorize the representative on form CDTFA-392. CDTFA suggests you still consider attending the exit conference to review the working papers.
See more answers on our tax relief FAQs page.
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Reviewed by Shawn Zali, Co-Founder, former CDTFA auditor (7+ years) · Last updated: October 27, 2026
Tax Resolution Plus Inc. is a private tax resolution firm. We are not affiliated with the CDTFA, the IRS or any government agency. This page is general information, not tax advice for your situation. Testimonials and case results reflect the experiences of individual clients. Results vary based on each taxpayer's circumstances.