Everyone is familiar with IRS tax audits but that is not the only audits that a business might face. All states and localities conduct sales tax and use tax audits on businesses in their jurisdiction. The various taxing authorities can make sales taxes very complex. These rates can also change throughout the year. The move to Internet sales also add to the complexity of sales tax.

Along the same lines many businesses fail to account for use tax. It is a "gotcha" for many new business owners. Then an audit takes place and they lack the documentation to demonstrate that taxes were paid. Auditors will also not check to see if sales taxes were paid by the vendor and thus cause a double-tax.

The AICPA has outlined some great tips in how to approach and sales and use tax audit. Some ones that I would like to highlight are:

1. Document all correspondence with the auditor. It is always good to keep everyone in the loop so there are no surprises. 
2. Pay close attention to the methodology use to pick the sample. This can have a tremendous amount of bearing on the final numbers.
3. Keep in contact during the audit to make sure that it is progressing at a reasonable pace. But don't feel obligated to over-disclose information.
4. Watch out for double taxation between sales tax payments and use tax payments.

Any audit notification has a certain amount of stress involved. But a business owner doesn't need to lose all their cool. That is why you have a good accountant on your management team. Whether internal or external, small business accountants can take some of the pain out of any audit notification.