The Board of Equalization often uses the mark up method for a sales tax audit. As explained in another Q&A, that method is not always reliable. Consequently, the Board may assert you owe more than you really do. During the course of its audit, if the auditor determines that your deficiency was caused by your negligence or because you intentionally disregarded the Sales and Use Tax laws, you may be subject to a 10% penalty of the deficiency amount. See Rev. & Tax. Code Section 6484.