Call Now (800) 681-1295
Close

Problems with the mark up audit

Table of Contents

    California’s Board of Equalization (BOE) often uses this method during certain types of audit. “Use of mark-up methods as an audit procedure is widespread in sales tax auditing,” concurs the BOE’s most recent audit technique Manuel. See Section 405.30 (https://www.cdtfa.ca.gov/taxes-and-fees/manuals/am-04.pdf).

    However, there are several weaknesses with this audit method. For this reason alone, it often is crucial for a business owner to retain a tax attorney to defend himself or herself against the State from over-reaching for tax liabilities.

    For example, the mark up method assumes that the current mark up figure was the same throughout the entire audit period. It blithely ignores a prior existing pricing structure, to the detriment of the business owner. Also, the shelf test may have incorrect selling prices, or it might have been incorrectly weighted, relative to other goods sold. (The shelf test is part of the mark-up audit, where the auditor chooses selected items from a shelf and compares the cost price with the shelf sale price).

    The BOE’s Audit Manuel even cautions that its agent should “not to rely too heavily on mark-up percentages . . . for all types of businesses” because “it may be time consuming to obtain and have little meaning.” Unfortunately, this advice is not always adhered to by the auditor. Accordingly, retaining a tax attorney to question the auditor’s methods, assumptions, and conclusions is advisable for a successful audit. Legal counsel can help reduce the mark-up audit by dismantling the asserted details by the auditor.

    Tax Help Videos

    Representing Clients from U.S. and International Locations Regarding Federal and California Tax Issues

    tax lawyers

    Main Office

    Orange County
    2601 Main St. Penthouse Suite
    Irvine, CA 92614
    (949) 681-3502

    Our headquarters is located in Irvine, CA. Our beautiful 19,700 office space is staffed full-time and always available for our clients to meet with our highly qualified and experienced staff of Attorneys, Certified Public Accountants and Enrolled Agents. We also offer virtual consultations and can travel to meet with clients in one of our satellite offices.

    Outside of our 4 hour initial consultation option, we do not charge travel time or travel expenses when traveling to one of our Satellite offices, or surrounding business districts, where it is necessary to meet personally with taxing authority personnel, make court appearances, or any in person meeting deemed necessary for the effective representation of a client. To make this as flexible, efficient, and convenient as possible, David W. Klasing is an Instrument Rated Private Pilot and Utilizes the Firms Cirrus SR22 to service client’s in California and in the Southwest by air. Offices outside these areas are serviced via commercial jet airlines. None of these costs are charged to our clients.

    Satellite Offices

    California
    (310) 492-5583
    (760) 338-7035
    (916) 290-6625
    (415) 287-6568
    (909) 991-7557
    (619) 780-2538
    (661) 432-1480
    (818) 935-6098
    (805) 200-4053
    (510) 764-1020
    (408) 643-0573
    (760) 338-7035
    Arizona
    (602) 975-0296
    New Mexico
    (505) 206-5308
    New York
    (332) 224-8515
    Texas
    (512) 828-6646
    Washington, DC
    (202) 918-9329
    Nevada
    (702) 997-6465
    Florida
    (786) 999-8406
    Utah
    (385) 501-5934