How to Appeal a CDTFA Sales Tax Audit Assessment

When California’s Department of Tax and Fee Administration (CDTFA) completes a sales tax audit, they’ll issue a Notice of Determination (NOD) — often with a hefty tax bill. But what if you disagree with the findings? What if the assessment is based on flawed estimates, missing documentation, or misunderstood industry practices?

You don’t have to accept it.

Appealing a CDTFA sales tax audit is your legal right — and with the right guidance, you can challenge the assessment, protect your business, and potentially reduce or eliminate the liability entirely.

This guide walks you through how to appeal a CDTFA audit step-by-step, including:

• Your timeline to act
  
  
• How to request an appeals conference
  
  
• What documents and arguments matter most
  
  
• What happens if you lose — and what to do next

STEP 1: UNDERSTAND YOUR NOTICE OF DETERMINATION (NOD)

The Notice of Determination is the CDTFA’s formal assessment of taxes, penalties, and interest owed based on the audit.

Key things to note:

• Issue date: Your 30-day appeal window starts here.
  
  
• Total amount due: Includes back taxes, interest, and penalties.
  
  
• Audit period: Review for any statute of limitations issues.
  
  
• Basis of determination: Read carefully to identify errors or assumptions.
  
  

If you disagree, you must act quickly — or you lose the right to contest it administratively.

STEP 2: FILE A TIMELY PETITION FOR RECONSIDERATION

You have 30 days from the date the NOD is issued to file a Petition for Reconsideration.

What to include in your petition:

• A written statement clearly stating you are contesting the NOD
  
  
• Your grounds for disagreement (e.g., methodology, missing documentation, misclassified items)
  
  
• Your request for an appeals conference or hearing
  
  
• Any supporting evidence or offer to provide documentation
  
  

Where to send it: Mail or electronically submit to the CDTFA as directed on your NOD. Keep copies of everything.

Failure to file within 30 days makes the determination final — even if it's wrong.

STEP 3: START GATHERING YOUR DEFENSE

Once you file the petition, you’ll have time to prepare your case. Now is the time to:

• Gather all original records: invoices, bank records, POS reports, etc.
  
  
• Review the auditor’s methods: Did they use markup tests? Projections? Industry averages?
  
  
• Identify major disagreements: For example, nontaxable sales counted as taxable, or missing purchases double-counted.
  
  

We often find that CDTFA auditors use flawed estimates, especially in restaurants, construction, and e-commerce.

STEP 4: PREPARE FOR THE APPEALS CONFERENCE

Most appeals are first heard in an informal setting called the Appeals Conference, conducted by a CDTFA Appeals Bureau attorney or hearing officer.

At this stage:

• You can submit more evidence and arguments
  
  
• You don’t need a lawyer — but representation helps significantly
  
  
• The officer will write a Decision and Recommendation (D&R)
  
  

This decision is nonbinding — you can still escalate if needed.

STEP 5: GO TO THE OFFICE OF TAX APPEALS (OTA)

If you disagree with the Appeals Bureau’s recommendation, you can appeal to the Office of Tax Appeals (OTA) — California’s independent tax appeals tribunal.

The OTA process includes:

• Filing a formal written appeal
  
  
• A potential live hearing with administrative law judges
  
  
• A written opinion published in some cases
  
  

These hearings are more formal and resemble court trials — you’ll need a strong legal and factual case by this point.

WHAT IF YOU LOSE THE APPEAL?

If your appeal fails, you still have options:

• Pay and file a refund claim (preserves your right to superior court action)
  
  
• Negotiate a payment plan or hardship deferral
  
  
• Request Offer in Compromise if you can’t pay in full
  
  
• Consider bankruptcy (only in some limited circumstances)
  

PRO TIPS FOR APPEALING CDTFA AUDITS

• Act fast — the 30-day deadline is rigid
  
  
• Get expert help — a CPA familiar with CDTFA audit methods can uncover flaws
  
  
• Don’t rely on emotion — build a case with evidence, not just opinions
  
  
• Challenge assumptions — CDTFA often assumes all deposits = sales, or all purchases = taxable
  
  
• Consider settlement options — sometimes you can negotiate a lower assessment outside of appeals

NEED HELP APPEALING A CDTFA AUDIT IN CALIFORNIA?

At Boulanger CPA, we help California business owners fight back against unfair CDTFA audit assessments. Whether you’re still within the 30-day window or already deep into the appeals process, we’ll help you prepare a rock-solid case, deal with CDTFA attorneys, and defend what’s yours.