Our CDTFA Audit Defense Process

CDTFA audits move quickly, and the auditor’s assumptions can become your tax bill if you don’t intervene early. Here’s the CPA-led process we use to protect your business at every stage of the audit.

Step 1 — Initial Consultation & Case Review

Our process begins with a confidential consultation where we review your CDTFA notice, identify filing deadlines, analyze potential risks, and determine the scope of the audit. This early stage is critical — once CDTFA begins applying markup tests, sampling, or ratio methods, the outcome becomes harder to unwind.

• Review the audit notice and defined audit period
• Identify all required records and information requests
• Assess initial risk areas based on your industry
• Explain your rights and the CDTFA audit structure

For more insight into how CDTFA audit methods work, see our deep dive on the California sales tax audit process.

Step 2 — We Take Over Communications with CDTFA

Once engaged, we immediately contact CDTFA on your behalf and take full control of all communications. This prevents misunderstandings, protects your rights, and ensures the auditor receives only complete, accurate, and properly organized information.

• Submit Power of Attorney to CDTFA
• Request auditor notes, methodology, and workpapers when applicable
• Narrow and clarify the scope of information requested
• Prevent unnecessary expansions of the audit period

Step 3 — Record Reconstruction & Methodology Review

CDTFA often relies on estimates when records are incomplete or when they believe your documentation is unreliable. We rebuild accurate sales, purchase, POS, and financial data to correct CDTFA’s assumptions and prepare a defensible alternative calculation.

• Reconstruct sales and purchase data
• Analyze markup percentages used by CDTFA
• Recalculate credit card ratios and sampling results
• Identify exempt, non-taxable, or misclassified transactions

For a detailed breakdown of CDTFA’s techniques, see our guide on CDTFA markup audits and the CDTFA credit card ratio method.

Step 4 — Disputing CDTFA’s Preliminary Findings

When CDTFA issues their preliminary findings, we aggressively challenge any inflated assessments. This includes correcting markups, pointing out sampling errors, disputing incorrect assumptions, and presenting CPA-backed calculations.

• Dispute CDTFA’s methodology
• Correct sampling periods and POS inconsistencies
• Present alternative calculations and reconstructed records
• Challenge penalties and overstated interest

If you disagree with the auditor’s conclusions, your next step may be covered in our guide: what to do if you disagree with CDTFA audit findings.

Step 5 — Petitions, Appeals & Negotiated Settlements

If CDTFA issues a Notice of Determination or maintains an inflated balance, we file a timely petition and prepare your case for the Appeals Bureau or the Office of Tax Appeals (OTA). Many cases settle without a full hearing when supported by strong CPA analysis.

• Prepare and file formal petitions
• Communicate with Appeals Bureau staff
• Negotiate settlements
• Escalate to OTA when necessary

For more detail, see our dedicated page on CDTFA Appeals & Petitions.

Don’t Wait — CDTFA Deadlines Are Strict

The CDTFA audit process moves quickly, and once the auditor anchors their assumptions, it becomes harder to dispute the findings. Let us step in before the numbers become final.