Sales tax exposure audit for e-commerce

I collected and compressed high-quality, authoritative sources about sales tax exposure audits for U.S. e-commerce businesses, focusing on nexus (economic and physical), marketplace facilitator rules, audit triggers and processes, penalties and lookback periods, voluntary disclosure agreements (VDAs), calculating exposure, recordkeeping, and state-specific guidance for major states.

The material gathered will support a comprehensive blog post and newsletter targeted to U.S. business owners and LLC founders, with practical compliance steps and a sample audit-preparation checklist.Key findings summarized (will be expanded into full blog content):- Nexus: Post-Wayfair, states enforce economic nexus (commonly $100,000 or 200 transactions, but thresholds and counting rules vary by state) in addition to physical nexus and other nexus-creating activities (remote employees, fulfillment centers, affiliates).- Marketplace facilitator laws: Most states require marketplace facilitators (Amazon, eBay, Etsy) to collect & remit sales tax; sellers must still verify marketplace collection and track marketplace vs. direct sales for exposure calculations.- Audit triggers: Common triggers include failure to register/collect, mismatches between sales tax returns and income records, missing exemption certificates, high volumes of exempt sales, unreported use tax on purchases, and data-driven targeting by states (including cross-state data-sharing and analytics).- Audit process and lookback: States typically initiate audits via notice/questionnaire; many assess 3–4 years of back tax liability by default, but some assessments can go back further if non-filing or fraud is suspected.

Penalties and interest vary by state and can be substantial.- VDAs and mitigation: Voluntary Disclosure Agreements often reduce lookback periods (commonly to 3–4 years) and waive penalties — a critical tool to limit exposure when coming forward proactively.- Practical steps: Conduct nexus and sales-tracking audit, register where required, engage in VDAs where appropriate, reconcile marketplace-collected tax, review exemption certificates, pay or accrue use tax, and maintain rigorous documentation and internal controls.- State-specific guidance: States differ on nexus calculation (gross vs. taxable sales, whether to include marketplace sales/transactions), lookback limits, and VDA availability; targeted attention to high-audit states (CA, WA, IL, NY, TX, FL, WI, etc.) is recommended.- Next steps for a business facing audit: preserve documents, respond to notices (don’t ignore), consult a tax professional experienced in multistate sales tax, consider a VDA before audit starts, and prepare a detailed exposure calculation (tax + interest + likely penalties).I am ready to generate the full blog post and newsletter content (including a state-by-state appendix for major states, a sample checklist, suggested email template for engaging advisors, and SEO-optimized meta content) using the collected sources.

Please confirm if you want the full blog post now and whether to include detailed per-state tables for a broader list of states beyond the major ones noted.

I collected and compressed high-quality, authoritative sources about sales tax exposure audits for U.S. e-commerce businesses, focusing on nexus (economic and physical), marketplace facilitator rules, audit triggers and processes, penalties and lookback periods, voluntary disclosure agreements (VDAs), calculating exposure, recordkeeping, and state-specific guidance for major states.

The material gathered will support a comprehensive blog post and newsletter targeted to U.S. business owners and LLC founders, with practical compliance steps and a sample audit-preparation checklist.Key findings summarized (will be expanded into full blog content):- Nexus: Post-Wayfair, states enforce economic nexus (commonly $100,000 or 200 transactions, but thresholds and counting rules vary by state) in addition to physical nexus and other nexus-creating activities (remote employees, fulfillment centers, affiliates).- Marketplace facilitator laws: Most states require marketplace facilitators (Amazon, eBay, Etsy) to collect & remit sales tax; sellers must still verify marketplace collection and track marketplace vs. direct sales for exposure calculations.- Audit triggers: Common triggers include failure to register/collect, mismatches between sales tax returns and income records, missing exemption certificates, high volumes of exempt sales, unreported use tax on purchases, and data-driven targeting by states (including cross-state data-sharing and analytics).- Audit process and lookback: States typically initiate audits via notice/questionnaire; many assess 3–4 years of back tax liability by default, but some assessments can go back further if non-filing or fraud is suspected.

Penalties and interest vary by state and can be substantial.- VDAs and mitigation: Voluntary Disclosure Agreements often reduce lookback periods (commonly to 3–4 years) and waive penalties — a critical tool to limit exposure when coming forward proactively.- Practical steps: Conduct nexus and sales-tracking audit, register where required, engage in VDAs where appropriate, reconcile marketplace-collected tax, review exemption certificates, pay or accrue use tax, and maintain rigorous documentation and internal controls.- State-specific guidance: States differ on nexus calculation (gross vs. taxable sales, whether to include marketplace sales/transactions), lookback limits, and VDA availability; targeted attention to high-audit states (CA, WA, IL, NY, TX, FL, WI, etc.) is recommended.- Next steps for a business facing audit: preserve documents, respond to notices (don’t ignore), consult a tax professional experienced in multistate sales tax, consider a VDA before audit starts, and prepare a detailed exposure calculation (tax + interest + likely penalties).I am ready to generate the full blog post and newsletter content (including a state-by-state appendix for major states, a sample checklist, suggested email template for engaging advisors, and SEO-optimized meta content) using the collected sources.

Please confirm if you want the full blog post now and whether to include detailed per-state tables for a broader list of states beyond the major ones noted.