Has your business received notice of an impending sales tax audit from the state of Illinois? Undergoing an Illinois sales tax audit can be a daunting and complex process, but you don’t have to face it alone.

Gordon Law, a trusted tax law firm based in Chicago, is here to provide you with the guidance and legal representation you need. With our extensive experience in handling sales tax audits and a deep understanding of Illinois tax laws, we are committed to helping you navigate your audit and achieve a favorable outcome.

In this guide, we’ll explain what an Illinois sales tax audit is, common issues to be aware of, and how to prepare.

What is an Illinois sales tax audit?

Sales tax audits (also known as sales and use tax audits) are conducted on the state level to ensure businesses comply with the state’s sales tax laws and regulations.

A sales and use tax audit is typically more complicated than an income tax audit. Many tax audit attorneys don’t have knowledge or experience with complex sales tax laws and will not defend these types of audits.

Common issues with sales tax audits include:

• Record Sampling: Rather than looking at all your business transactions, the auditor will typically look at a sample of your data. For example, they may look at 3 months of transactions to determine your sales tax owed, then apply those findings to the entire year. This can negatively impact businesses that are highly seasonal. Choosing the right records to have examined is key when defending an Illinois sales tax audit.
• Industry Comparisons: The auditor will often compare your sales to industry benchmarks to estimate how much tax you might owe and how accurate your records might be. This is rarely beneficial for the business being audited. Skilled representation is needed to protect your rights and negotiate with the state.
• Additional Audits: Unfortunately, a sales tax audit may be just the start. After a sales tax audit is closed, the Illinois Department of Revenue will often target the same business for an income tax audit shortly after. Our team at Gordon Law understands how this process works and how to mitigate your risks.

At Gordon Law, we’ve focused on sales tax audits since our founding in 2012. Nearly 50% of the tax audits we defend are brought by the Illinois Department of Revenue, including sales tax audits. We’ve helped countless clients navigate their audit safely and save thousands or even millions of dollars on the resulting tax bill.

Reach out today at (847) 580-1279 if you have questions about your Illinois sales tax audit.

What triggers an Illinois sales tax audit?

While the specific reasons for a tax audit may vary, there are several common factors that can increase the likelihood of being selected for a sales tax audit in Illinois:

• Discrepancies in Sales Tax Returns: If your sales tax returns show inconsistencies or irregularities, such as large fluctuations in reported sales, significant changes in tax liability, or discrepancies compared to industry averages, it may raise red flags and trigger an audit.
• Unreported Sales or Underpayment of Taxes: Failing to report all taxable sales or underpaying sales tax can draw the attention of tax authorities. They may compare your reported sales to other sources of information, such as your income tax returns, industry benchmarks, third-party data, or information obtained from other businesses.
• Prior Audit Issues: If you have previously been audited by the state and had unresolved issues or outstanding tax liabilities, it increases the chances of being audited again.
• Industry-Specific Risk Factors: Certain industries, such as construction, retail, and hospitality, are considered higher risk for sales tax non-compliance due to cash transactions, complex supply chains, or specific industry regulations. In recent years, we’ve seen a spike in Illinois sales tax audits against restaurants, liquor stores, and convenience stores.

If you’ve been selected for a sales tax audit, our experienced sales tax attorneys can help you get safely to the other side. Don’t wait—give us a call today at (847) 580-1279 to schedule your free consultation!

How long does a sales tax audit take?

On average, an Illinois sales tax audit can last anywhere from a few weeks to several months. The duration of a sales tax audit in Illinois can vary widely depending on several factors, including the complexity of your business operations, the volume of transactions, and the cooperation of your company during the audit process.

During the audit, the Illinois Department of Revenue will typically request various documents and information to verify your sales tax returns and ensure compliance with the tax laws. The state may request documents such as:

• Sales records
• Purchase invoices
• Tax exemption certificates
• General ledger
• Income tax returns
• Fixed asset reports

It’s important to note that the audit process can be time-consuming and may require significant effort from your company’s personnel to gather the requested information and respond to the auditor’s inquiries promptly.

This is where the knowledge of a seasoned sales tax lawyer can be invaluable. Our team can guide you through the process, help organize your records, and communicate with the auditor on your behalf.

Have questions about your Illinois sales tax audit? Contact Gordon Law for a free consultation!

What happens after a sales tax audit?

Once the sales tax audit is completed, the auditor will present their findings. These may include adjustments to your reported sales, taxes owed, penalties, and interest. At this stage, you have the right to dispute any discrepancies or disagree with the auditor’s conclusions.

If you believe the audit results are incorrect or unfair, it’s important to seek professional representation to advocate for you and protect your rights. Keep in mind that many tax audits have important, inflexible deadlines. If you miss a deadline, you’ll lose your appeal rights forever, so don’t wait to seek professional help!

Gordon Law has a team of experienced Illinois sales tax attorneys who can carefully review the audit findings, identify potential errors or misinterpretations, and develop a robust defense strategy.

In some cases, it may be possible to negotiate a tax settlement or installment agreement with the Illinois Department of Revenue to resolve any outstanding tax liabilities. Your attorney can help you explore these options and negotiate on your behalf to minimize the financial impact on your business.

If you want to dispute the results of an Illinois sales tax audit, give our attorneys a call today at (847) 580-1279. We have years of experience helping our clients lower their tax bills after an audit!

How to prepare for an Illinois sales tax audit

While facing a sales tax audit can be stressful, a little preparation can significantly improve your chances of a successful outcome. Here are some essential steps to help you prepare for an Illinois sales tax audit:

• Review Your Sales Tax Returns: Conduct an internal review of your sales tax returns to identify any potential discrepancies or errors. Make sure all sales and taxable transactions are accurately reported.
• Organize Your Records: Maintain comprehensive and well-organized records of your sales, purchases, and related financial transactions. Ensure you have supporting documentation readily available to substantiate your reported figures.
• Seek Professional Guidance: Engage the services of a qualified sales tax lawyer, like the attorneys at Gordon Law, who have defended dozens of sales tax audits. They can provide you with valuable guidance, negotiate with the Illinois Department of Revenue, and protect your rights throughout the audit process.

How much does it cost to fight a sales tax audit in Illinois?

The typical cost to fight an Illinois sales tax audit using professional representation is between $10,000 and $20,000 per tax year; the cost depends on the scope of the examination and the complexity of your tax situation.

For a personalized quote, schedule a free consultation with a tax audit lawyer!

Act now: Secure experienced representation for your Illinois sales tax audit

Facing an Illinois sales tax audit can be overwhelming, but you don’t have to go it alone. The experienced sales tax attorneys at Gordon Law are ready to provide you with clear guidance, aggressive advocacy, and personalized attention your business needs. We’ll review your situation, answer your questions, and chart a course of action to help you achieve a favorable outcome for your Illinois sales tax audit.

Remember, time is of the essence. Don’t risk the financial well-being of your company. Reach out today for experienced, personalized, crystal-clear legal advice.