Sales Tax Audit Triggers: What to Watch for in 2025
As states increase enforcement, more businesses are being flagged for sales tax audits, often without realizing the risks. From missing exemption certificates to unregistered nexus, small compliance gaps can lead to big penalties. In this post, we break down the top sales tax audit triggers and how your business can avoid them in 2025.
Top Reasons Businesses Get Flagged for Sales Tax Audits
🚨 Missing or Invalid Exemption Certificates
Failure to collect valid, up-to-date exemption certificates is one of the most common sales tax audit triggers. If a certificate is expired, incomplete, or missing, the business is liable for the unpaid tax—even if the sale was to a tax-exempt customer.
Need help with certificate management? Read our blog: How to Avoid Exemption Certificate Compliance Risks
🚨 Multi-State Nexus and Unregistered Sales
If your business has economic or physical presence in multiple states and hasn’t registered or remitted sales tax in those jurisdictions, you may be flagged. States closely monitor out-of-state sellers, especially post-Wayfair.
🚨 Inconsistent or Late Filings
Late, missed, or inconsistent sales tax filings raise red flags. Even one missed filing can put your company on a state auditor’s radar.
🚨 Sales Tax Miscalculations or Underreporting
Incorrectly calculating tax on sales, especially when using manual methods or outdated rates, can trigger audits—particularly if patterns suggest underpayment.
What to Expect During a Sales Tax Audit
Sales tax audits vary by state but often follow a similar process:
- Review of exemption certificates
- Comparison of reported sales to actual revenue
- Reconciliation of taxable vs. exempt sales
- Requests for documentation, invoices, and tax filings
Audits typically look back 3–6 years and can be expanded if errors are found.
How to Avoid an Audit in 2025
✅ Automate Your Sales Tax Calculations – Use up-to-date software to calculate and apply the correct tax rate to every transaction.
✅ Keep Exemption Certificates Current – Implement a system to track, store, and renew certificates.
✅ Monitor Nexus & Stay Registered – Regularly assess where you have sales tax obligations.
✅ File Accurately & On Time – Avoid late or inconsistent filings that raise suspicion.
✅ Partner with a Compliance Expert – Avoid risks by working with professionals who understand state-specific requirements.
For a deeper look at what these risks can cost you, check out The Hidden Costs of Sales Tax Non-Compliance
Simplify Compliance with Clarus Partners
At Clarus Partners, we help businesses reduce their sales tax audit risk with a complete solution that includes:
- Automated tax calculations and filing
- Exemption certificate management
- Nexus monitoring
- Audit defense and expert guidance
Want to see how all the pieces fit together? Read our Sales & Use Tax Compliance Solution blog.
Don’t wait for an audit notice. Be proactive and protect your business in 2025.
📞 Contact us for a risk assessment