Sales tax audit readiness is your next advisory offering

In practice, clients bring you today's problems, not tomorrow's. They tell you they changed how or where they sell, right after it becomes a liability. Then one day it's, "Oh, by the way, we're getting audited." Now you're both scrambling.

That reactive posture is the default for most firms when it comes to sales tax, and it's an expensive habit. I recently moderated a discussion with Dawn Brolin, CEO of Powerful Accounting, on what it actually takes to get a client audit ready before the state comes calling for the sales tax money. Here are a few things from that conversation that are worth sitting with.

Sales tax enforcement isn't slowing down

Sales tax has become the top revenue source for more than 65% of U.S. jurisdictions since 2018, and states know it. This year alone there have been 463 combined rate and rule changes nationwide. States like Texas, New York, Florida and California are now hiring dedicated data scientists to cross-reference payroll registrations against sales tax filings, so the moment a client has an employee or a 1099 contractor in a new state, they may already owe.

Add shifting thresholds on what counts as a taxable transaction, plus states redefining what's taxable by category, and you get a moving target that most controllers have no realistic way to track by hand.

You can't advise if you can't see exposure

Dawn's story made this concrete. A referred client landed under a Connecticut audit, handed her a couple hundred QuickBooks invoices, and asked a simple question, “Are we exposed?”

Running that analysis manually would have taken days she didn't have, and the client wouldn't pay for. Instead, she ran the invoices through Kintsugi’s monitoring dashboard. Within minutes, it surfaced real exposure in Washington the client didn't know about, as well as a situation in Arizona where the client had collected tax without actually owing it.

That second finding matters as much as the first. It's not just about catching underpayment. It's giving the client an informed choice, backed by documentation, instead of a guess.

What audit ready actually looks like

It comes down to a core file you can hand over on request: nexus determinations and the reasoning behind them, exemption certificates kept current (not collected once and forgotten), and a clear trail from each transaction to the return.

Dawn compared it to the work papers behind every balance sheet number on a tax return. She shared a quick example from a different engagement, a non-filer client who got pulled into an audit. She uploaded her work papers, and the auditor approved them within a day. The alternative, she said, is an auditor looking at your client's exposure before you do.

Instead of point-in-time snapshots, a monitoring tool keeps comparing four numbers — the sales tax a client should have collected versus what they did collect, and what they should have remitted versus what they actually remitted. Exposure gets flagged as it develops, documentation builds itself in the background, and a portfolio view shows you which clients to call first.

If Washington redefines a service category tomorrow, you can see every affected client in one click. And when an auditor asks you to walk through a nexus determination, you export the records instead of digging through email threads. None of this replaces the CPA. It’s the tool that does the heavy lifting, but the client relationship is still yours.

Price the risk, not the hours

Dawn's pricing philosophy is worth stealing directly. She runs sales tax advisory on a subscription, not by the project or the hour. For a lighter-touch engagement, she'd price it as a service for clients with nexus in multiple states or heavy product sales on a platform like Shopify.

Her reasoning is worth borrowing: "You're taking the risk on. That is worth something." The tool may cut down the time it takes, but time was never what the client was buying. What she's really selling is the liability she's now willing to carry for the client. A tool that makes the analysis faster doesn't shrink that value.

If anything, it clears space to have more of the conversations that actually move the needle, whether to register in a new state, file a voluntary disclosure agreement to erase penalties on unpaid back taxes, or change how a service line gets taxed going forward.

A four-step playbook to get started

A framework for firms scaling this across a full portfolio comes down to four moves:

1. Identify. Find where exposure is concentrating across your whole book, not just with the client making noise. Watch for growth signals like new locations, e-commerce expansion and remote hires.
2. Assess. Baseline the actual exposure with a nexus assessment instead of a gut check, and review whether the documentation is complete.
3. Build. Replace periodic manual checks with continuous monitoring, and keep documentation current as you go.
4. Package. Price it as advisory, based on the value and risk you're taking on, and build it into touchpoints you already have, like onboarding, quarterly reviews, and year-end.

Sales tax readiness isn't a niche specialty for firms that "do sales tax." It's a baseline your clients don't know to ask for until they're already in trouble. Building it into your standing advisory offering, and pricing it on the risk you're carrying, is how one of the most avoided conversations in practice becomes one of the most valuable.

Ready to run a client exposure assessment? Request a walkthrough and a free nexus study at CPA.com/sales-tax.

About the author
Brandon Allfrey, CPA, CGMA, is the Senior Director of Tax Transformation at CPA.com where he helps CPA firms modernize tax compliance and expand advisory services by leading the strategy and development of innovative tax technology solutions.