California OTA Partially Grants Tax Adjustment to Taxpayer

The California Office of Tax Appeals (OTA) issued a decision partially granting the taxpayer tax adjustments. The dispute involved the state Tax Department’s determination that the taxpayer underreported taxable sales and owed additional sales and use tax. After finding the taxpayer’s records inadequate, the Appeal Court used an indirect audit method to estimate unreported taxable sales based on a 26.73 percent markup derived from data for similar businesses. The court reasoned that the initial tax assessment was reasonable, given the inadequate records and that the taxpayer failed to meet its burden of proving a lower markup percentage was warranted beyond ...