For the last 15 years California sales tax audits have continually derived the most revenue from assessments of California use tax and unsupported sales for resale. These two categories have held either the #1 or #2 spot for each year according to a review of the California State Board of Equalization Annual Report Archives. Revenue from underreported sales is also very popular making up several categories (e.g. difference between recorded and reported taxable sales, difference between accrued tax and tax paid, unreported sales to employees).
As a California taxpayer it can be very helpful to utilize the list of Top Ten Areas of Noncompliance as you continually work on improving your sales and use tax administration process. You can bet that your auditor is going to be checking your compliance with these categories and more. Use this list to get a jump start on your compliance if you aren’t already doing so. This is even useful if you aren’t registered in California.