CDTFA Audit Records Checklist: What California Businesses Should Prepare
ARC · California sales & use tax consulting
Receiving a CDTFA records request is one thing. Producing a clear, complete response is another. A folder full of reports will not explain itself. Your preparation should connect the requested records to the reporting periods, transactions, and figures under review.
Depending on the request, relevant records may include filed sales and use tax returns, supporting worksheets, sales and purchase invoices, accounting ledgers, point-of-sale data, resale documentation, and payment records. Start with the actual request and identify the periods and formats required.
Use this checklist to organize your work—not as an instruction to submit every file automatically. For help preparing your response, explore ARC’s California sales tax audit defense and representation services.
Before gathering documents, define the request
Read every page of the letter and attachments. Identify the taxpayer, account, periods, locations, requested records, and response dates. Distinguish the initial engagement correspondence from a later Information/Document Request. Regulation 1698.5, Audit Procedures, explains those document types and the audit communication process.
Create one request log. Give each requested item a number, a responsible person, and a status. If different employees are gathering records, this prevents the same request from receiving contradictory responses.
CDTFA audit records checklist: what to locate and review
CDTFA Publication 76, Audits, describes examination of business records and testing of reporting accuracy. The categories below combine that context with a practical filing system. The documents actually required depend on the business and the agency’s request.
| Record category | Examples to locate | Preparation question |
|---|---|---|
| Agency correspondence | Letters, requests, attachments, prior responses. | What is requested, and when is it due? |
| Filed returns | Sales and use tax returns, amendments, worksheets. | Which figures were actually reported? |
| Sales records | Invoices, transaction exports, refunds, credit memos. | Can the detail be reconciled to reported sales? |
| Accounting and payments | Ledgers, bank statements, merchant reports, reconciliations. | What does each report measure? |
| Purchases | Vendor invoices, equipment invoices, purchase ledgers. | What tax treatment was applied? |
| Deductions and exemptions | Resale certificates and transaction-specific support. | Can each claimed treatment be supported? |
| Electronic systems | Original exports, field descriptions, system history. | Can historical records still be retrieved? |
1. Correspondence and a master request log
Keep original letters and attachments together. Add a record of what your team submitted, when, and through which channel. If the auditor follows up on an earlier request, the log should show whether an item was provided, clarified, or remains unresolved.
2. Filed returns and supporting worksheets
Locate the filed version of each relevant return rather than relying on a draft spreadsheet. Keep amendments clearly labeled. Build a period index showing which worksheet supports each return and who prepared it. Flag missing worksheets for investigation instead of recreating them from memory.
3. Sales and point-of-sale records
Label exports with their source system, covered dates, locations, and creation date. Check whether filters exclude closed locations or inactive products. Preserve the original export and explain any working adjustments separately.
As an organizational exercise, identify where credit memos, refunds, and voids appear. Do not assume that two reports labeled “sales” use the same definition.
4. Accounting, bank, and merchant records
When relevant to the request, assemble the underlying records alongside a reconciliation. A reconciliation should explain differences rather than simply force totals to match. Note whether a report tracks invoices, customer payments, bank deposits, or another measure.
A business has a sales register and a merchant settlement report. Its preparer checks the date ranges, report definitions, fees, refunds, and settlement timing before comparing totals. The resulting worksheet identifies the items that explain the difference and flags any unresolved amount for review.
5. Purchase and equipment records
For significant purchases, assemble the invoice, description, location, use, and tax treatment. Keep supporting explanations attached to the specific transaction. If treatment depends on specialized industry rules, obtain review of those facts rather than relying on a generic label such as “business equipment.”
ARC provides focused services for manufacturing sales tax exemptions, food processing exemptions, and winery sales and use tax.
6. Resale and other deduction documentation
Publication 103, Sales for Resale, explains valid resale certificates, timely acceptance, and good faith. Organize certificates by customer and link the supporting documentation to the transactions at issue. A customer’s business name alone does not establish the treatment of every purchase.
For other claimed deductions, identify the applicable basis and supporting records. If documentation is missing, describe the gap accurately. Do not backdate certificates or create a false record of what was available when a sale occurred.
How to organize an audit response your team can explain
The following workflow is a practical recommendation for managing the project. It is not a substitute for the auditor’s instructions.
- 1 · PreserveSave original files and correspondence.
- 2 · MapConnect each request to its records.
- 3 · ReviewCheck periods, definitions, and completeness.
- 4 · SubmitTrack delivery and retain a copy.
Use consistent names and separate working files
A file named 2025-Q1_Sales_Register_Location-A_Original.csv is easier to identify than Final-Sales-New2.csv. Use a separate working folder for calculations. Label the version, preparer, and review status so another person can follow the work.
Maintain a submission index
For each submission, record the request number, file names, covered periods, delivery date, and confirmation. Briefly explain known limitations—for example, that a report covers one location rather than the entire company. Keep the exact submitted version.
Review before sending
- Does the file open and display correctly?
- Do its dates and locations match the request?
- Are abbreviations and columns explained?
- Are any periods missing or duplicated?
- Can a reviewer trace the summary to source detail?
- Have unresolved issues been clearly identified?
This review is about accuracy and clarity. It should not be used to remove responsive information or disguise unfavorable facts.
Electronic records, PDFs, and retention: avoid common assumptions
Regulation 1698 distinguishes machine-readable electronic records from storage-only images such as PDFs. Saving a printed report as a PDF does not necessarily replace the underlying electronic data obligations. Preserve relevant source data and clarify the requested format.
The regulation generally requires covered records to be retained for at least four years, subject to its provisions. Do not interpret that as automatic permission to delete older records connected to an unresolved matter. Review applicable obligations before disposal.
Check access before changing systems
Before canceling an accounting or point-of-sale subscription, confirm what historical data can be exported and how it can be read. Keep field descriptions and a record of the system version where useful. Test a sample retrieval instead of assuming a backup is usable.
Ask your software provider specific questions about exports, retention settings, and older locations. Document the answers for your preparation team.
What if requested records are missing or difficult to produce?
Identify the gap, its cause, the affected periods, and the recovery steps attempted. Then raise it promptly. Regulation 1698.5 directs auditors to work with taxpayers on production difficulties, including satisfactory alternative sources. An alternative must be evaluated; it is not automatically a replacement for every missing record.
Prepare a short recovery plan: who will contact the prior bookkeeper or software provider, what can be recovered, and when you expect an answer. Keep recovered records separate from estimates or reconstructed working papers and label each accurately.
What if a request is unclear?
Ask what information the requested record should establish and clarify the period, location, and format. Summarize the clarification in your log. If a specialist is handling communications, make sure they receive the complete request and attachments.
What if you discover a possible reporting error?
Preserve the original records and document the issue for review. Do not change a filed position simply to make a report agree with another report. Determine the facts and the appropriate correction procedure. An ARC sales tax refund or reverse audit review may also be relevant when the issue concerns possible overpayment.
Put Decades of California Sales Tax Experience Behind Your Audit Response
Your business needs more than a stack of documents. It needs a clear explanation of what those records show. ARC’s California sales tax audit defense and representation services help businesses evaluate audit questions and prepare documented responses.
Joan Armenta-Roberts brings experience from both sides of the audit process: 17 years with the California State Board of Equalization, including work as a tax auditor, followed by 18 years in public accounting at KPMG and PwC. That background informs ARC’s approach to reviewing audit issues, identifying questions that need closer examination, and presenting the records and explanations that support your position. Meet Joan and the ARC team.
Whether the concern involves sales reconciliation, resale documentation, purchase records, or industry-specific exemptions, get experienced guidance before an unresolved question becomes a rushed submission.
Before your next records response is due, talk with ARC. Contact ARC about your CDTFA audit request, or call Joan at 916-947-5160 or Zach at 213-453-1816. Have the complete request and response dates available so the team can assess your situation and urgency.
Frequently asked questions about CDTFA audit records
What should I gather first?
Start with the complete letter, attachments, requested periods, and response dates. Use those to build a request log before collecting files from different systems.
Do I need to send every accounting file?
Use the actual request and applicable obligations to determine what is needed. Clarify uncertainty and provide accurate, responsive records with a clear index.
Are bank statements enough by themselves?
Do not assume so. Ask what the request requires and identify the transaction records and explanations needed to support the figures under review.
Can I replace electronic data with PDF reports?
Not automatically. Regulation 1698 distinguishes machine-readable records from storage-only images. Preserve applicable source data and clarify the required format.
How long should sales tax records be retained?
Regulation 1698 generally sets a minimum of four years for covered records, subject to its provisions. Obtain guidance before disposing of material connected to an ongoing audit or dispute.
What if a former bookkeeper has the records?
Identify the files and periods needed, request access promptly, and document the recovery effort. Make sure your coordinator knows what remains unavailable.
Should I recreate a missing document?
Do not fabricate or backdate an original record. Clearly distinguish any reconstruction from source documentation and discuss acceptable support for the particular issue.
Can ARC help before we submit the records?
Contact ARC to discuss the request, timing, and appropriate engagement. Confirm responsibility for responses; a consultation request does not extend an existing deadline.
Get Experienced Help Before Your Next Records Submission
Turn an overwhelming document request into a clear response plan. Talk with ARC about the records, reporting questions, and dates your business needs to address.
Joan: 916-947-5160
Zach: 213-453-1816