How to Respond to a CDTFA Audit Letter in California

If you’ve received an audit letter from the California Department of Tax and Fee Administration (CDTFA), take a deep breath — then take action.

Sales tax audits in California move fast and can escalate quickly if you don’t respond correctly. Whether you’re a restaurant, retailer, contractor, or service business, the way you handle the first few steps can determine whether your audit is manageable… or devastating.

In this guide, we walk you through what to expect and how to respond professionally and strategically.

What Is a CDTFA Audit Letter?

The audit letter is your formal notice that the CDTFA is reviewing your sales tax reporting. It typically includes:

• The audit period (usually 3+ years)
• A request for records and documents
• An assigned auditor’s name and contact information

The letter may sound routine, but it’s a serious legal notification — and the clock starts ticking the day it arrives.

Many business owners ask, what triggers a CDTFA sales tax audit? Common reasons include late filings, mismatched sales reports, cash-heavy industries, or prior compliance issues. Knowing these triggers can help you prepare a stronger defense.

Step 1: Respond Before the Deadline

Never ignore a CDTFA audit letter. You typically have 14–30 days to reply and begin the process.

DO respond in writing, confirming receipt and willingness to cooperate

DON’T send over all your records without reviewing them first

DO contact a tax professional experienced in CDTFA audits

If you miss your deadline, the auditor may proceed based on estimates — or escalate the case.

Step 2: Get Clear on the Audit Scope

Before handing anything over, clarify:

• The exact years or quarters being audited
• What industries or locations are included
• What methods will be used to sample your data

Many assessments are inflated simply because the scope wasn’t clearly defined — or the business gave the CDTFA too much access.

Step 3: Review & Prepare Your Records

Start gathering:

• Sales tax returns (filed and paid)
• POS reports and Z-tapes
• Bank statements
• General ledger entries
• Purchase and resale records

Warning: CDTFA auditors may assume missing records = underreported sales. Don’t give them that opening.

At this stage, federal tax issues can surface too. If the IRS is involved, you may need help with responding to an IRS audit assessment or even challenging IRS penalties that stack on top of state liabilities.

Step 4: Do NOT Represent Yourself (In Most Cases)

Most CDTFA audits involve:

• Industry markup estimates
• Inventory/purchase reconciliations
• Interviews with your staff
• Assumptions based on limited data

If you try to “just cooperate,” you may agree to things that drastically increase your liability. A CPA or representative who understands CDTFA audits can challenge methods and defend your margins.

We also see overlapping state enforcement, such as California FTB bank levy enforcement or an EDD payroll tax levy in California, which can compound financial pressure on business owners.

Step 5: Don’t Ignore the Next Letters

The audit letter is just the beginning. If you don’t take it seriously, the CDTFA may:

• Assess penalties + interest
• File a tax lien on your business
• Move to levy bank accounts or suspend your permit

This is when many taxpayers also search for IRS tax relief near you to get both state and federal agencies under control with professional help.

Responding early and strategically is your best defense.

Read more: What Triggers a CDTFA Sales Audit in California

Get Help Before You Hand Anything Over

At Boulanger CPA and Consulting PC, we help California business owners respond to CDTFA audits — and protect their livelihoods from aggressive assessments.

If you want to prepare properly and avoid unnecessary liability, learn more in Defend What’s Yours — our resource for protecting businesses against government overreach.

📍 Based in Orange County — Serving All of California

Call: 657-218-5700
Email: marc@boulangercpa.com
Schedule a CDTFA Audit Strategy Call

Already received your audit letter? Visit our  CDTFA Audit Defense page to learn how we can take over communication and protect your business.

📣 About the Author

Marc Boulanger, CPA is the founder of Boulanger CPA and Consulting PC, a boutique tax resolution firm based in Orange County, California and trusted by high-income individuals and business owners across Southern California.

He is the author of Defend What’s Yours: A California Taxpayer’s Guide to Beating the IRS and FTB at Their Own Game, available now on Amazon. The book offers a step-by-step plan for resolving IRS and FTB tax debt without losing your business, your home, or your peace of mind.

With over a decade of experience resolving high-stakes IRS and State tax matters, Marc brings strategic insight to complex cases involving wage garnishments, bank levies, unfiled returns, and six-figure tax debts. He is known for helping clients reduce or eliminate tax liabilities through expertly negotiated settlements and compliance plans.

Marc is a Certified Public Accountant licensed in California and Oklahoma and holds the designation of Certified Tax Representation Consultant. He is a member of the American Society of Tax Problem Solvers (ASTPS) — the national organization founded by the educators and practitioners who have trained thousands of CPAs, EAs, and tax attorneys in IRS representation strategy.

Every case is handled with discretion, proven methodology, and direct CPA-led representation — not call center scripts.

📍 Learn more at www.orangecounty.cpa or call (657) 218-5700.