Business Tax Audit Process

1. AUDIT ENGAGEMENT LETTER  - The audit process begins with the issuance of an Audit Engagement Letter to the taxpayer. This letter outlines the audit periods, identifies the assigned auditor and the auditor’s supervisor, provides a list of required records to be submitted, and specifies a respond by date to contact the auditor, which is generally 15 days after the engagement letter is issued. The audit may close at any time after this respond by date.
2. ENTRANCE INTERVIEW  - The auditor generally will conduct an entrance interview with the taxpayer or the taxpayer’s designated representative on or about the respond by date in the engagement letter. The auditor will explain the purpose and process of the audit, and gather additional information about the taxpayer’s business operations and accounting records. This is also an opportunity for the taxpayer or their representative to ask questions. As part of this entrance interview, the taxpayer and auditor are expected to agree on a deadline for the taxpayer to submit the required records, generally within 30 days after the entrance interview.
3. RECORD SUBMISSION - To facilitate a smooth and efficient audit process, taxpayers should ensure that all records listed in their Audit Engagement Letter are timely made available to the auditor. The auditor may identify additional records required in order to complete their examination based on the entrance interview or review of the initially provided records.  All documents submitted will be treated as confidential taxpayer information pursuant to BTRC § 6.22-1. The audit may close at any time after the respond by date.
4. ANALYSIS - The auditor will analyze the records submitted and any other information available relevant to the audit. The auditor will prepare workpapers to calculate and describe their findings. This process generally takes four to six weeks after all requested records are provided to the auditor. Taxpayer delays in providing records may cause audits to take longer than expected. In rare instances where the taxpayer does not provide sufficient records timely for review, the auditor may request the taxpayer sign a waiver of the statutory deadlines to complete the audit. This waiver does not toll or extend the statute of limitations for refunds, credits, or claims. Taxpayers must submit timely requests or claims independent of the audit process. 
5. EXIT CONFERENCE - After the auditor has completed their analysis, the auditor will arrange for an exit conference (virtually or by phone) to review the audit findings, identify any additional information that may be relevant, and attempt to resolve any disputed issues.
6. ISSUANCE OF AUDIT NOTICE - Depending on the outcome of the audit, the auditor issues one of the following:
   • Notice of Tax Audit Credit (if an overpayment is found and is timely for refund)
   • Notice of Tax Audit Completion (if the returns are accepted as filed)
   • Notice of Tax Audit Deficiency (if additional tax is due) 

If the taxpayer disagrees with the audit results after the issuance of an audit notice, the taxpayer may file a Petition for Redetermination with the Office of the Treasurer & Tax Collector, generally within 30 days of the notice. The petition process provides an opportunity for the taxpayer to directly present their case to the Tax Collector.

1. PETITION FOR REDETERMINATION - There is no specific form for a petition, only that it be verified by the person against whom the Office of the Treasurer & Tax Collector issued the notice, stating under penalty of perjury the specific grounds upon which the petition is founded, with specificity sufficient to enable the Tax Collector to understand and evaluate the petition, and verifying the information and authenticating the records upon which the petitioner relies in support of the petition. Any ground for redetermination that is not specified in the petition for redetermination shall be deemed waived by the petitioner in any later judicial proceeding.
2. ORAL HEARING - If an oral hearing is requested in the petition, the Tax Collector (or their designated hearing officer) shall hold a hearing after giving at least 15 days’ notice of the time and place of the hearing. An oral hearing is not required to petition for redetermination. The Tax Collector will review the documents submitted if a hearing is not requested by the taxpayer. The taxpayer may request the hearing be held in person at San Francisco City Hall, or via video conference.  Oral hearings can be relatively informal and are the Tax Collector’s opportunity to gather more facts about the audit. Generally, the hearing will begin with introductions followed by a brief summary of the audit position. Then the taxpayer generally has the balance of the hearing time to provide facts and argument to the Tax Collector.  The Tax Collector generally does not render a decision on the day of the hearing. In some cases the Tax Collector may keep the hearing open for additional time for the taxpayer to provide additional records.
3. TAX COLLECTOR DECISION - The Tax Collector Decision will specify what actions the Tax Collector took to adjust the Notice of Tax Audit Deficiency or Notice of Tax Audit Credit, if any. The decision will also specify the updated amounts due from the audit or revised credit, if any. Generally, the decision becomes final after 15 days. The Tax Collector Decision is the final step of the audit process in the Office of the Treasurer & Tax Collector. 

If the taxpayer disagrees with the Tax Collector Decision on their Petition for Redetermination, the taxpayer may file a Claim for Business Tax Refund with the Controller’s Office after paying any amount due. Refund claim forms are available on the City Attorney of San Francisco’s website: http://www.sfcityattorney.org/claims/.

Please note that taxpayers must first exhaust their administrative remedies as outlined in Section 6.13-5 of the BTRC before seeking judicial relief.

If taxpayers have any questions regarding the audit process or need assistance, please contact the assigned auditor or the principal auditor directly using the contact information provided in the Audit Engagement Letter. Our staff will be happy to assist with any questions related to the audit scope, documentation requests, or procedures.