The Department may use the records it obtains from the wholesalers in two ways. First, the Department can compare the purchases of the retail businesses to their reported amounts of total sales and taxable sales. That comparison will indicate whether underreporting seems likely. An audit assessment results when an auditor finds that a vendor owed more tax than the amount reported. However, assessments do not always indicate tax fraud or intentional cheating.
Noncompliance occurs in a variety of forms and for a variety of reasons.
Appendix E discusses the selection of the comparative group in more detail.