Understanding the Differences in Regulatory Tax Sampling and Estimation Methodologies by Federal & State Jurisdictions

• Activity Number: 223 - Contributed Poster Presentations: Statistical Auditing Interest Group
• Type: Contributed
• Date/Time: Tuesday, August 4, 2020 : 10:00 AM to 2:00 PM
• Sponsor: Statistical Auditing Interest Group
• Author(s): Zachary Rhyne*
• Companies: Ryan, LLC.
• Keywords: statistical sampling; tax; audit; stratification; sales and use tax; federal tax

Abstract

While many taxing jurisdictions are increasingly exploring and accepting statistical sampling for tax audits, there remains a large discrepancy in accepted sampling and estimation methodologies by state. Some regulatory agencies, such as the Internal Revenue Service (IRS), have robust statistical sampling procedures closely aligned with the scientific literature of mathematical statistics and to the business requirements of taxpayers. This paper explores the current state of regulatory tax sampling particularly within states conducting sales and use tax audits and compares those states’ sampling methods to the IRS sampling guidance.