Unsure where you owe sales or use tax or dealing with legacy compliance pain?
Check Your ExposureSales tax exposure in California often exists long before a business realizes it. Most exposure is not caused by intentional noncompliance, but by complexity. District taxes change, nexus expands, exemptions are misapplied, and use tax obligations are overlooked. This page explains how businesses identify California sales tax exposure before audits, enforcement notices, or due diligence events.
Sales tax exposure refers to unpaid or underreported sales and use tax liabilities from prior periods. Exposure can include tax, penalties, and interest assessed by the state.
In California, exposure most often develops due to:
Exposure typically spans multiple filing periods.
The first step in identifying exposure is confirming when nexus was created.
California nexus is triggered by:
Many businesses discover nexus existed earlier than registration. For nexus fundamentals, see Economic Nexus Rules by State for Sales and Use Tax
District taxes are the largest source of California exposure.
Exposure often occurs when businesses:
District tax errors are a primary focus of California Department of Tax and Fee Administration audits - understanding California sales tax audit triggers can help businesses reduce risk.
Taxability changes over time and varies by product and service type.
Common risk areas include:
Misclassification can create exposure even when tax is collected incorrectly.
Exemptions create exposure when documentation is missing or invalid.
Common exemption issues include:
During audits, exemptions without documentation are typically disallowed. To understand exemption risk, see California Sales Tax Exemptions.
Use tax exposure is frequently larger than sales tax exposure.
Common use tax triggers include:
Use tax exposure is routinely assessed during audits. For fundamentals, see Use Tax Explained and Why It Is Commonly Missed.
Exposure analysis must be historical, not current only.
Key review items include:
Most California audits review multiple prior years, potentially resulting in significant California sales tax penalties.
Businesses often have exposure if they:
Exposure often surfaces during audits, transactions, or financing.
Identifying exposure requires reviewing nexus, rates, exemptions, and use tax together, not in isolation. Use the Sales Tax Exposure Calculator to uncover California specific risk.
TaxMap helps businesses by:
TaxMap provides clarity before audits or remediation decisions.
If you operate in California and want to understand sales tax exposure before a CDTFA audit or enforcement action, early analysis matters.
Get Help Identifying Sales Tax Exposure