A Pinch of Salt: State Audit Guessing Games: When Can States Issue Estimated Assessments?


There are generally three types of state tax assessments: (1) an assessment based on actual information provided by the taxpayer during an audit of a taxpayer’s books and records (an audit assessment); (2) an assessment based on the best available information, which may include information contained in the taxpayer’s books and records as well as any other relevant source of information (an estimated assessment); and (3) an assessment based on any information available, typically issued in extraordinary circumstances in which the state believes its ability to collect the tax may be in jeopardy (a jeopardy assessment).

Most taxpayers are all too familiar with audit assessments, which are the most typical form of assessment, and we explored jeopardy assessments and the narrow circumstances justifying their use in a previous Pinch of SALT. This article focuses on the third type of assessment: the estimated assessment. Although estimated assessments are perhaps most common in the sales and use tax area, taxpayers may face them for any type of tax.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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