I am somewhat surprised by the number of states that do not make their audit manuals publicly available online. A state tax agency’s audit manual is a guidance document that explains the procedures, policies, and standards their auditors should follow when conducting an audit. More surprising to me are those states that have decided to limit the distribution of their manuals to requests under their version of The Freedom of Information Act (this is an ongoing project of many, many years by Tax Analysts, for example). But why require taxpayers and tax professionals to jump through such hoops or place the information behind subscription-based research services?

I was particularly disappointed to see that one state (I’m not naming names here) enacted legislation earlier this year preventing any disclosure of the tax department’s audit manual and audit guidelines (along with a list of other internal arcane info). Withholding the department’s “11 herbs and spices” of their audit process is perhaps understandable, but why the audit manual? Redact the spicy parts, if you must (if there are any), but let taxpayers know how you conduct your business and what you expect.

From 2008 to 2010, the Multistate Tax Commission (MTC) completed a project to compile, update, and publish audit manuals for both halves of its Joint Audit Program (income and franchise tax, sales and use tax). There was some internal handwringing at the time over the decision to make the manuals publicly available on the MTC website, but they remain available today. The effort to demystify MTC joint audits was a success. I believe it reduced the amount of general angst over MTC audits over time (not that such audits are ever going to be popular among businesses).

The era of states playing “hide the ball” with taxpayers should have ended decades ago. Thank you to the states that have sufficient confidence in their people and procedures to make their audit manuals readily available. The rest should do better.