What does it mean to circulate the vendors?

Answer

Frequently during an audit the auditor may question whether or not the purchases that they have that you’ve reported in your books or records is complete and the way they would do that would be to circulate the vendors. That is they would send a letter to your major vendors and ask them to provide a detailed report on the total purchases that they’ve made from you over a certain period of time. They would then evaluate those reports they get back from the vendors to what’s in your books and records to determine whether or not your purchases are complete. This is usually done in conjunction with a markup analysis but the first step would be they might question the completeness of your purchases.

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