Throughout my career I have faced several instances where states have made audit assessments or taken positions under audit that contradict the position the state has taken in the past when it has audited the company. This change in position by the state has occurred even when there has been NO CHANGE in the state's statutes, rulings and court cases since the last audit.
Should the state be able to change their position without any change in authority? In most cases I would say no. Unfortunately, when you challenge the position within the audit, you may not get anywhere. You may have to go to appeals or even court to resolve. My experience is that resolution is highly likely at the appeals level (this obviously depends on the facts of each case).
With that said, getting back to my original question, should a state be able to change its position without any change in authority? Allowing states to do so causes a taxpayer to incur time and money to challenge the change in position, when there is no reasonable basis for the change.
Why would a state make an assessment when there is no change or basis for the assessment? Well, the answer may be that the state has changed its policy or interpretation of a statute or regulation. The state may believe that this change in interpretation is enough. It may or may not be, depending on the facts of the case.
Overall, if you run into this situation don't just accept it. Question it. Challenge it. Just remember, you may have to go to appeals to resolve the matter.
DISCLAIMER: Each case is different and states may have justification for their change in position. This is a reminder to not just accept the change, but to seek to clearly understand the state's position so you can determine if you should challenge it.