Managing a SQL Server database with over one terabyte of data Recently we have an audit database that went over one terabyte and, since we have storage problems, management is looking for options.

My proposal is at the end of each year we take a backup and truncate all the tables which will keep the database manageable. 

It will not be beneficial to have an archive database as it will again consume the same space. 

I would like to have an expert opinion about the options that I can propose to the management that is either allocate more space or truncate the whole database every year.
Get more space.   If you have a business requirement to retain that much data, they have to come up with the money.
Turn on page compression for the biggest tables (and indexes) (test test test!), Log data compresses extremely well, but compressing that amount of data is going to take some time.
See point 1