Over-Reported Tax and Sales and Use Tax Audits
Most companies are audited by state taxing authorities every four years and the outcome of each audit can be an unplanned assessment. Unfortunately, the overpayments in an audit are seldom identified by the auditor.
When a company is under an audit for sales and use tax, it is imperative to perform a review for refund opportunities.
The purpose of a refund review, or reverse audit, is to identify and document areas where sales tax has been improperly charged and paid to vendors or use tax was improperly accrued and remitted by the company to the taxing authority. These overpayments may be the result of the company’s unfamiliarity with the applicable sales tax statutes and exemptions or from the company’s inability to keep up with the myriad of law and policy changes that occur every day.
The following table represents just a few examples of sales and use tax audits that were performed with and without assistance and the outcomes resulting under each scenario.
Recent Audit Defense Results
|Type of Business||Audit Result Without Assistance||Audit Result After Assistance||Overall Savings|
|Contractor and Restoration Services||$43,087||$20,558||$22,259|
|Data Processing Services||$445,140||($655,406)||$1,100,546|
|Manufacturer and Contractor – HVAC||$149,956||($19,745)||$169,701|
|Manufacturer of Earth-Moving / Mining Equipment||$197,523||$103,585||$93,938|
|Manufacturer of Food Products||$100,000||($166,000)||$266,000|
|Manufacturer of Forgings, Castings, etc. for Aerospace and Industrial Operations||$217,464||($841,106)||$1,058,570|
|Manufacturer of Furniture||$70,024||($390,293)||$460,317|
|Manufacturer of Hi-Tech Equipment||>$1,000,000||($9,044)||>$1,000,000|
|Manufacturer of Packaging Supplies||$59,922||($12,853)||$72,775|
|Manufacturer of Point-of-Purchase Displays||$16,499||($4,046)||$20,545|
|Owner and Operator – Franchise Restaurants||$736,842||$214,952||$521,890|
|Property and Casualty Insurance Company||$88,916||($41,331)||$499,247|
|Wholesaler of Pet Food and Pet Supplies||$18,362||($17,257)||$35,619|
The BMSS SALT Services Group recognizes how complicated and overwhelming state and local taxes can be. We are available to assist you with your state and local tax issues and can provide a variety of services to give you the peace of mind concerning this ever-changing aspect of your business.
To find out more about these and other SALT issues, please join us on April 26th for a State and Local Tax Seminar featuring keynote speaker, Tom Smith, CPA, BDO’s State and Local Tax Practice Leader for the Southwest Region. He will be covering various sales and use tax issues that business owners face today. For more information, or to register, please click on SALT Seminar. Breakfast will be provided and CPE credit is available.