Over-Reported Tax and Sales and Use Tax Audits

SALT Event Brite ImageWhat you don’t know will cost you.

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
Electrical Contractor $200,000 >($1,200,000) >$1,000,000
Electrical Contractor $16,828 ($171,011) $187,839
General Contractor $32,787 $3,640 $29,147
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.