How Manufacturers Can Reduce Sales Tax Audit Assessments

Here are three quick tips for manufacturers to help minimize assessments during sales tax audit.

1) Look for overpaid taxes

It sounds crazy but why not? Hire a qualified sales and use tax firm to conduct an overpayment review as soon as the auditor leaves. You’ve already pulled the records for your sales tax audit and (hopefully) organized the data. The threat of triggering an audit is gone. Plus, overpayment reviews are conducted on contingency so no money comes out of your company’s pocket. Why not find out if you can offset any sales tax assessments by recouping overpayments?

Auditors focus on finding the underpayment of taxes. If you can present the auditor with invoices on which tax has been overpaid, your assessment can be reduced and you may even end up with a net refund.

2) Scrutinize the Auditor’s Report

Auditors are human and even a small mistake can translate into thousands of dollars saved. Check the auditor’s figures. Look for typos, transferred numbers, extra numbers added to the tax base and other “human” errors. These mistakes are easy to prove.

3) Verify Tax Paid with Vendors

Before remitting underpaid taxes to the state, check with your key customers to find out if they have recently been audited. Verify that they have not already been assessed the sales tax amount. The general rule is that sales and use tax is only paid once.

As long as you are professional and forthcoming with your actions, most auditors are willing to work with you to reduce assessments. Regardless, if you can knock down assessments by finding overpayments, identifying errors on the report and/or proving that your vendor already paid the sales tax, you are well within your rights to challenge an auditor’s

For more tips about sales and use tax for manufacturers, sign up to receive Cherry Bekaert's quarterly newsletter.