Case Studies


Establishing Positive Relationships Results in Refund of Sales Tax Audit Assessment

All businesses strive to have strong internal procedures in place to deal with sales tax. This typically involves a sales tax calculation program, highly qualified tax accountants, and sufficient staff in place to handle the ever growing complexity of sales tax filing and compliance. Unfortunately, if your business is subject to a sales tax audit, there is usually some deficiency found which results in an assessment.

Jeffie Pike’s client had been selected for a sales tax audit. In this scenario, sales tax was missing from invoices to one major customer. This was due to a procedural breakdown that had later been found and corrected. For the time frame of the audit, the process issue existed. The result was a final assessment of over $55,000, the bulk of it for that single customer.

Jeffie reviewed the documentation. She noted that the customer was the end user of the client’s products. That meant they were liable for sales tax. If not collected by the client, they were liable to accrue and remit as use tax. If that was the case, then the state had collected twice. This was not an equitable outcome, and needed to be remedied.

The next step was to open a dialogue with the client’s customer, to find out if use tax had been paid.

Jeffie repeatedly contacted the customer requesting assistance. Phone calls and emails went unanswered for about a month. She was finally able to connect with someone in their tax department. She explained the problem. The customer advised that they had accrued the use tax, and were willing to provide a letter to the state as proof that this had been done.

Then next problem was that the sixty day statute of limitations to appeal the assessment had passed. There was no way to appeal through normal legal channels.

The state’s sales tax office was contacted, and the problem explained. They said it was unlikely a petition would work, but there was a chance to collect by filing a claim for a refund. However, the client would have to provide proof that the tax was paid twice. The only way to do that was to get the records from the client’s customer, which they were still reluctant to provide.

Jeffie was able to secure a contact in the state’s legal division. She explained the problem to him. He said he would talk to the refunds office on behalf of her client. A few days later, he sent an email saying the judge would not rule in the client’s favor without proof and asked if her client would accept $1,000 in settlement.  She advised the client to decline the offer.

The customer was finally convinced to provide the detailed proof of payment. The only stipulation was they would not provide the documents direct to the client, due to confidentiality. The customer agreed to FedEx their proof directly to the state’s refund division.

Jeffie’s persistence paid off. The lawyer emailed her and said that although she didn’t have the requisite proof, “Because you have been so courteous and professional and helpful, we can pay you $48,000.”

A lengthy trial was avoided, and the client was very happy to receive a refund check within a month of the decision.



Consistent Determination Gets $53,000 Sales Tax Refund Paid

Due to economic conditions, states are doing everything they can to boost their revenues. They raise tax rates, remove exemptions, and add items to the tax base. Another tactic is to make it difficult to get refunds of sales taxes paid in error. Claims may be denied for purely administrative errors, or delayed for an unreasonable amount of time. It is up to the taxpayer to be proactive to ensure they receive back the money that is lawfully theirs.

In this scenario, Jeffie Pike was asked to review a significant amount of sales tax short pays for one of the major customers of her client. During her review, she found short payments in excess of $50,000 for one state, dating back over two years.  Her client had remitted this tax to the state timely.

She contacted the customer, and it was discovered that the sales tax had been charged in error, the customer should have been exempt. There was no exempt certificate on file, so Jeffie asked the customer to provide one, which they did immediately.

The rules for applying for refunds for that state were reviewed. Jeffie amended several years of returns, completed the refund form, and sent it to the Refunds Division.

Jeffie called to check the status of the claim every month. After four months, it was finally assigned to an agent.  The agent advised her that they needed more information to process the claim. Jeffie provided this within days.

Monthly phone calls to the Refunds Division did not speed the processing of the claim. She got many excuses; the department was understaffed, agents were busy, or that their particular claim was not high priority.  Still, each time she called, she was given a date when the claim would be reviewed.  After each review, more information was requested. Jeffie was beginning to suspect that all these delays were stalling tactics.

The client was growing understandably impatient. This claim had been with the Refunds Division for over a year. Jeffie was now convinced this claim could potentially remain in limbo indefinitely. She felt it was time to escalate this to a higher state office, so she wrote a letter to the Governor expressing her displeasure with the Refunds Division.

The Governor’s office responded within a week, providing a name and phone number for the Head of the Treasury Department.  The Refunds Division then contacted Jeffie, but unfortunately they were continuing to make ridiculous demands for more information. She was asked to contact her client’s customer for additional documentation that as far as Jeffie was concerned, wasn’t relevant. However, in the interests of concluding the claim, the requested information was provided.

Unbelievably, several more months went by, as Jeffie continued with her monthly phone calls requesting status. However, it was clear that it was time to escalate this again.

Jeffie phoned the Treasury Department, and due to her referral from the Governor, she was able to speak directly with the Chief of Audit Services. She explained how unhappy she was with the length of time it was taking to process the claim.

No further communication was necessary, within a week of that phone call, a check was received in the amount of $53,000, which was close to the amount of the original claim.

As final follow-up, Jeffie sent a letter of thanks to the Governor’s office, as she believed their intervention was a key factor in the final result.

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