Sales and Use Tax – Underpayments and Refunds
July 10, 2020
By Andria Siciliano and Dennis Downing
Of the many ongoing tasks facing companies, managing sales and use tax expense, with the myriad of exemptions, exclusions and differing interpretations, can be one of the most daunting. Two conflicting, but equally troubling errors are often faced: overpayments and underpayments of tax.
Underpayments are often caught as part of either the financial statement audit, or -- worse -- a state audit. However, state auditors (and to some extent financial statement auditors) generally only identify underpayments, not overpayments.
As a result, overpayments often go undetected, resulting in past and future loss of cash and income.
Further complicating the issue is that the typical exemptions/exclusions can vary by industry or business. For instance, the focus for life sciences companies (such as lab supplies, machinery, equipment, even utilities used in R&D) is much different from that of retailers (advertising, packaging, shipping and delivery) or financial services companies (data centers, sourcing of services).
Your tax consultant should be able to help you in a number of ways:
- Identify overpayments
- File claims to obtain the refunds to which you are entitled
- Recommend and help you implement changes to your policies so the problems don’t persist.