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Underpayments and Refunds

One of the most daunting tasks facing many companies is managing their sales and use tax expense due to the myriad of exemptions, exclusions and differing interpretations.  This challenge often leads to companies facing conflicting, but equally troubling, types of errors: 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.

EisnerAmper helps clients across a broad range of industries, including

not only identify overpayments, but file claims to obtain the refunds to which they are entitled.  Furthermore, we help remediate these issues by recommending and helping implement changes to policies and procedures so the problem doesn’t persist.

Our Approach

Our approach to sales tax reverse audits generally consists of four phases:

1. Evaluation of Potential Benefit

In the initial phase, we perform a high-level evaluation of the potential benefit, to determine whether or not significant overpayments may exist. This is done through discussions with client personnel to gain an understanding of the business as well as its current policies and procedures regarding sales and use tax. We identify potential exemptions and exclusions that may be applicable as well as the historical treatment of these items. We may also review certain accounts and/or invoices to ensure our understanding is accurate.

2. Detailed Information Gathering

Once it is determined that significant overpayments may exist, we begin to gather the detailed information necessary to file a claim for refund. This includes detailed account review, as well as a detailed invoice review to identify specific overpayments. We perform in-depth research of applicable exemptions and exclusions to ensure their applicability to the case at hand. We organize and summarize the information as appropriate for the next phase.

3. Filing of Claim for Refund

Once the overpayments have been identified and documented, we will file a claim for refund with the appropriate taxing authorities. If necessary, we will meet with the taxing authorities to explain our position and answer any questions they may have regarding the claim.

4. Remediation and Recommendations

At the end of our review, we will provide a final report with a summary of our findings and our recommendations.  This will include how to correct the issues that created the overpaid sales and use tax, whether it is implementing new systems or using a simplified tax decision matrix for use tax accruals.  

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