Mon, December 9 2013
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Sales Tax Audit - Case Studies
More and more companies are coming to Kruse & Associates for their Sales Tax Audit needs.
High Tech Manufacturer
The taxpayer is a retailer of component parts and assemblies on a global basis. The sales tax audit liability centered around the lack of documentation supporting exempt international sales and sales for resale. Our sales tax audit experts were successful in convincing the auditor that the transactions did in fact qualify as exempt even though the standard forms of documentation (export forms and resale certificates) were not available. The audit liability was reduced from $97,678 to $24,372.
Restaurant with Cocktails
The taxpayer operated a successful restaurant with a cocktail lounge. Live entertainment was provided during the evening. The Board's audit used the "mark up" method to establish taxable sales. The initial audit liability was set up at $377,425. Our experienced Sales/Use Tax professionals were able to demonstrate that the cost of goods sold and the mark ups used by the audit staff were incorrect. The Tax liability was reduced to $25,300. Additionally the 10% negligence penalty was abated.
Manufacturer and Retailer of Machinery and Equipment
The taxpayer manufactured custom machinery and equipment. The Board audit staff determined that the Taxpayer was a retailer of machinery & equimpment. Additionally, the Board audit staff disallowed sales for resale. As such a $43,400 tax liability was recommended. Our sales tax experts were able to establish that lump sum construction contracts were involved and tax was only due on the COST of the materials. Sales for resale were ultimately supported and the tax liability was reduce to $21,200. We were also successful in getting the 10% negligence penalty abated.
Wholesaler of Roofing Materials
The taxpayer had just been audited by the California State Board of Equalization and was facing a proposed sales tax liability approaching $100,000. We reviewed the auditor's workpapers which disclosed errors in the auditor's test sampling which, when corrected, reduced the tax liability by over $60,000.
California Sales Tax Audit