Dino Marcaccio
President
Former Texas Comptroller State Tax Auditor

To be or not to be? Should we perform our review for overpaid sales tax before, during, or after my routine state tax audit? 

(Short answer: Dont wait, the audit will limit the scope of available credits down to a narrow sample. We are able to capture 100% of all available credits when performed while no audit is in progress.)

Been in this situation recently? A marketing professional calls you about a review of your purchase invoices for potential overpayments of sales and use tax and you are not sure whether to wait for your routine sales tax audit to search for credits or let a consultant who specializes in sales tax recovery review your records now?

Why does it make a difference? I thought it was all the same!

The first and most important reason you would want to have the savings review performed before any pending audit would be to thwart the audit. Many times by submitting a refund request before said audit is generated the Texas Comptroller deems the audit a risk of losing money for the state and never issues the audit. It also creates the risk that the sales tax professional that just submitted the refund request has also reviewed their company’s records and identified and resolved any potential sales tax exposure the Texas Comptroller thought you may have, thus making said pending audit non-productive in the Texas Comptroller’s eyes. 

Second, it forces the Comptroller to verify and refund the money before they actually start the audit.  Also, the Comptroller can’t include any of the credit transactions we get approved in their sampling, and thus reduces the projection factor (the amount by which an error in a sample can grow once projected out over the sample population) and thus saves them money in the audit as well. When you reduce the sample population you reduce the magnification of any errors because the population is smaller.

Conducting the overpayment review before your routine state tax audit is critical to lost revenue recovery. 

Many times, companies wait until the audit is generated and in progress to identify and include credits in the audit all while handling the audit at the same time and this is impossible. Auditors will typically perform a sampled audit instead of a detailed audit which potentially leaves 60% of viable credits off the table.

Not sure what overpayments of sales tax are or if you are even eligible for a state tax lost revenue review schedule a free consultation with a Texas Tax Group lost revenue recovery specialist now! Please fill in the below for a consultant to call you back.

Best of luck,

Dino