EXEMPTION AND RESALE CERTIFICATES MAKE TRANSACTION TAX AUDITS CHALLENGING
This Global 500 company is one of North America’s largest manufacturers of paint, coatings and specialty chemicals.
The company’s transaction tax audits had generally resulted in significant audit assessments, and the company was concerned about how its current examination was going. The main area of concern was sales transactions and how the company acquired and organized exemption and resale certificates. The client clearly understood the spirit of its problem and had previously been focused only on creating the actual documentation required to defend the audit; it had not researched alternative audit methods and had not considered using a sample population instead of actual documentation.
Because the company’s staff members were committed to a company-wide ERP implementation, the client was looking for a competent consultant to interact with the auditor on its behalf. The client wanted to be informed throughout the process, but involved as little as possible. The client also wanted to make sure their best interests were being addressed. DMA analyzed the data to identify any anomalies. Any customers that were either not representative or were obviously resale customers were removed from the sample population. There were also other customers in question that were removed and grouped separately, and were tested separately by the auditor. DMA was able to remove over 80% of the client’s customers from the audit sample by conducting this analysis, which was a significant advance in limiting the client’s exposure and reducing the amount of time required to complete the audit.
Through additional research and negotiation, DMA successfully convinced the auditor to accept a smaller general sales population and remove specific customers related to retailers, manufacturers, and other exempt entities. This process saved the client both time and money by not having to gather the actual exemption and resale certificates, and reducing the projected tax amounts due. The client now knows that a custom population can be created that would allow for a more favorable audit result. The client was so impressed with the results that they asked DMA to utilize the same methodology to bring the audit current with the state.
DMA’s Transaction Tax Audit Management & Defense service focuses on your specific needs related to current, upcoming or past US sales/use and Canada sales tax audits. We can manage the entire audit process on your behalf or review audit work papers at any time during the audit process and prior to the statute of limitations expiring.
We focus on helping you reduce proposed transaction tax audit assessments. And, we will provide you with recommendations to eliminate prospective tax errors in the future.
“DMA has been a great partner. Our team does not view them as a service provider, but rather an extension of the team. I always respond to the question of, ‘What would you do differently?’ with ‘I should have partnered with DMA sooner.’”