Audit!

[Wisconsin Beth]

Um, good luck?  Best wishes?  Been nice "knowing" you?  I'm fairly sure there is something appropriate to say here.  I just don't know what it is! 

[ArchietheDragon]

Nov 3, 2015 11:43:17 GMT -5 deminmaine said:

I have two agents from the state revenue department sitting at the book keeping desk right now conducting a sales and use tax audit.

Been there.   Be nice, give them what they ask for.    

Are all of your sales taxable?

[mmhmm]

Nov 3, 2015 11:43:17 GMT -5 deminmaine said:

I have two agents from the state revenue department sitting at the book keeping desk right now conducting a sales and use tax audit.

You have my condolences. Please, let us know how it all turns out - if you can. If you can't, I think you can get one call once you get to the jail. Call somebody to let us know where you are and where to send care packages! 

[NancysSummerSip]

Nov 3, 2015 11:43:17 GMT -5 deminmaine said:

I have two agents from the state revenue department sitting at the book keeping desk right now conducting a sales and use tax audit.

This is a business audit, right? Sorry, I did not want to assume it, so I had to ask.

When it's over, a little something from the bar?

[mmhmm]

Nov 3, 2015 11:54:02 GMT -5 deminmaine said:

It is a business Audit. I got the letter about four weeks ago, and they conducted their initial interview with me last week. Looong process.

Many of our sales are exempt, so that is what triggered the audit, according to them. But, this is the first time in 23 years, so it is a slow trigger.

Gah! I can understand what you must be feeling. If it hasn't happened in 23 years, it's an unknown of epic proportion. Those scare the britches off me! Good luck!

[ArchietheDragon]

Nov 3, 2015 11:54:02 GMT -5 deminmaine said:

It is a business Audit. I got the letter about four weeks ago, and they conducted their initial interview with me last week. Looong process.

Many of our sales are exempt, so that is what triggered the audit, according to them. But, this is the first time in 23 years, so it is a slow trigger.

DO you have the exempt certificates?    

[bean29]

Yeah, I had to go through that when I first started this job.

It really wasn't too bad. They took our GL and check registers, then selected transactions and asked us to pull the invoices. They did go back several years - I don't remember if it was 3 or 5. Our CPA got them to kick out a few items they found, so we only had to pay tax on a few things and the penalty wasn't too bad.

[ArchietheDragon]

Nov 3, 2015 12:00:35 GMT -5 deminmaine said:

They're going back 3 years, but concentrating on 2014.

Archie- I only have some of the exempt certs, but they weren't that concerned about that. If we're working on a Federal Building I guess it's kind of obvious? Of course they're not done. I may be asking a lot of people for certs.....

Yeah, the CT auditors weren't sticklers for having the certs for the obvious ones, either.  

Just remember, you are smarter than them and know your business better than they do.  They don't know what the heck they are looking at.

[The Captain]

Pffth.  Piece of cake.

I currently have a Federal Income tax audit, a Federal Excise tax audit, four state income tax audits, and two state sales and use tax audits ongoing.

Which state?  Some don't take certs that are gotten retroactively...

[ArchietheDragon]

Nov 3, 2015 12:08:15 GMT -5 The Captain said:

Pffth.  Piece of cake.

I currently have a Federal Income tax audit, a Federal Excise tax audit, four state income tax audits, and two state sales and use tax audits ongoing.
        

That is terrible.   How long do they usually go on for?

[The Captain]

Nov 3, 2015 12:09:38 GMT -5 ArchietheDragon said:

Nov 3, 2015 12:08:15 GMT -5 The Captain said:

Pffth.  Piece of cake.

I currently have a Federal Income tax audit, a Federal Excise tax audit, four state income tax audits, and two state sales and use tax audits ongoing.
        

That is terrible.   How long do they usually go on for?

The excise audit is wrapping up - less than 6 months.  The Federal Income Tax audit, we basically rolled from one audit cycle to the next with maybe a two month break in between?  Basically constantly under audit for the past 6 years.  The current audit cycle should be closed out in 3-4 months.

One state income tax audit has been ongoing for over 4 years.  We had one auditor go on FMLA and another auditor resign so have had to train/start from the beginning basically twice (we're complex and this state does a lousy job of training their auditors).

Another state income tax audit is about 4 months now, with about another 2-3 to finish.

The other two audits are plodding over a year now because the state auditors are overbooked.

One sales and use audit is stalled on a legal issue that the state does not want to litigate with us so we're waiting on administrative guidance.

The final sales and use audit has been going on for about 8 months, should be wrapping up soon.

[ArchietheDragon]

Nov 3, 2015 12:27:30 GMT -5 The Captain said:

Nov 3, 2015 12:09:38 GMT -5 ArchietheDragon said:

That is terrible.   How long do they usually go on for?

The excise audit is wrapping up - less than 6 months.  The Federal Income Tax audit, we basically rolled from one audit cycle to the next with maybe a two month break in between?  Basically constantly under audit for the past 6 years.  The current audit cycle should be closed out in 3-4 months.

One state income tax audit has been ongoing for over 4 years.  We had one auditor go on FMLA and another auditor resign so have had to train/start from the beginning basically twice (we're complex and this state does a lousy job of training their auditors).

Another state income tax audit is about 4 months now, with about another 2-3 to finish.

The other two audits are plodding over a year now because the state auditors are overbooked.

One sales and use audit is stalled on a legal issue that the state does not want to litigate with us so we're waiting on administrative guidance.

The final sales and use audit has been going on for about 8 months, should be wrapping up soon.

Yup.   I was right.  That is terrible. 

[Tennesseer]

Nov 3, 2015 11:43:17 GMT -5 deminmaine said:

I have two agents from the state revenue department sitting at the book keeping desk right now conducting a sales and use tax audit.

(It's fueled and ready to whisk you to a non-extradition country.)

[ArchietheDragon]

Nov 3, 2015 12:00:35 GMT -5 deminmaine said:

They're going back 3 years, but concentrating on 2014.

Archie- I only have some of the exempt certs, but they weren't that concerned about that. If we're working on a Federal Building I guess it's kind of obvious? Of course they're not done. I may be asking a lot of people for certs.....

out of curiosity, what do they seem to be focusing on?

[GRG a/k/a goldenrulegirl]

[ArchietheDragon]

Nov 3, 2015 12:51:08 GMT -5 deminmaine said:

Nov 3, 2015 12:07:22 GMT -5 ArchietheDragon said:

Yeah, the CT auditors weren't sticklers for having the certs for the obvious ones, either.  

Just remember, you are smarter than them and know your business better than they do.  They don't know what the heck they are looking at.

Yeah, they have asked some "silly" questions. But they've asked some good ones too. I'm glad I don't have anything to hide.

I'm still a bit nervous because I know will have made some mistakes.  I don't want to come out of this with too big a bill.

The bill at the end is negotiable.    Don't take their first offer. 

[taz157]

Nov 3, 2015 12:03:21 GMT -5 @sroo4 said:

O.o  Good luck!   Here's my funny audit story (internal auditors hired by my company)

I had auditors scheduled at my site one day, bad enough right?   Well it just so happened I had a temp at the time that was under investigation for bank robbery (Yeah,  can't make this sh#t up).  So at the same time I'm juggling auditors the police come to conduct and interview with the temp.   I started joking with the detective and told him, "I'm impressed,  I think I have a new definition of a bad day"  After I told him about the audit in process he laughed and asked if he should come back at a different time.   I said no... the more the merrier,  just please give me a heads up if he planned to arrest her and I would keep the auditors in the back 

Was the temp arrested?

[ArchietheDragon]

Nov 3, 2015 12:55:04 GMT -5 deminmaine said:

That is interesting.  I don't expect it to be too big, BUT, it is always negotiable?

I routinely deducted submittal drawing expense which is.....NOT..... deductible. 

 
It has been in my experience.   What i have seen is the amount you will owe is made up of the underlying tax you owe, the penalties and the interest.   In some states the interest is statutory, so they can't negotiate that, but the underlying tax and the penalty can be worked down, especially if you have been doing a good job for 23 years without ever having anyone check up on you.  

[Abby Normal]

Nov 3, 2015 11:43:17 GMT -5 deminmaine said:

I have two agents from the state revenue department sitting at the book keeping desk right now conducting a sales and use tax audit.

My sympathies.  We've had a few over the years and they've never been an issue. We file in a bunch of states. But, I finished up one a few months ago that I just started calling the proctology exam.  The auditor was awful. She was focused on making sure we were paying sales tax on applicable items- some are exempt for our industry.  Anyway- she actually tried to charge us a penalty because one of our suppliers calculated the sales tax incorrectly.  Pissed me right off. Who the hell recalculates the tax on every invoice?  

The initial amount we "owed" was like 25 grand.  I argued with her enough that we managed to get it down to 7.  I took it and ran before she realized what she hadn't look at yet. We were doing it right, but it probably would have take a few weeks for her to understand it. In other words, she didn't even look at what we were charging tax on.  It was the weirdest sales audit we've ever had. 

[mroped]

IRS agent- someone that I would like to never meet!

Speaking of deductions: 
I have a friend that has some sort of farm thing going on. Anyhow, the man buys dog food- he has 5 or 6 of them- and writes it off as "rodent control"
his logic is that traps and such take too much time and if you don't dispose of the rodents in due time, then you have a stink on your hands!

[ArchietheDragon]

Nov 3, 2015 16:05:23 GMT -5 deminmaine said:

Our audit started the same way. I gave them a "tour" of the plant. they pointed out oddball little items that would not be tax deductible, and asked when we purchased them. One of them was a material cart that is probably 50 years old. We may have bought it 10- 15 years ago, and the whole thing is moot. Thank goodness they got off that tangent.

Our business is pretty simple- raw materials in, product out. All of the little incidentals that are not deductible we tend to purchase without exemptions anyway. We don't have a cert at Staples or Best Buy, for instance. We pay tax at purchase.

Despite their disappointment at this, they were really a rather agreeable pair. He was young and bright eyed, and she was more experienced and knowledgeable. I think they could see rather quickly that I was not a criminal mastermind, but a simple manufacturer, albeit in the construction industry.

I think this was the big thing today. They went through all of the AP/ AR, and asked reams of questions. I will get zinged on the submittals issue. On the other hand I also have some credits coming! It sounds like I'll make out OK.  Of course I'll let you know when they get back with the report.  He indicated probably a week, maybe two.

In the end, hopefully it will just be a big waste of my time, and not my money.  I do appreciate that plane on the runway though Tenn.  I've never flown like that before!

A week or two would be awesome.   in and out.  

[tskeeter]

Nov 3, 2015 16:05:23 GMT -5 deminmaine said:

Our audit started the same way. I gave them a "tour" of the plant. they pointed out oddball little items that would not be tax deductible, and asked when we purchased them. One of them was a material cart that is probably 50 years old. We may have bought it 10- 15 years ago, and the whole thing is moot. Thank goodness they got off that tangent.

Our business is pretty simple- raw materials in, product out. All of the little incidentals that are not deductible we tend to purchase without exemptions anyway. We don't have a cert at Staples or Best Buy, for instance. We pay tax at purchase.

Despite their disappointment at this, they were really a rather agreeable pair. He was young and bright eyed, and she was more experienced and knowledgeable. I think they could see rather quickly that I was not a criminal mastermind, but a simple manufacturer, albeit in the construction industry.

I think this was the big thing today. They went through all of the AP/ AR, and asked reams of questions. I will get zinged on the submittals issue. On the other hand I also have some credits coming! It sounds like I'll make out OK.  Of course I'll let you know when they get back with the report.  He indicated probably a week, maybe two.

In the end, hopefully it will just be a big waste of my time, and not my money.  I do appreciate that plane on the runway though Tenn.  I've never flown like that before!

Sounds like when I was working in CA for a large multinational company. Sales/Use Tax Audits every three years. Focused mostly on capital investment purchases, looking for transactions with out of state suppliers where we did not self assess taxes.  They would go though the capital items the first day, then start into the manufacturing expense items.  At the end of the second day they would want to meet and they would propose that the state refund the identified over payments of a few thousand dollars (we were intentionally conservative) and the would terminate the audit.  Despite finding they owed us money time after time, they insisted on bothering us every three years.

[debthaven]

DH had two audits at work ... the first time, they complained about the "company bikes". DH and his partner both rode bikes to work. The French tax authority refused to accept the bikes as "company vehicles". DH's partner asked, but if we'd both bought 50K Mercedes, that would have been OK, right? The tax authority said oh yes, absolutely! So two 50K cars would have been fine, but not two 500e bikes. 

The second time they found ... nuttin'. Zero, zilch.

Good luck ... I know it's incredibly stressful!

[The Captain]

Nov 3, 2015 12:52:48 GMT -5 deminmaine said:

Nov 3, 2015 12:08:15 GMT -5 The Captain said:

Pffth.  Piece of cake.

I currently have a Federal Income tax audit, a Federal Excise tax audit, four state income tax audits, and two state sales and use tax audits ongoing.

Which state?  Some don't take certs that are gotten retroactively...

Maine. They were tickled that I take title here to collect sales tax for OoS jobs here.

Looking at what you have going on Captain, this almost feels like a day in the park.  That is rough.

I work for a large, publically traded, multi-national company (and have most of my career).   Our current audit load is pretty "normal" for a company our size - I'd even go so far as to say we're light.

When I worked for a large, very well known retailer, it was common to have over 20+ state income and S&U audits running concurrently.   I am sooo glad I didn't manage state audits there!

States are desperate for revenue.  After the financial crisis of 2008-2009 many state agencies froze hiring.  They are just now ramping up again (in the past year or two) which is why you see a lot of greenies getting trained in the field.

Why is why ArchietheDragon's point about negotiating is spot on.  Just because the auditor says something is taxable, doesn't mean they're right.  You know your business, and if there are areas where big dollars are involved you should look up the law to make sure the auditors are, in fact, correct.

I mentioned in a prior post one of our S&U audits is stalled because I've taken a position that I think is supportable on something the state doesn't necessarily agree with.  My company is willing to litigate it because the dollars are huge.  The state does not want to litigate because if they loose the issue, it will be retroactive for 5 years for us, and three years for the rest of the industry.  Industry wide the dollars are enormous.

So instead the state is going to issue an administrative bulletin to "clarify" the issue on a prospective basis.  Other companies in our industry will have to file retroactive claims to get their money back, but it won't get as much press as case law. Kind of sneaky but it saves us the cost of litigation. That, and the fact that there is always a chance we could lose in litigation.

[Abby Normal]

Nov 3, 2015 17:29:18 GMT -5 The Captain said:

Spot on there.  During our proctology exam-  our auditor kept insisting an item was consumable (which is taxable) not repairs (which they allow an exclusion for under certain circumstances).  Her only justification was that we bought so many of them that they must be consumable.  We have several sites and she focusing on one that was 500 miles away. Despite a tour at the closer location - she still wasn't convinced.  So I forced her to drive the 500 miles to the other site and had the manager point out everywhere they were used.  Manager wouldn't let her leave until he pointed nearly all of them out.  There are 5,286 of them at that site.     

yep- made her just a miserable as she made us. 
 
By the time she was done- with the amount of hours she spent- I hardly think the state would think it was worth her time. 

[plugginaway22]

We had one of these audits about 5 years ago.
Mostly focused on credit card statements for 'out of state online purchases'.
In the end we owed the state of PA about $4500, back taxes and penalties.
They were in the office a full 5 days going through everything!
Since then I am so meticulous with paying monthly sales and use taxes.

[Wisconsin Beth]

[ArchietheDragon]

how is your audit going?