If your business has been assessed by the state, or is facing a Sales & Use Tax Audit, consider what YOU need to defend your tax position and protect your company’s tax incentives. If the assessment includes penalties for misusing a certificate, late returns, or underpaid taxes, you especially need an Audit Defense team.
In this blog, we’ll look at three things every business should know if they’re facing an audit. (Download our White Paper for a deeper dive.) CPRS specializes in Tax Audit Representation and Audit Defense, providing services to some of the world’s largest companies.
With 119 years of combined experience
working at state departments of revenue, CPRS knows the DOR playbook.
“Unlike most corporate tax departments, CPRS has in-house knowledge of state Departments of Revenue (DOR) and the sampling processes they use,” said Jeff Heyel, CMI, CPA, Vice President of Tax for CPRS. “We provide both Audit Representation – working with clients directly throughout the entire audit process – and Audit Defense, looking at tax assessments after the audit is complete and finding ways to reduce those assessments.”
Taxes Reduced 92% with CPRS Audit Representation
As an example, one large airline had a $468,000 tax assessment after a state audit. A few years later, the airline, facing another audit, hired CPRS for Audit Representation. “Our team got involved in the sampling process early on and eventually created a 92% reduction in assessed taxes, compared to the previous audit,” Heyel noted.
“The sampling method matters for numerous reasons. For example, in some states, credit errors will only be projected with a statistical sample,” Heyel said. “The sample plan can have a material impact on projected tax liabilities. Therefore, it is important to evaluate the sampling plan before it is finalized. CPRS intervenes, respectfully of course, to ensure the sample is representative of the entirety of taxable activities.”
CPRS reviews every facet of a state auditor’s sample plan, from the sampling method used to the accuracy of the auditor’s projection calculations. We then provide insights and recommendations to ensure the projected tax results are representative, reasonable, and not overstated.
Not every state approaches tax audits in the same manner.
Read our White Paper to learn the states most likely to audit sales taxes.
6-Figure Refund with CPRS Audit Defense
For companies that have already been audited, a CPRS Audit Defense Review can lead to significant reductions.
For an international software company, CPRS turned a $4,000 tax assessment into a 6-figure refund by looking at what the state auditor did not take into account. Using its experienced tax team, CPRS developed a defensible tax theory that created a nearly $300,000 refund.
With more than 75 years of refund incentive experience, CPRS knows how to audit for overpayments.
Need a Second Opinion?
If your business has been audited, CPRS will evaluate any preliminary assessment for free, Heyel offered.
“At a minimum, we can put another set of experienced eyes on your assessment before you accept an audit outcome,” Heyel said. “And, if your business already accepted an audit, there is still a statutory window for us to review and reduce. Again, we will evaluate for free.”
This offer is especially important because the amount of state tax audits being done is rising. According to TaxValet, sales tax audit rates have quadrupled recently.
3 Things to Know if Your Business Gets Audited
If you’re facing an audit and considering outside support, here are 3 things you need to consider:
- How State DORs Operate
Knowing how state Departments of Revenue operate is crucial to defending your tax position, reducing assessments, or abating penalties. DOR audits follow a complicated process that works in favor of the state.
- Sampling Methodologies
Tax auditors at DORs often use sampling to identify a percentage of tax overpaid or underpaid. This percentage is then used across all tax categories. If you don’t get the right sample, it could cost you tens of thousands of dollars.
- Senior-Level Tax Experience
Addressing complex business taxes that change from state-to-state and year-to-year requires more than just a general understanding – it demands the insight of seasoned professionals.
Whether you’re just receiving your audit notice or already in the thick of it, CPRS steps in as your advocate—managing auditor communications, gathering documentation, negotiating sample plans, and reducing your burden wherever possible.
Take a bite out of your sales tax bill. Download our White Paper, then contact the CPRS Tax Team.
