Top 5 Ways
Corporations Overpay Sales & Use Taxes
With the myriad of business taxes levied in most states, the question is not “Are you overpaying sales and use tax?” It’s “By how much?”
Diverse tax structures, constantly changing excise regulations, and differing approaches by state Departments of Revenue impact the taxable amounts corporations have to pay. Even in the five states without sales and use taxes (Alaska, Delaware, Montana, New Hampshire and Oregon), various excise, meal, lodging and other taxes are imposed, says the Sales Tax Institute.
Many corporations unknowingly overpay these taxes. The Tax Audit Representation and Audit Defense experts at CPRS conduct hundreds of Reverse Sales and Use Tax Audits every year, ensuring adherence to tax regulations, improving financial processes, and often resulting in substantial cost recoveries. Reverse Sales and Use Tax Audits identify and address complex tax issues, providing actionable insights that lead to improved tax compliance and financial efficiency.
With 190+ years of tax experience on our team, CPRS knows where Sales and Use Tax overpayments hide: usually in software services, large invoices, overreliance on tax software, and large CapEx expenditures.
Ask yourself these 5 questions to see if your company is overpaying state sales and use taxes.
1. We purchase a lot of software or SaaS used across multiple states—could that lead to tax
overpayments?
Yes. Tax treatment for software, SaaS, and related services varies significantly by state and jurisdiction.
If your business uses these tools across multiple locations, there’s a strong likelihood that tax is not being
applied consistently—or correctly—which can lead to overpayments.
2. Our tax team reviews large invoices—doesn’t that catch most issues?
Not necessarily. Internal tax teams are focused on high-priority compliance and planning matters. While
they may review major invoices, it’s not practical to analyze every line item in detail. As a result, smaller but
systematic overpayments often go unnoticed.
3. Doesn’t our tax software already identify all available savings opportunities?
Tax software is an important tool, but it’s not perfect. Sales and use tax rules are extremely complex and
change frequently. Many companies rely heavily on automation, which can lead to missed exemptions,
misapplied rates, or incorrect taxability assumptions.
4. Our tax software tracks changes across all states—shouldn’t that keep us covered?
While modern tax software is highly sophisticated, no system is completely infallible. State and local tax
rules evolve quickly, and nuances in interpretation—especially around exemptions and use-based rules—can
still result in overpayment.
5. Would large CapEx or construction costs impact state taxes?
Absolutely – any business with large expenditures for ongoing capital projects, maintenance and repair, or
construction mega-projects likely have big state tax bills that should be reviewed. CPRS are the experts in
these types of massive programs. We regularly audit nearly 25% of the nation’s oil refineries, for example.
If your company isn’t conducting Reverse Sales & Use Tax Audits, you’re probably overpaying. A focused review by a firm that concentrates specifically on identifying overpayments can often uncover opportunities that may have been outside the scope of a traditional audit. If you want an experienced team, including former state sales and use tax auditors, talk to CPRS. Be sure you’re capturing all available tax benefits.
