Case Study: Reverse Sales Tax Audit - Production of Construction Materials
BACKGROUND
ABC Company is a leading producer of construction aggregates (primarily crushed stone, sand, and gravel) and a major producer of asphalt mix and ready-mixed concrete in the United States. The company operates more than 300 aggregate production and related facilities, serving markets in 20 U.S. states, the District of Columbia, and Mexico. The company's products are used for infrastructure, commercial and residential construction, and other public and private projects.
CHALLENGE
ABC Company operates in multiple states and must understand the taxability of their products, services, and purchases state by state. Their transactions may qualify for exemptions and special rules depending on the product and its intended use. ABC Company does all of its sales tax compliance in house but wanted to get a second opinion to see if there were any areas of opportunity of exposure.
SOLUTION
Philip performed a thorough reverse sales tax audit, which involved reviewing ABC Company's purchasing records and identifying areas where they may have overpaid sales tax. After analyzing their purchases related to mining and quarrying, Philip discovered that ABC Company had overpaid $2M in sales tax. The company believed that they were required to pay sales tax on these purchases since they were the "end user" of the tangible property. However, Philip explained that the purchases actually qualified for exemptions since they were used for producing raw materials.
Specifically, in the states where ABC Company operates, there are exemptions for purchases of tangible personal property that are used directly in mining or quarrying operations. These exemptions apply to equipment, tools, and supplies that are used to extract and process raw materials. Once Philip identified the overpayments, he worked with the auditors in each state to file refund claims on behalf of ABC Company.
Moving forward, ABC Company implemented changes to their internal processes to ensure that they properly apply exemptions and other rules to their purchases.
RESULTS
Thanks to Philip's expertise and diligence, ABC Company was able to recover the $2M in overpaid sales tax. The refund claims were approved by state and local governments, and the money was returned to ABC Company. This recovery of funds allowed ABC Company to invest in other areas of the business and improve their bottom line.
In addition to recovering the overpaid sales tax, ABC Company adjusted their internal processes to prevent future overpayments of the same nature. By implementing changes to ensure compliance with sales tax laws and exemptions, the company will avoid unnecessary expenses and improve their overall financial health.
CONCLUSION
ABC Company's experience highlights the importance of conducting regular sales tax audits and seeking a second opinion to identify potential areas of overpayment or exposure. Philip's expertise in reverse sales tax audits allowed ABC Company to recover $2M in overpaid sales tax and implement changes to their internal processes to prevent future overpayments.
The recovery of funds allowed the company to invest in other areas of the business and improve their bottom line. By implementing changes to ensure compliance with sales tax laws and exemptions, ABC Company will avoid unnecessary expenses and improve their overall financial health. This case study demonstrates the benefits of working with specialized sales tax professionals to navigate the complexities of state and local tax laws and maximize savings for businesses.
AT A GLANCE
CHALLENGES
Operating in multiple states and understanding the taxability of their products, services, and purchases state by state
Potential exposure to overpayments due to incorrect application of exemptions and special rules
BENEFITS
Expertise in reverse sales tax audits and identifying areas of overpayment
Ability to file refund claims on behalf of the company with state and local governments
Guidance on implementing changes to internal processes to prevent future overpayments
TIME AND RESOURCE SAVINGS
Conducting a thorough reverse sales tax audit saved time and resources by identifying areas of overpayment and allowing the company to file refund claims efficiently
Implementation of changes to internal processes saves time and resources by ensuring proper application of sales tax exemptions and rules
FINANCIAL SAVINGS
Recovery of $2M in overpaid sales tax directly improved the company's financial position
Proper application of sales tax exemptions and rules will prevent future overpayments and save the company money in the long run
EXPERTISE
Expertise in reverse sales tax audits and knowledge of state and local tax laws provided significant benefits to the company
Philip's guidance allowed the company to recover overpaid sales tax and improve compliance practices to prevent future overpayments
ADDITIONAL BENEFITS
Implementation of changes to internal processes to ensure compliance with sales tax laws and exemptions will improve the company's overall financial health
Conducting regular sales tax audits and seeking a second opinion can help businesses identify potential areas of overpayment or exposure and maximize savings.
OUR MISSION
What sets us apart from other sales tax consulting firms is our commitment to offering top-notch services without charging exorbitant fees typical of other firms.
​
We believe that every business deserves quality sales tax consulting that is accessible and affordable, and we have built our practice around this core value.
