There are taxpayers who pay consultants to look for and retrieve overpayments of sales and use tax. There are several ways to perform this service. One option is to reduce sales tax remittances or request a refund from the vendor without the approval of the state taxing authority. Another option is to submit a refund request directly to the state taxing authority.
When the refund request is submitted to the state taxing authority it is audited to ensure that the tax authority agrees that tax was paid in error. The approval of the tax credit by the taxing authority is a great litmus test. It provides the claimant with security that the credit is actually valid. The downside is that it usually takes longer to get the credit from the state taxing authority and the credit refund filing may trigger an audit of the business by the state taxing authority. Audits are typically triggered by larger refund requests.
The first option, i.e. taking a credit that is not approved by the state taxing authority, can be problematic for a few reasons. When a taxpayer takes credit for an overpayment of tax without having the credit scrutinized by the state taxing authority, there is always a risk that the state will not agree that the credit was due. If the state does not agree the credit was due, the state will issue a bill for the tax, interest, and (sometimes) penalty. The finding that the taxing authority does not agree with the taking of a credit typically happens in the context of an audit of the taxpayer. This can be a costly headache for a taxpayer who otherwise would have been in compliance with governing sales and use tax rules. A taxability error can also be costly if a taxpayer changes their accounting practices based on a misunderstanding or misapplicaton of tax law due to the invalid identification of a credit.
For these reasons, it is typically better to file a refund request with the state taxing authority and get the credit approved if the amount being claimed is material (or will become material over time). If the overpayment is material and it would hurt the business should a subsequent state review reveal the credit is not due, get the credit approved before taking it. The manner in which a credit is taken is a business decision. But you should know your risks. Ask your state tax consultant their procedures for the refund of their fee if you pay a contingency fee for the credit identification and the credit is ultimately not approved by the taxing authority prior to payment of the consultant.