There is nothing worse than a taxpayer who reaches out for help with a sales and use tax deficiency after all deadlines for an administrative appeal have been missed. There is very little to be done. The process typically works like this:
- An audit is conducted and results are processed by the state taxing authority who generates a bill. Participate in the audit! Present your documents! If you want an accurate audit result make sure you advocate for yourself or hire someone to do so during the audit. During the field work is the best time to advocate for your business.
- You receive the bill along with a letter that tells you how long you have to protest the findings. This is the most important deadline in the process. If you do not agree with the findings, make sure you communicate the reasons you do not agree with the results in the format mandated by the state taxing authority. If you miss this deadline it will be difficult, if not impossible in some jurisdictions, to get anyone to revisit the merits of the audit findings.
- The redetermination process begins. The state taxing authority will contact you or your representative to open a dialogue about the audit results. Make sure you comply with information requests in a timely fashion. Whereas an accountant can guide you through the audit and redetermination process, if you must proceed to a hearing, hire an experienced litigator. The process is more formal than most people believe. The state is represented by attorneys in the redetermination process.
If you begin to get communications from the attorney general, the deficiency finding is now final. It is rare that anyone will hear any argument that the underlying deficiency is not accurate because ample opportunity to challenge it has been afforded. At this point, you are being asked to make payment arrangements. The state has broad powers to secure payment, including but not limited to, filing liens, seizing property, and seizing bank accounts.
NOTE: There are instances in which taxpayers have successfully lobbied taxing authorities to look at their audit after missing deadlines. The circumstances are typically extraordinary. Relying on an exception to the rule is not advisable.