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Case Study
Sales and Use Tax Audit and Refund - Speciality Machinery
Based in northeastern Wisconsin, the company is a leading North American manufacturer of specialty manufacturing machinery for the paper industry.
The company was on a regular audit cycle with Wisconsin for sales tax audits. There was some turnover of the accounting staff from the prior audit. The company had successfully reduced the assessment on their own to approximately $135,000. At that time, they believed the auditor had allowed the exemptions to which they were entitled and even had allowed two refund claims they had identified.
Daryl had maintained a recurring discussion with the CFO about their sales tax issues. The CFO knew they did not have the internal resources with detailed sales tax expertise. Therefore, the company engaged NTWR Consulting to review the proposed tax audit report before it was finalized.
Since the audit report had already been proposed, the timeframe necessary to complete the project was extremely tight. The process was completed in two months despite the state’s supervisor being replaced one month into the project.
Daryl used Wisconsin statutory provision for “reliance on prior audits” to roll forward the treatment of many issued that had been challenged and allowed in the prior audit. Based upon the workpapers / interim schedule versions and email threads from the prior audit, the company was able to substantiate these positions. Numerous transactions in the statistical sample were able to be removed because they were voided / reversed transactions. The company was able to recompute its use tax accrual for its stores’ accounts based upon a product analysis to identify the proper tax treatment for items that were consumed in the manufacturing process.
After the various services provided by NTWR Consulting, the audit resulted in a small refund to the company. The company also received a refund from a vendor who charged Arkansas sales tax in error on a drop shipment transaction selected in the sample. A software vendor issued a credit because they forgot to apply sales tax to a credit they issued on the price adjustment for taxable software. These two ancillary issues provided over $8,000 in additional savings
"Daryl’s experience and knowledge were extremely helpful in verifying that we did not pay more tax than we were required. We did not know how to identify the prior audit issues from the schedules provided by the auditor. Daryl was able to match the original pick list to our prior audit pick list and finalized audit report to identify issues that had been determined to be exempt. He helped us with our major stores’ vendors to create product level exemptions to eliminate the need for detailed periodic analysis of all items purchased through those accounts. That saved considerable staff time, and we now have comfort in the taxability as the tax determination was approved by the auditor. We definitely will use him again in the future to assess any proposed reports before we pay them or if we need help with state and local tax issues again.”
-Corporate Controller
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