SALT Report 2233 – The Connecticut Department of Revenue Services issued guidance regarding their newly enacted procedures that were created to minimize the potential for multiple taxation of retail sales in situations where an audit of a retailer and its retail customer reveals that the proper amount of sales and use taxes were not paid on a particular sale.
In an effort to determine whether the proper taxes have been paid, the Department will generally conduct an audit of both the retailer and its retail customer. Because of this, it is possible that, if taxes were not paid on a particular retail sale, and the audit examinations were conducted on both the retailer and its customer, an assessment might be made against both parties for the same retail sale.
Therefore, the new procedures provide that when conducting an audit examination of a retailer, the Department will consider separately those taxable retail sales that were made by the retailer to a retail customer. If the Department determines that the retailer failed to collect tax on a taxable retail sale, the Department will make an audit assessment in connection with that sale against the customer, not against the retailer.
To provide further guidance, the Department issued a Policy Statement that addresses the following situations:
- The policy as it applies to retail customers
- How to establish that the retailer or retail customer was subjected to an audit for one or more of the same taxable periods
- Notification of perpetually audited taxpayers
- Audit examinations being currently conducted, and
- Audit Verification letters
The Department’s new Policy Statement modifies and supersedes Policy Statement 93(4), Audit Examination Policy for Retail Transactions and is currently in effect.
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