SALT Report 2603 – The Pennsylvania Department of Revenue issued a tax bulletin to provide guidance to taxpayers involved in sales and use tax audits and to taxpayers proposing to resolve their sales and use tax issues through the managed audit process. The bulletin states that during an audit, the Department will project both underpayments and overpayments based on a stratified random sample of computerized records if the taxpayer meets the following requirements:
- The taxpayer is currently under audit by the Department or has entered into an agreement with the Department to conduct a managed audit to address sales and use tax compliance issues prior to audit selection.
- There are verifiable electronic purchase records available to the Department to facilitate a stratified random sample of both underpayments and overpayments.
- The volume of records supports the need for use of sampling procedures.
- An agreement is reached by the Department and the taxpayer on the use of the sampling method and procedures. The sampling agreement must include: that the population of electronic records will be provided to the Department, verification of the population, and stratification and selection of the sample by the Department.
- There is sufficient evidence to allow the Department to determine whether the taxpayer has underpaid tax, that no tax is due, or that tax was overpaid for each transaction in the sample. This evidence must include: a copy of the source document for the transaction; proof of payment; a valid reason for the exemption supported by documentation; and the taxpayer’s testimony that no credit memo, tax refund, or any other reimbursement for a tax overpayment has been received.
In the event a credit is determined, the Department will issue a credit for any overpaid sales or use tax during the audit period if the overpayment is discovered through the auditor’s examination of the records, or through information supplied to the auditor from the taxpayer on a complete basis.
For Further Information