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<br />Exhibit A <br /> <br />SALES AND USE TAX AUDIT (SUT A) ADDENDUM <br /> <br />OBJECTIVES AND METHODS <br /> <br />MMC's sales and use tax audit service is designed to maximize the City's income - and <br />minimize the cost of lost revenue - by detecting and documenting misallocations of local district <br />tax (also knows as Transactions & Use Tax), Bradley-Bums sales tax and local use tax activity <br />within the statute of limitations on recoverability. <br /> <br />In perfonning the sales and use tax audit program MMC shall: <br /> <br />0 Identify and correct the sales/use tax reporting errors of businesses that, based on the <br />nexus of their activities, are not properly registered with the City. <br /> <br />0 Identify and correct the reporting of businesses that are improperly reporting tax to state <br />and county pools (i.e. classifying sales tax as use tax) and thereby depriving the City of <br />sales tax revenue. <br /> <br />0 Detect, document and correct sales/use tax reporting errors/omissions and thereby <br />generate new, previously unrealized revenue for the City. <br /> <br />0 Ensure through comprehensive audit measures that the revenue infonnation used for <br />ongoing economic analysis includes all sales/use tax generators. <br /> <br />0 Assist the City with strategies to preserve and even enhance sales and use tax revenue <br />generated by existing businesses within the City. <br /> <br />MMC's proposed sales/use tax allocation audit services for the City includes five distinct types <br />of audits: <br /> <br />0 Taxable Nexus Field audits <br />0 Pennitization audits <br />0 Deficiency assessment audits <br />0 Accounts payable audits <br />0 Quarterly Distribution Report audits <br /> <br />TAXABLE NEXUS FIELD AUDITS <br /> <br />MMC's initial and periodic taxable nexus field audits include a physical canvassing and <br />evaluation of sales/use tax generating businesses located in the City. In the absence of this <br />undertaking, significant misallocations will remain undetected. MMC's field audits focus on <br />those businesses located in the City from which the City has not been receiving sales/use tax <br />revenue. The result is new or 'found' revenue for the City. <br /> <br />PERMITIZATION AUDITS <br /> <br />Wholesalers, contractors, processors, manufacturers and other non-retail businesses will <br />frequently not have a sales tax pennit properly registered to the City in which they are located <br />because their business operations do not include a point-or-sale qualifying activity. However, <br />these companies will often generate local sales/use tax from the State Board of Equalization <br /> <br />7 <br />