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<br />SALES AND USE TAX AUDIT (SUTA) ADDENDUM <br /> <br />OBJECTIVES AND METHODS <br /> <br />MuniServices' Sales and Use Tax Audit Service is designed to maximize the City's income-and minimize <br />the cost of lost revenue-by detecting and documenting misallocations of Local District Tax (also known <br />as Transactions & Use Tax), Bradley-Burns sales tax and local use tax activity within the statute of <br />limitations on recoverability. <br /> <br />In performing the sales and use tax audit program MuniServices shall: <br /> <br />D Identify and correct the sales/use tax reporting errors of businesses that, based on the nexus of <br />their activities, are not properly registered with the City. <br /> <br />D Identify and correct the reporting of businesses that are improperly reporting tax to state and <br />county pools (i.e. classifying sales tax as use tax) and thereby depriving the City of sales tax <br />revenue. <br /> <br />D Detect, document and correct sales/use tax reporting errors/omissions and thereby generate <br />new, previously unrealized revenue for the City. <br /> <br />D Ensure through comprehensive audit measures that the revenue information used for ongoing <br />economic analysis includes all sales/use tax generators. <br /> <br />D 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 />MuniServices' proposed sales/use tax allocation audit services for the City includes five distinct types of <br /> <br />audits: <br /> <br />D Taxable Nexus Field audits <br />D Permitization audits <br />D Deficiency assessment audits <br />D Accounts payable audits <br />D Quarterly Distribution Report audits <br /> <br />TAXABLE NEXUS FIELD AUDITS <br /> <br />MuniServices' initial and periodic taxable nexus field audits include a physical canvassing and evaluation <br />of sales/use tax generating businesses located in the City. In the absence of this undertaking, significant <br />misallocations will remain undetected. MuniServices' field audits focus on those businesses located in <br />the City from which the City has not been receiving sales/use tax revenue. <br /> <br />PERMITIZATION AUDITS <br /> <br />Wholesalers, contractors, processors, manufacturers and other non-retail businesses will frequently not <br />have a sales tax permit properly registered to the City in which they are located because their business <br />operations do not include a point-of-sale qualifying activity. However, these companies will often <br />generate local sales/use tax from the State Board of Equalization (SBE) audit deficiency assessments, <br />occasional sales (i.e., mergers and acquisitions), and self-accrual of use tax on purchases. MuniServices' <br /> <br />5UTA1-032907vl <br /> <br />1 <br />