A new effort is underway to increase review and compliance with Pennsylvania sales and use tax, according to a recent announcement by the state Department of Revenue (DOR). For the first time, audits of sales and use tax returns will be conducted remotely under a new desk review pilot program.
DOR launched the effort, which will be housed within the department’s Pass-Through Business Office, to uncover sales and use tax under reporters, non-filers and unregistered taxpayers in the Commonwealth. This new practice will “review business tax fillings to explore instances where sales tax is due on taxable purchases…but may not have been paid,” according to DOR. This often occurs when businesses purchase goods and equipment online, from a catalog or in another state.
How remote sales and use tax desk reviews will work
A remote sales and use tax desk review may be conducted independently or in conjunction with a personal income tax review. These reviews are not required to be performed with a field audit, but DOR reserves the right to open such an inquiry if it believes there is a significant under reporting of taxes.
If sales or use noncompliance is uncovered during the desk review, liabilities will be imposed. Furthermore, if taxpayers fail to respond to information requests or other correspondence related to a desk review, it is highly likely that DOR will open a field audit and issue jeopardy assessments.
Prepare for extra sales and use tax scrutiny
In anticipation of this new desk review practice, businesses engaged in the sale of taxable goods or services in Pennsylvania should review their sales and use tax obligations and liabilities. Sales and use tax compliance can be challenging, due to the constantly shifting landscape of taxes across various jurisdictions, but conducting a self-review (also known as a reverse audit) of a company’s administration, compliance and reporting is a proactive way to assess tax standing and identify needed action. In addition to tax exposure, a self-review is also a chance to identify overpayment and refund opportunities.
RKL’s team of state and local tax experts can help companies conduct a self-review or reverse sales and use tax audit to avoid the burdens and challenges presented by desk reviews and field audits. Contact me today with questions or for more information at jskrinak@RKLcpa.com or 717.409.8855.
Contributed by Jason C. Skrinak, CPA, State and Local Taxes (SALT) Practice Leader for RKL’s Tax Services Group. Highly regarded throughout the region for his deep knowledge and expertise in SALT consulting, Jason has significant experience representing taxpayers before Pennsylvania’s Board of Appeals and Board of Finance and Revenue.