Affeldt Consulting Company

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Affeldt Consulting Company

• Sales and Use Tax Presentation
• Northern Lights IAPP
• November 16, 2006

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Sales and Use tax Issues How they affect your
business

• Sales Tax. Use Tax. Is there a difference?
• How to accrue Use Tax?
• When to submit Use Tax accrued?

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Some examples of when use tax may be due

• You buy taxable items over the Internet and the
  seller doesnt collect Minnesota sales tax from
  you at the time of purchase
• You purchase raw materials for your manufacturing
  business, and decide to remove some items from
  inventory for other use (advertising display,)
• You purchase tangible items from a seller located
  out of Minnesota, and have the goods delivered
  within the state

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Did you know?

• If you purchase taxable items from a seller out
  of Minnesota and pay the sales tax rate charged
  by the seller at a lower rate than Minnesotas
  rate, then you owe the difference between the two
  rates to Minnesota.
• The most common assessment of sales or use tax in
  an audit is for use tax due on taxable items
  purchased from outside of Minnesota and shipped
  into the state

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Exemption CertificatesHow to issue and accept in
good faith

• Single-Purchase versus Blanket Exemptions
• The exemption certificate transfers the burden of
  proof
• Seller - retain the completed exemption
  certificates
• Purchaser keep a copy and a list of
  certificates issued to suppliers, including items
  inclusive
• Acceptance in good faith

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Presumption of Tax Burden of Proof MN Stat.
297A.665

• The seller has the initial burden of proof that a
  sale is nontaxable
• All sales are assumed taxable until proven
  otherwise
• When the purchaser gives the seller a completed
  exemption certificate, the burden of proof is
  transferred from the seller to the purchaser
• For a single purchase just for that purchase.
  For a Blanket for all continuing purchases of
  same or similar items.
• The seller is required to accept the certificate
  in good faith. As long as the form is
  completed and signed, your responsibility ends
  there.

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Types of Exemptions

• Agricultural or Industrial Production
• Direct Pay requires prior approval and number
  from MNDOR
• Exempt Organization requires prior approval and
  number from MNDOR
• Motor Carrier direct pay requires prior
  approval and number from MNDOR
• Multiple points of use
• Percentage exemption advertising materials,
  utilities use in agricultural or industrial
  production
• Resale
• Resource recovery facility you must receive
  prior approval from MNDOR
• Other exemptions numerous others allowed by law

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Audits What to expect?

• General Guidelines
• Steps in the Process
• Things to consider

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General Guidelines

• Statute of Limitations Generally 3 ½ years
• Informational Requests sales and purchases
• Sampling procedures
• Allocate your time wisely Dont sweat the small
  stuff, unless its sampled

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Steps in the Process

• Notification Letter
• Informational Requests supply whats requested.
  Nothing more. Nothing Less.
• Preliminary Assessment
• Final Assessment
• Appeals Process Dont hesitate to appeal

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Things to consider

• Auditor / Taxpayer Meetings Request to meet
  with a MNDOR supervisor if needed
• Minnesota Department of Revenue Allies vs. Foes
• The Auditor Whose side are they on?
• Does that seem right?
• Audit Defense

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Audit Defense

• Your best Defense is a good Offense
• Defense Wins Championships

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What makes a good Offense?

• Experience
• Expertise
• Service
• Commitment
• Dedication
• Perseverance
• Skills
• Value

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Experience and Expertise

• Complete review of all sampled transactions/period
  s
• Efforts to identify overpayments of taxes
• Dont be strong-armed or gullible
• Dedicate the time or resources
• Consider outsourcing your defense

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Do I need to outsource our Offense?

• Whats at stake?
• What will it cost?

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Whats at stake?

• How big is your assessment?
• Are we big enough to have potential for
  significant refunds?
• How much time might it take?

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What will it cost?If you work with Affeldt
Consulting

• Initial Consultation is always free
• Fees are contingent upon savings
• Save time, money and effort at no risk

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Affeldt Consulting CompanySales and Use Tax
Consultants since 1994

• Free Consultations on all new projects
• Fees can always be structured Contingent upon
  savings

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Affeldt Consulting History

• I began my career in State and Local Tax _at_ Arthur
  Andersen in 1991
• Started Affeldt Consulting in 1994
• Goals Offer more experience, better service,
  better value at a better price
• Multi-state Consulting in nearly every state

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Our Clients

• Wide range of clients industries
• Clients Annual Revenue range from 20B to as
  little as 5M
• Many of the large companies in Minnesota are our
  clients, including10 over 1Billion Annual
  Revenue
• References Available

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Affeldt Services Offered

• Audit Defense
• Reverse sales and use tax audits
• Appeals
• Refunds - Capital Equipment/Purchaser
• Nexus Studies Anonymous Disclosures
• Federal Excise Tax Claims
• Multi-state Sales and Use Tax Consulting

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Are you maximizing your Refunds?

• Affeldt Consulting will save you money
• save you time and reduce expenses
• Guaranteed!