Tax Advice – Is It Worth the Paper It’s Written On?

August 2021

Nobody likes getting that dreaded letter in the mail – you are being audited for sales and use tax. But you can get ahead of the problem by getting written advice from the Tax Department on whether your sales, or purchases, are subject to tax. If you are charging, remitting, and paying the correct tax, there is nothing to worry about when it comes to an audit.

Many taxpayers believe that calling the Tax Department with a taxability question and getting a verbal answer puts them in the clear. However, the representatives answering the phone are not specialists in an area of tax; they have general knowledge and are often wrong when it comes to the complexity of sales tax. We recommend getting written advice.

Different states have different ways of obtaining written advice from the taxing authority. New York offers a method of providing informal advice by writing into the Taxpayer Guidance Unit. While the advice is not binding on the Tax Department, it is a good way to get a sense of taxability. To get binding guidance, you can request an Advisory Opinion from Office of Counsel. However, be forewarned, Advisory Opinions take three or more years to receive.

New Jersey, on the other hand, takes questions by email and will respond in approximately one week. Responses are through email as well.

California Department of Tax and Fee Administration also takes email questions and responds within nine days.

Indiana has a customer portal that allows secure messaging between a taxpayer and the Department of Revenue. However, Indiana also takes emails, written letters, and in person questions.

If you or your client need taxability advice in any State, contact Sales Tax Defense. Save yourself the trouble of finding out that the advice you received from a help desk representative was not correct.

Success Story

Sales from Nontaxable to Taxable – What Happened?

An accountant was representing a company on a sales tax audit. Everything seemed to be going smoothly. The auditor agreed that all of the company’s sales were nontaxable. Then one day, the auditor contacted the accountant, explained that he spoke with his supervisor, and they now believe all sales are taxable as an information service. The accountant, being rightfully shocked, contacted Sales Tax Defense.

We took over the sales tax audit. We found out that not only did the auditor believe sales were taxable but that certain large purchases were subject to use tax as well. We started at the beginning, explained what the company did and why its services were nontaxable. We then explained what was actually being purchased. It appeared that the company previously used certain words that made sales sound taxable, but we were fast in correcting the auditor’s understanding.

The audit resulted in no tax due!