Wondering what to expect if audited for sales tax or nexus by Utah?
Here are some highlights and resources regarding what to expect when under a Utah sales tax or compliance audits:
The Auditing Division of the Utah State Tax Commission is one of the largest audit organizations in the state of Utah. The Commission employs over 125 professional auditors, audit technicians and support staff.
Sales Tax Audits:
Sales tax is one of the largest revenue sources for Utah and helps fund the general operations of the state. Sales tax auditors spend a majority of their time at taxpayers’ offices looking at detailed sales and purchase transactions to verify that the proper amount of tax has been remitted to the state. Taxpayers range from large corporations to small sole proprietorships. Utah State sale tax auditors travel to locations all over the United States to perform their work.
Compliance Audits:
Compliance auditors locate unlicensed taxpayers, help them get licensed, and assess their tax liability. Several of the auditors focus on Nexus activities which ¬determine if a taxpayer has sufficient business presence in Utah to require tax registration and the, collection and reporting of sales tax.
WHAT SHOULD YOU EXPECT?
Opening Conference
A meeting held at your place of business between you and representatives from the Utah State Auditing Division. You’ll be told about the Utah Taxpayer Bill of Rights and be given an explanation of the audit process. The audit scope will be discussed, including the tax types, audit periods, and records to be reviewed during the audit. You should also plan on providing the auditor a tour of your facility.
The taxpayer has these rights in all audit interviews:
- The conference shall be reasonably scheduled. Whenever possible, the Tax Commission will comply with the taxpayer’s schedule to conduct the opening conference.
- The taxpayer may record the opening conference.
- The taxpayer may have an attorney or any other representative with power of attorney represent them at an opening conference.
Division Conference
If you have questions or concerns regarding an ongoing audit at any time during the audit process and you are unable to resolve them with the auditor handling the audit, you may ask to meet with the auditor’s supervisor to resolve issues.
Preliminary Notice
A Preliminary Notice is a letter from the Utah State Tax Commission Auditing Division. It will describe the findings of the audit, and it will contain a tax assessment if the audit results show an underpayment of tax.
The Preliminary Notice is not a final assessment. You will have 25 days to review the findings and discuss them informally with the Auditing Division. You may also request an extension of time if needed.
After the review period, a binding Statutory Notice will be issued.
If you agree with the assessments proposed in the Preliminary Notice, you may pay the tax assessment during this phase of the notice process and thus stop the interest accrual.
Statutory Notice
Unless full payment of the assessment under the Preliminary Notice is made, you will receive a Statutory Notice. It is a legal and binding assessment of the tax liability.
Appealing the Assessment (Timely Filing is Required!)
If you disagree with the adjustments proposed on the Statutory Notice, you must submit an appeal in writing with the Tax Commission’s Appeals Unit within the required 30 days. If the appeal is not timely filed, the Statutory Notice becomes a final assessment and full payment is due.
Appeals to the Tax Commission
More detailed information on appealing to the Utah State Tax Commission can be found on their Office of the Commission, Appeals Unit page.
Mediation Process
As an alternative to the standard litigation process, the Tax Commission offers mediation. The following concepts control or define the mediation process per the Commission:
- “Mediation is a process in which a neutral third party, called a mediator, helps parties in a dispute work together toward a mutually acceptable resolution of their problem.
- Mediation is usually voluntary, although occasionally the parties may have signed a pre-dispute mediation agreement that requires them to submit their dispute to mediation.
- Mediation is always non-binding. The mediator has no authority to impose a binding result on the parties.
- Meditation typically consists of informal joint and separate meetings with the mediator in which the mediator helps the parties move toward settlement, if they choose to do so.
- The parties retain control over the mediation process as well as over the result of the mediation sessions. If the parties do not reach a mutually acceptable agreement, they are free to pursue other resolution processes, such as litigation.
- Most mediated disputes settle, either during the mediation process or shortly thereafter.”
You may request mediation in a current or future Tax Commission appeal by contacting the Appeals Unit at (801) 297-2280.
Criminal Investigation
The Utah State Tax Commission’s criminal investigation unit prosecutes those who willfully evade Utah’s tax laws.
This unit is trained in detecting tax fraud. They receive information from the Tax Commission’s Auditing Division and other sources, and determine whether there is a pattern of underpayments of tax that may constitute criminal fraud by individuals or businesses.
The Utah Attorney General’s office also supports the process with a dedicated a full-time attorney to prepare and prosecute criminal tax cases in the state courts.
Additional Resources:
Official tax information for the State of Utah
Disclaimer:
Information was gathered from the Utah State Tax Commission website. The information provided is subject to change and to varying interpretation. It may be directly from the website or it may have been subject to interpretation. Information is provide as a courtesy only and should not be relied upon in protecting appeal rights, etc. It is intended to provide general information only and is not to be considered as a substitute for professional advice. We advise seeking professional assistance regarding the specifics of your audit.