Audit Process

A Maryland sales and use tax audit consists of the following steps:

  1. Receive notification letter of audit and record request
  2. Retrieve asset, expense and sales records for audit
  3. Have initial meeting with auditor for explanation of accounting system and business and start of audit
  4. Receive audit workpapers for individual line items assessed for assets, expenses and sales
  5. Review individual line items in workpapers
  6. Provide documentation for disputed line items
  7. State of Maryland determines projection methodology for expenses and sales from federal income tax returns
  8. Receive final field workpapers with total tax due
  9. Receive assessment notice with 30% interest and 10% penalty added
  10. Request informal hearing
  11. Provide documentation for disputed line items
  12. Receive adjusted workpapers
  13. Receive determination letter and final workpapers
  14. File for Tax Court

Common Mistakes

A Maryland sales and use tax audit takes many hours to prepare for and can be costly, sometimes very costly. Companies don’t realize that through the projection process of sales and expenses that they can owe tens or even hundreds of thousands of dollars. Large assessments can be caused by the simplest of errors.

The most common mistakes are:

Sales: invalid or no resale or exemption certificates. Tax not collected on a taxable sale or on all components of a taxable sale. Pickup, counter and employee sales are taxable sales. A rental is considered a sale and tax should be collected.

Expenses: use tax not paid on suppliers who are not licensed to collect Maryland sales tax. Confusion over taxable and nontaxable services.

Assets: use tax not paid on suppliers who are not licensed to collect Maryland sales tax.

Marsu Associates specializes in reviewing Maryland sales and use tax audits. Since 1981 we have assisted 100’s of companies in lowering their assessments to the lowest amount possible and to get approved any refund available. Marsu can intercede at any stage of the audit process to assist your cause. Click here to see a brief description of consulting services that we offer. If you are looking for sales tax help or sales tax audit assistance call or email us today. Don’t make the mistake of thinking that your accountant or a lawyer can best represent your company. Your accountant’s expertise is doing your state and federal income taxes, not sales taxes. A lawyer loves to litigate, but do they know anything about Maryland sales taxes?