Missouri business owners are oft times approached by CPA firms to conduct refund reviews, but most are concerned that doing so will trigger an audit. That’s enough for many owners to walk away from a reverse audit even when substantial sums of refunds may be on the table. Well, most Missourians are unfamiliar with the fact that they are actually in a coveted position exclusive to the Show Me State which makes performing refund reviews very attractive.
Missouri offers a unique opportunity to obtain refunds of sales and use taxes erroneously paid over a ten-year period. That’s more than triple the many states with a three-year statute of limitations window on refunds. But here’s the additional benefit of pursuing this opportunity – while taxpayers have ten years to claim refunds, the Department of Revenue can only look for underpaid taxes for the last three years. This is an incredibly unusual and beneficial opportunity to obtain refunds as other states have the same or shorter time period to claim refunds as the state has to assess additional tax. The extended period to claim refunds in Missouri reduces concerns that filing a refund claim will trigger an audit that would partially or entirely offset the refund claim. It also provides a much longer time period for bigger refunds at a time when recession woes threaten to hit businesses hard all over the state.
Manufacturers in Missouri have a history of experiencing complicated tax rules and how they are applied. But these complications can serve as a benefit too because it’s likely that errors have been made in overpaid taxes. Because Missouri has complicated tax rules for manufacturers, this is actually a great opportunity to review purchases to determine if the tax rules have been misapplied and if a refund is due. For example, Missouri exempts electrical energy used in manufacturing from all state taxes and the local use tax, but it does not exempt the local sales tax. However, if the total cost of electrical energy exceeds 10% of the total cost of production, the electricity is exempt from all state and local sales and use taxes.
Utilize a seasoned sales and use tax specialist for your reverse audit and enjoy these unique advantages available to your Missouri business.
Nic Schatte, CPA, is a Tax Manager for Clarus Partners Advisors, and is based out of their St. Louis, MO office. He brings over 20 years’ experience on both sides of the audit as well as Big Four accounting firms and a Fortune 20 company. He can be reached at [email protected]