Requests for a sales tax refund in Pennsylvania could require taxpayers to first agree to an audit under a new policy under consideration by the Pennsylvania Department of Revenue.
In a draft bulletin, the DOR said it is considering changing its procedure for reviewing "large and complex sales and use tax refund petitions" by addressing them "through the field audit process." The draft bulletin was distributed to a limited number of practitioners and has not been posted on the department's website. The department is still reviewing the draft bulletin and no publication date has been set.
If finalized as written, however, the DOR could choose to audit a company as soon as it files a refund request at the Board of Appeals, which could dissuade taxpayers from filing refund petitions at all and well as lengthening wait times for refunds. A number of practitioners who have reviewed the proposed policy termed it "a retaliatory audit provision," or "a scare tactic for the wary taxpayer who would not want to subject themselves to an audit."
"The decision to conduct a field audit will be at the discretion of the Department, but in general, large or complex refund petitions or recurring issues are more likely to be referred for a field audit," the bulletin says.
The term "large and complex" has not been defined under the proposal, which could lead to the threat of audits for virtually any business entity, especially if this tactic is employed in states where the additional revenue from foregone refunds is used to supplement state tax revenues.