Affeldt Consulting Affeldt Consulting CompanyCompany

Sales and Use Tax PresentationSales and Use Tax Presentation

Northern Lights – IAPPNorthern Lights – IAPP

November 16, 2006November 16, 2006

Sales and Use tax IssuesSales and Use tax IssuesHow they affect your businessHow they affect your business

Sales Tax. Use Tax. Is there a Sales Tax. Use Tax. Is there a difference?difference?

How to accrue Use Tax?How to accrue Use Tax?

When to submit Use Tax accrued?When to submit Use Tax accrued?

Some examples of when use tax Some examples of when use tax may be due:may be due:

You buy taxable items over the Internet and the You buy taxable items over the Internet and the seller doesn’t collect Minnesota sales tax from seller doesn’t collect Minnesota sales tax from you at the time of purchaseyou at the time of purchase

You purchase raw materials for your You purchase raw materials for your manufacturing business, and decide to remove manufacturing business, and decide to remove some items from inventory for other use some items from inventory for other use (advertising display,…)(advertising display,…)

You purchase tangible items from a seller You purchase tangible items from a seller located out of Minnesota, and have the goods located out of Minnesota, and have the goods delivered within the state delivered within the state

Did you know?Did you know?

If you purchase taxable items from a seller out of If you purchase taxable items from a seller out of Minnesota and pay the sales tax rate charged by Minnesota and pay the sales tax rate charged by the seller at a lower rate than Minnesota’s rate, the seller at a lower rate than Minnesota’s rate, then you owe the difference between the two then you owe the difference between the two rates to Minnesota.rates to Minnesota.

The most common assessment of sales or use The most common assessment of sales or use tax in an audit is for use tax due on taxable tax in an audit is for use tax due on taxable items purchased from outside of Minnesota and items purchased from outside of Minnesota and shipped into the state shipped into the state

Exemption CertificatesExemption CertificatesHow to issue and accept in “good faith”How to issue and accept in “good faith”

Single-Purchase versus Blanket ExemptionsSingle-Purchase versus Blanket Exemptions The exemption certificate transfers the burden of The exemption certificate transfers the burden of

proofproof Seller - retain the completed exemption Seller - retain the completed exemption

certificatescertificates Purchaser – keep a copy and a list of certificates Purchaser – keep a copy and a list of certificates

issued to suppliers, including items inclusiveissued to suppliers, including items inclusive Acceptance in “good faith”Acceptance in “good faith”

Presumption of Tax; Burden of Presumption of Tax; Burden of Proof MN Stat. 297A.665Proof MN Stat. 297A.665

The seller has the initial burden of proof that a sale is The seller has the initial burden of proof that a sale is nontaxablenontaxable

All sales are assumed taxable until proven otherwiseAll sales are assumed taxable until proven otherwise When the purchaser gives the seller a completed When the purchaser gives the seller a completed

exemption certificate, the burden of proof is transferred exemption certificate, the burden of proof is transferred from the seller to the purchaserfrom the seller to the purchaser

For a single purchase – just for that purchase. For a For a single purchase – just for that purchase. For a Blanket – for all continuing purchases of same or similar Blanket – for all continuing purchases of same or similar items.items.

The seller is required to accept the certificate in “good The seller is required to accept the certificate in “good faith”. As long as the form is completed and signed, your faith”. As long as the form is completed and signed, your responsibility ends there. responsibility ends there.

Types of ExemptionsTypes of Exemptions Agricultural or Industrial ProductionAgricultural or Industrial Production Direct Pay – requires prior approval and number from MNDORDirect Pay – requires prior approval and number from MNDOR Exempt Organization – requires prior approval and number from Exempt Organization – requires prior approval and number from

MNDORMNDOR Motor Carrier direct pay – requires prior approval and number from Motor Carrier direct pay – requires prior approval and number from

MNDORMNDOR Multiple points of useMultiple points of use Percentage exemption – advertising materials, utilities use in Percentage exemption – advertising materials, utilities use in

agricultural or industrial productionagricultural or industrial production ResaleResale Resource recovery facility – you must receive prior approval from Resource recovery facility – you must receive prior approval from

MNDORMNDOR Other exemptions – numerous others allowed by lawOther exemptions – numerous others allowed by law

Audits – What to expect?Audits – What to expect?

General GuidelinesGeneral Guidelines

Steps in the ProcessSteps in the Process

Things to considerThings to consider

General GuidelinesGeneral Guidelines

Statute of Limitations – Generally 3 ½ Statute of Limitations – Generally 3 ½ yearsyears

Informational Requests – sales and Informational Requests – sales and purchasespurchases

Sampling proceduresSampling procedures Allocate your time wisely – Don’t sweat the Allocate your time wisely – Don’t sweat the

small stuff, unless its sampledsmall stuff, unless its sampled

Steps in the ProcessSteps in the Process

Notification LetterNotification Letter Informational Requests – supply what’s Informational Requests – supply what’s

requested. Nothing more. Nothing Less.requested. Nothing more. Nothing Less. Preliminary AssessmentPreliminary Assessment Final AssessmentFinal Assessment Appeals Process – Don’t hesitate to Appeals Process – Don’t hesitate to

appealappeal

Things to consider…Things to consider…

Auditor / Taxpayer Meetings – Request to Auditor / Taxpayer Meetings – Request to meet with a MNDOR supervisor if neededmeet with a MNDOR supervisor if needed

Minnesota Department of Revenue – Minnesota Department of Revenue – Allies vs. FoesAllies vs. Foes

The Auditor – Whose side are they on?The Auditor – Whose side are they on? Does that seem right?Does that seem right? Audit DefenseAudit Defense

Audit Defense Audit Defense

Your best Defense is a good OffenseYour best Defense is a good Offense

Defense Wins ChampionshipsDefense Wins Championships

What makes a good Offense?What makes a good Offense?

ExperienceExperience ExpertiseExpertise ServiceService CommitmentCommitment DedicationDedication PerseverancePerseverance SkillsSkills ValueValue

Experience and ExpertiseExperience and Expertise

Complete review of all sampled Complete review of all sampled transactions/periodstransactions/periods

Efforts to identify overpayments of taxesEfforts to identify overpayments of taxes Don’t be strong-armed or gullibleDon’t be strong-armed or gullible Dedicate the time or resourcesDedicate the time or resources Consider outsourcing your defense Consider outsourcing your defense

Do I need to outsource our Do I need to outsource our Offense?Offense?

What’s at stake?What’s at stake?

What will it cost?What will it cost?

What’s at stake?What’s at stake?

How big is your assessment?How big is your assessment?

Are we big enough to have potential for Are we big enough to have potential for significant refunds?significant refunds?

How much time might it take?How much time might it take?

What will it cost?What will it cost?If you work with Affeldt Consulting…If you work with Affeldt Consulting…

Initial Consultation is always freeInitial Consultation is always free

Fees are contingent upon savingsFees are contingent upon savings

Save time, money and effort at no riskSave time, money and effort at no risk

Affeldt Consulting CompanyAffeldt Consulting CompanySales and Use Tax Consultants since 1994Sales and Use Tax Consultants since 1994

Free Consultations on all new projectsFree Consultations on all new projects

Fees can always be structured Contingent Fees can always be structured Contingent upon savingsupon savings

Affeldt Consulting HistoryAffeldt Consulting History

I began my career in State and Local Tax I began my career in State and Local Tax @ Arthur Andersen in 1991@ Arthur Andersen in 1991

Started Affeldt Consulting in 1994Started Affeldt Consulting in 1994 Goals: Offer more experience, better Goals: Offer more experience, better

service, better value at a better priceservice, better value at a better price Multi-state Consulting in nearly every stateMulti-state Consulting in nearly every state

Our Clients…Our Clients…

Wide range of client’s industriesWide range of client’s industries Clients Annual Revenue range from $20B Clients Annual Revenue range from $20B

to as little as $5Mto as little as $5M Many of the large companies in Minnesota Many of the large companies in Minnesota

are our clients, including…10 over are our clients, including…10 over $1Billion Annual Revenue$1Billion Annual Revenue

References AvailableReferences Available

Affeldt Services Offered…Affeldt Services Offered…

Audit DefenseAudit Defense Reverse sales and use tax auditsReverse sales and use tax audits AppealsAppeals Refunds - Capital Equipment/PurchaserRefunds - Capital Equipment/Purchaser Nexus Studies – Anonymous DisclosuresNexus Studies – Anonymous Disclosures Federal Excise Tax ClaimsFederal Excise Tax Claims Multi-state Sales and Use Tax ConsultingMulti-state Sales and Use Tax Consulting

Are you maximizing your Are you maximizing your Refunds?Refunds?

Affeldt Consulting will save you moneyAffeldt Consulting will save you moneysave you time and reduce expensessave you time and reduce expenses

Guaranteed!Guaranteed!