Sales Tax State Activity Update - June 2004

Process for Overpayment Of Sales Tax Explained in Pennsylvania

The Pennsylvania Department of Revenue (DOR) has published its position on how auditors will handle overpayments of sales and use tax discovered during the course of an audit effective November 19, 2003.

If it is determined by the auditor a sales or use tax overpayment exists the auditor may grant a credit. If the taxpayer during the examination discovers an overpayment made to a vendor it must provide the auditor with the following:

1. A copy of the source document for the transaction (invoice)

2. Proof of payment

3. A valid reason for the exemption and documentation as to why it is exempt

4. The taxpayer’s attest that no credit memo, tax refund or similar reimbursement for the overpaymentwas provided to the taxpayer

If any of the above are lacking the auditor may deny the credit.

Tax overpayments made to a vendor will be subtracted from the final deficiency or add to any overpayment determined for the taxpayer’s returns regardless if a test audit or a detail audit was performed. Vendor overpayments will not enter into calculations used in a test audit procedure.

If an auditor does not grant a credit for either a sales or use tax overpayment the only remedy available to the taxpayer is to file a refund petition within six months of the mailing date of the notice of assessment.

According to the DOR the denial of an overpayment can only be recovered through the refund petition process, and not upon an appeal of the audit findings. The DOR cites 72 P.S.§ 10003.1(b) as its authority for this position.

(Sales Tax Bullentin 2004-02, May 14, 2004, Pennsylvania Department Of Revenue) 06/04

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