SALES AND USE TAX OVERPAYMENTS
This issue deserves attention as the Texas statute of limitations is four years for sales taxes. Our experience has been that companies may have significant overpayments available for refund so that every month that passes without filing refunds could mean substantial dollars lost forever.
There are numerous oilfield items that qualify for sales tax exemption that are regularly overlooked by vendors and accounts payable departments. These include certain processing equipment, certain oilfield chemicals, well servicing activities, real property services, and processing equipment repairs. Taxpayers are allowed to collect refunds of overpaid taxes for a period of four years. A company is highly likely to have many purchases falling under these exempt categories. We have been able to locate refunds for companies that have tried very hard to catch these specific types of overpayments themselves but the sheer volume of invoices flowing through their payables system precludes them from identifying all qualifying exempt purchases.
As you are aware, most accounting departments do not have time available to pursue this type of time-consuming special project. We can take the time to properly review the company’s invoices and locate purchases that should be exempt and make the necessary filings with the vendors and Comptroller’s office to recoup the overpaid sales taxes without placing a burden on the accounting department personnel. We would need access to the actual invoices paid by the company so that we could analyze them for taxes paid on services and supplies that were actually exempt. We have found that the vendors will usually charge tax even if they are aware that the item may be tax exempt due to their paranoia of exposure on audit. Our review also allows us to educate the accounting personnel as to what is properly tax exempt so that you can stop paying tax on eligible items in the future.
The actual refund process itself would begin with our analysis of the invoices paid over the past four years to attempt to locate sales taxes paid on exempt purchases. We would copy any exempt purchase invoices from the files and bring those back to our offices in San Antonio. We will then prepare the documentation package that would be sent to the Comptroller and each vendor explaining exactly what was purchased that we are claiming as exempt. Once we have filed the refund request with the State, they will review the refund for proper documentation and then assign it out to a field office for audit. Once the refund is approved through audit, then it should take another one to two months to generate the refund check.
We have a very good relationship with the Comptroller’s office due to the fact that our claims are fair and do not attempt to take frivolous positions while still attempting to collect the most tax refund available for our clients. Craig Clayton would perform the analysis of your information and you would not have to deal with a firm’s inexperienced staff accountants. We would attempt to keep your staff’s time spent on this project to a minimum. Our main requirement from your staff would be to give us direction on your invoice coding system and the methods used to file your invoices. We feel confident that this project would be efficient and economically beneficial to your company.