A Fortune 50 multinational consumer goods company with 24 manufacturing facilities located in 18 different states routinely engages outside sales tax consulting firms to conduct reverse sales & use tax audits to ensure it is maximizing the benefits to which it is entitled at each facility. The company had not conducted a review of its major hair care products manufacturing facility in the past several years.
This manufacturer wanted to update its current taxability matrix for its hair care products manufacturing facility located in Iowa while evaluating prior purchases for potential sales & use tax refunds and liabilities.
Agile’s sales and use tax consultants were retained to help the manufacturer analyze the 26,000 transactions that comprised a single year’s worth of accounts payable purchases for this major facility. Agile began the review by running the data dump of all purchases within this time period through its proprietary sampling software program, which uses nine different selection criteria to identify those transactions most likely to contain tax overpayments. The output provided Agile with a sample of transactions for every vendor that the plant had made purchases from during this 12-month period of time.
Agile reviewed the sample and then extrapolated the results of the sample across the population of those vendors’ invoices that Agile determined potentially contained either refunds or liabilities. Agile also reviewed every transaction over a specific dollar threshold to ensure that all large dollar purchases were evaluated. Refunds of over $1M were identified along with liabilities of approximately $4,000.
In addition to recovering the $1M+ sales & use tax dollars for this Fortune 50 manufacturer, Agile provided updated taxability matrices with accompanying citations, as well as best practices about how to minimize the future sales & use tax footprint for this facility. These results are a reminder that while sales & use tax software programs enable large, complex entities to operate their sales & use tax functions in a timely fashion, those programs can never be configured to capture all the nuances required to correctly evaluate whether taxes should be charged. Deployment of sales & use tax compliance software needs to be accompanied by regularly scheduled reverse sales & use tax audits to eliminate overpayments and maximize the benefit of available exemptions.
The success of this review of a single year’s worth of accounts payable records resulted in the company expanding Agile’s scope to review all transactions within the open 36-month statute of limitations.
Identified over $1M in recoveries at a single facility for a 12-month period of time
Determined that 93% of the recoveries related to use tax self-assessed from erroneous or outdated taxability designations
Retained Agile to assist this Fortune 50 manufacturer in additional sales & use tax projects based on the level of detail and success of this review
Updated company’s taxability matrix to reduce use tax spend and improve bottom line results of this Iowa facility by $70,250 per month on a go forward basis