Case Study: Multinational Manufacturer and Operator of Educational & Training Facilities

See How Agile Recovered Over $1,000,000

Background

This multinational company manufacturers flight training devices at 3 US locations and operates flight training facilities on 5 continents.  In its manufacturing division, the tax function was decentralized with locations in Missouri, Oklahoma and Texas taking responsibility for their own compliance and managing of sales and use tax exemptions.  The tax function for the training facilities was centralized within a single location.  The company had previously engaged consultants to perform VAT reviews in Canada and Europe, but had never brought in an external 3rd party to evaluate its US operations.

Goals

Agile was engaged to evaluate the company’s US sales and use tax compliance function across its entire footprint to determine both potential sales and use tax refunds recoverable and potential liabilities owed to the states.  Armed with this knowledge, the company hoped to maximize recoveries while refining its sales and use tax compliance function to eliminate overpayments and reduce the risk of future audit assessments.

Agile’s Role

Agile began by conducting reverse sales and use tax audits on the manufacturing division’s operations by traveling to the locations in Missouri, Oklahoma and Texas.  Agile recovered over $350,000 for the manufacturing division for various issues including: repair parts to manufacturing equipment, utilities consumed in production, and use tax assessed in error on exempt services or cost-of-goods-sold items.  Along with those savings, Agile presented suggested changes and actionable best practices to improve the tax function at each manufacturing facility.

Agile’s review then continued on to the US flight training facilities.  Agile’s sales tax consultants identified several nuances and changes in tax law that yielded exceptional results.  For the flight training division of the company, Agile recovered over $600,000 for various issues including: electronically transmitted software, repairs to aircraft based in Florida, self-constructed assets installed in Texas and use tax assessed in error on real property construction or repairs.

In Texas, where the company operates its largest number of flight training facilities, the Texas Comptroller had held in previous audits that the self-constructed assets used by the company to train students at its flight training centers were subject to tax on the cost of the materials used to construct the assets.  Agile fought and won a ruling that enabled the company to claim an exemption on the cost of those materials based on the characteristics of the assets which were constructed in its manufacturing division and reassembled in its Texas flight training facilities.  This ruling yielded sales and use tax refunds exceeding $500,000 and provides an ongoing benefit for all assets the company installs in its Texas facilities.

case study agile recovered over $1 millionEighteen months after the initial review, Agile was asked to perform a second review of the Oklahoma facility because of a large expansion in productive output.  Agile identified an additional $90,000 in recoverable refunds, much of which was attributable to the changes Agile suggested after its initial review.  Based on these results, the company’s management decided it would achieve better and more consistent results by engaging Agile to perform its sales and use tax compliance for the state of Oklahoma.  Between the reduction in overpayment errors and the reduced staffing, Agile saves the company approximately $7,000 per month on an ongoing basis.

In total, Agile recovered over $1,000,000 for both divisions of the company and continues to provide outsourced monthly sales and use tax compliance for the Oklahoma facility.

case study outsourced compliance to AgileResults

  • Secured over $1M in sales and use tax refunds over the past 5 years
  • Fought and won a ruling in the state of Texas related to self-constructed assets which yielded savings of over $500,000 to the company
  • Outsourced its sales and use tax compliance function to Agile for the Oklahoma manufacturing facility
  • Provided updated taxability matrices and accompanying citations to help company maximize the benefit of the exemptions for which they qualify in the 20 US states in which they operate
  • Reduced ongoing risk of audit assessments by evaluating current practices within the sales and use tax compliance function and providing analysis of potential underpayments so that corrections could be made
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