MCAA Management Methods Manual - Preparing for a …

B u l l e t i n Copyright, Mechanical Contractors Association of America, Inc., 2005 1 Bulletin No. TX 6 File: Taxes Preparing for a Sales Tax Audit INTRODUCTION In the best of circumstances, state and local tax audits of construction contractors eventually turn adversarial and are, therefore, not to be treated lightly. It is best to be prepared, organized, and focused on resolving the issues with practicality and technical proficiency. To position yourself best, you should know the process and the rules. Areas typically troubling for construction contractor audits include the following: 1. Exempt purchases: Are they really exempt? 2. Use tax: Did you pay the right jurisdiction or did you pay at all? 3. Leasing transactions: Is the lessor or lessee responsible for paying the sales tax?

PRE-AUDIT Prior to receiving the audit notification from the state or local government, you should already have a plan on how to effectively defend yourself.

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