Auditor Responsibilities in CSP Compliance Audits: Key Rules and Tax Compliance Duties

Auditor Responsibilities 2014 CSP Contract Compliance Audit January 16, 2014 AD14002 State Training Webinar 1

Rule 806.3.4 Audit Core Team D. Responsibilities 2. The Audit Core Team will: g) Obtain a response from the member states of their intentions to participate in the current audit cycle for each CSP. 2

Rule 806.3.5.5 (D) Tax Compliance Audit of Transactions Processed by the CSP D. Member state auditors are responsible for reviewing the seller s transactions to determine if they were taxed correctly. If errors exist the auditors must determine if the errors were caused by any of the following reasons including but not limited to: 3

Rule 806.3.5.5 (D) 1.) Deviation from the state s rates and boundaries tables; 2.) Noncompliance with the state s taxability matrix; 3.) Non-compliance with state approved expanded matrix; 4.) Changes posted through Testing Central were not implemented in a timely manner (10 days); (This will be verified through the Audit Core Team); 5.) Seller overrides of the CSP system; 6.) Exemption information and/or certificates were not available or did not contain all of the required data elements; 7.) Calculations that were tested and approved during the certification process; 8.) Errors in computing tax were based on erroneous information from the states. 4

Current CSPs 11 Taxware (ADP) 13 Avalara 14 Exactor 15 CCH (SpeedTax) 16 Accurate Tax Currently no model 1 sellers 17 Fed Tax 5

Appendix F 10/26/13 SST Reports Information and file layouts for required data elements for SST reports and files 1. Compensation Reports - 001ARC134V140116.csv 2. Audit Work Files - 001ARA134V140116.csv 3. Control Totals Files - 001ART134V140116.csv 4. Product Mapping Files - MS99999999134001V140116.csv 6

Audit Work Files File Format: Files will be provided in a comma delimited (.csv) format. The CSPs will ensure there are no commas contained within the record fields. Can be converted in Excel or other software such as ACL 7

Data File Layout Data will show all sales records for your State only Model 1 sellers shipping into your State Will contain up to 41 fields (39 required) File layout in Appendix F Updated10-26-13 See Example of file before and after 8

Audit Procedures Performed by the Core Team to Assist State Audits Compile Data Combine your State s data Reconcile Sales All sales will be summarized by SER filing period by classification, SSTID Verify Data State responsibility to compare detail data summary to returns filed and control totals report from CSP (appendix F) 9

Audit Procedures Performed by the Core Team to Assist State Audits Compensation The core team will provide % breaks (dates) to all states State to compare proper % was taken on the SER s Test Mapping Files Core team will perform a sample from each CSP and compare to detail data State Responsibility - Determined by each State 10

Product Mapping File The CSP will provide a Product Mapping Report when insufficient information is passed from the Seller to the CSP. Consider doing testing to verify that the CSP s mapping file is correct! 11

Verify Exemptions Your State will be provided an Excel workbook with all non-taxed sales Sheet 1 Taxability Matrix (Your State) Sheet 2 All Non Taxed Sales (tax = 0.00) Sheet 3 Product Exemptions Sheet 4 Quest Product Exemptions Sheet 5 Entity Exemptions Sheet 6 Quest Entity Exemptions Sheet 7 Taxable Sales No Tax Charged 12

Certificate of Exemption Form Can be found at SST Web Site Library: http://www.streamlinedsalestax.org/index. php?page=forms-2 F0003 Exemption Certificate See Example F0008 Exemption Certificate Instructions 13

Exemption Certificate(s) If data elements in Audit file are complete when audit of CSP is performed: The exemption for that sale is accepted! If missing data elements when audit of CSP is performed: Follow your State guidelines for acceptance of an exemption 120 days minimum must be given from date of notice (When you give them a list of questions) 14

Exemption Administration Training Prepared by the Streamlined Sales Tax Governing Board Audit Committee PowerPoint presentation is available for States to use to train their auditors when reviewing exemption documentation. 15

Sales Tax Preliminary Compliance Audit (Feedback) Report Preliminary Report Due June 16, 2014 Main Page Model 1 Sellers Must be completed and returned to Core Team via Core Team Sharefile web site Audit Report Page (2nd sheet) Must be completed if questionable items are found from Model 1 sellers during audit of each CSP and request has been sent for additional documentation. See Example 16

Sales Tax Final Compliance Audit (Feedback) Report Final Report Due August 16, 2014 Main Page Model 1 Sellers Must be completed and returned to Core Team via Core Team Sharefile web site Audit Report Page (2nd sheet) Must be completed if errors are found from Model 1 sellers during audit of each CSP See Example 17

State Auditor Timeline Date Item Due January 13, 2014 Audit Core Team will submit questionnaires to member/associate member states. All questionnaires must be returned to Audit Core Team by end of business today. The CSPs will have completed the delivery of the download files of the state specific sales transaction information, exemption information, and tax collection/remittance information for each model 1 seller they performed CSP services. Audit Core Team will provide the member/associate member states a spreadsheet of questionable items based upon the Audit Procedures document. Member/associate member states will review the model 1 sellers' records, including the Audit Core Team spreadsheets and prepare reports that notify the Audit Core Team of their findings. The Audit Core team will forward to member/associate member states preliminary reports detailing work completed to date and outlining any potential audit adjustment areas that are discovered. By the end of the day all member/associate member states' preliminary feedback reports must be forwarded to the Audit Core Team. February 10, 2014 February 15, 2014 March 15, 2014 March 15, 2014 thru June 15, 2014 May 31, 2014 June 16, 2014 18

State Auditor Timeline . . . Date Item Due June 15, 2014 to July 10, 2014 The Audit Core Team will work with the CSPs and the states to resolve any issues that are a result of communication problems or misunderstandings. July 10, 2014 to August 11, 2014 The CSPs will review and comment on the preliminary findings of the compliance audit. Comments will be sent to the Audit Core Team and may be sent to the member/associate member states. August 11, 2014 to September 14, 2014 The Audit Core Team and member/associate member states will amend their findings, if necessary. September 15, 2014 The final contract compliance audit report on each CSP will be forwarded to the Executive Director. As soon as possible (Can begin March 2014) Complete your state sales tax audit of each CSP, using the policies and procedures applicable to your own state. 19

Auditor Responsibilities Thank You! http://t2.gstatic.com/images?q=tbn:ANd9GcQ2I7TFgAmD3HgLwtUHdM2GqWqKwokNO3niP4zjshvCDQWRSK3TIPinPA 20