taxes

Motor Fuels Tax Audit Procedures Manual - Ch. 153

Chapter 12 - Audit Write-Up

Introduction

Audit write-up includes completion of the following:

  • Record of Audit Planning, Activities, and Results
  • Other documentary Evidence (i.e., State of Purchasing, Gasoline or Diesel Fuel for resale, signed Statements, etc.)
  • Exhibits (i.e., manifests, exchange agreements, consignment agreements, permit additions/deletions list, monthly summaries, etc.)
  • Schedules
  • Index to Working Papers
  • Audit Cover Letter
  • Audit Report
  • TCR, Multi-Tax Payment Form, etc., if applicable
  • AWM Comments - Notes to Reviewer
    • Comments about bankruptcy
    • Valid open collection records
    • Penalty and interest waiver information

Refer to the Auditing Fundamentals manual for more information.

No Tax Change Audit

When an audit examination results in no adjustments, then a No Tax Change audit must be prepared. Refer to the Auditing Fundamentals manual for what should be included in the audit package.

Certificate of No Tax Due Audits

The request for a Certificate of No Tax Due must be in writing from the seller or purchaser, and the Comptroller has 60 days to issue the certificate after the records are made available for audit or after the written request is received, whichever is later.

The certificate must be issued no later than 90 days after the written request is received. Any amount found to be due must be paid before the certificate is issued.

Due to confidentiality restrictions, if there is an amount required to be paid, that information will be sent to the seller.

A Certificate of No Tax Due audit is a PRIORITY ASSIGNMENT. The audit procedures and write-up are the same as those for a efficiency/credit or No Tax Change audit.

Amended Audits

An amended audit is an adjustment to a completed audit. Refer to the Auditing Fundamentals manual for write-up procedures for an amended audit.

Open Collection Records

Always run XICOLL before submitting an audit to the RPC or for processing as an NTD audit. Any open records should be analyzed. Valid open collection should remain open. They are not included in the audit adjustments. Examples of valid records are those open for penalties or interest due, overpayment, underpayment, estimated with partial payment, and bonds. Invalid open collection records should be closed and all audited amounts picked up in the audit adjustments. Examples of invalid records are those open for nonfiler, estimated with no payment and partial filer. To have an invalid record closed, e-mail the RPC. Include the taxpayer name, taxpayer number, tax code, periods to be closed and the reason why.

Handling Allowance

The statute allows a 2% handling allowance to distributors and suppliers for the expenses of collecting, accounting for, reporting and remitting the tax collected and for keeping records. A 1/2 % handling allowance is allowed to all other fuels permittees who file reports and remit tax, with the exception of a Liquefied Gas Dealer who receives a 1% allowance. Prior to September 1, 2000 timely filing of reports was not a prerequisite of receiving the handling allowance. Beginning September 1, 2000 the 2% handling allowance for suppliers and distributors is limited to timely filed reports. For all other permittees the handling allowance becomes tied to a timely filing prerequisite beginning October 1, 2001. The appropriate handling should reduce audit adjustments and credits prior to September 1, 2000, for distributors and suppliers. For all other fuels permit holders the reduction should be made until October 1, 2001. After the dates the handling allowance became dependent on timely filing, audit adjustments/credits should NOT be reduced by the appropriate handling allowance.

The handling allowance should not be allowed on an audit of a taxpayer not permitted for the fuels tax being audited.

The handling allowances may not be allowed on audits of permittees if the taxpayer is not in compliance with the record keeping, collecting, reporting, and remitting requirements of the statute. The disallowance of the handling allowance on audits of permittees should be reviewed on an audit-by-audit basis.

Penalty and Interest Waiver

Penalty waiver and criteria are discussed in detail in the Auditing Fundamentals manual. Penalty waiver is generally recommended if these criteria are met. The auditor should discuss the criteria with the taxpayer at the exit conference. Penalty is usually only waived for periods originally filed timely.

Interest is usually never waived except where documentation exists that an agent of the Comptroller gave erroneous information.

Audit Examples

The following examples A, B, and C show various schedules and formats.

Example A is an audit based on a sample and projection of disallowed tax-free sales and a detailed exam of disallowed tax-free sales.

Example B is a projection based on a sample of taxable gallons sold at net when they should have been sold at gross.

Example C is an Audit Summary Report using a "Total Gallons To Account For" format. The notes at the bottom show that several exams supported this schedule. Under this method, any or all of the elements of the report are audited except taxable sales, thereby leaving audited gross taxable gallons as a computed or balancing figure. If the gain and loss column was eliminated, then losses would automatically be disallowed and become a part of the audited gross taxable gallons. The elimination of the gain/loss column would be proper in case of totally inadequate records or audits where fraud is detected.

Go to Audit Examples for printouts (pdf's) of the following:

  • AUDIT EXAMPLE A – PENALTY & INTEREST WORKSHEET page 1
  • AUDIT EXAMPLE A – PENALTY & INTEREST WORKSHEET page 2
  • AUDIT EXAMPLE A – AUDIT COVER LETTER
  • AUDIT EXAMPLE A – AUDIT REPORT
  • AUDIT EXAMPLE A – AUDIT ADJUSTMENT REPORT
  • AUDIT EXAMPLE A – EXAM 1
  • AUDIT EXAMPLE A – EXAM 2
  • AUDIT EXAMPLE A – EXAM 2-A
  • AUDIT EXAMPLE A – EXAM 2-B page 1
  • AUDIT EXAMPLE A – EXAM 2-B page 2
  • AUDIT EXAMPLE A – EXAM 3
  • AUDIT EXAMPLE A – EXHIBIT I
  • AUDIT EXAMPLE A – EXHIBIT II
  • AUDIT EXAMPLE B – PENALTY & INTEREST WAIVER WORKSHEET page 1
  • AUDIT EXAMPLE B – PENALTY & INTEREST WAIVER WORKSHEET page 2
  • AUDIT EXAMPLE B – AUDIT COVER LETTER
  • AUDIT EXAMPLE B – AUDIT REPORT
  • AUDIT EXAMPLE B – INDEX TO WORKING PAPERS
  • AUDIT EXAMPLE B – EXAM 1
  • AUDIT EXAMPLE B – EXAM 2
  • AUDIT EXAMPLE B – EXAM 3
  • AUDIT EXAMPLE B – EXAM 3-A
  • AUDIT EXAMPLE B – EXAM 3-B page 1
  • AUDIT EXAMPLE B – EXAM 3-B page 2
  • AUDIT EXAMPLE B – EXHIBIT I
  • AUDIT EXAMPLE C – "TOTAL GALLONS TO ACCOUNT FOR" SUMMARY

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(Revised 02/2004)