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YELLOW SHEET Office of the State Auditor of Missouri |
June 26, 2003
Report No. 2003-55
The following areas of concern were discovered as a result of an audit conducted by our office of the Department of Revenue, Division of Taxation and Collection, Sales and Use Tax.
The Department of Revenue (DOR) does not track information regarding all 115 sales and use tax exemptions currently provided by state law and, as a result, cannot determine the effects on state revenue related to each of the exemptions.� DOR records indicate adjustments to gross sales receipts totaling approximately $110 billion and $108 billion in fiscal years 2002 and 2001, respectively.� The taxpayer is not required to provide detailed information of what is included in the adjustments total reported on the sales and use tax returns.� In addition, according to DOR personnel, some taxpayers report only taxable sales and do not include gross sales receipt or adjustment amounts on the sales and use tax return.
Because exemption information is not reported and tracked for most exemptions, the cost in terms of reduced state sales and use tax revenue for each exemption cannot be determined, which reduces the general assembly's ability to make informed decisions regarding the propriety of current and possible future exemptions.
Our audit also noted that the DOR lacks procedures to monitor the issuance or use of project exemption certificates issued by tax-exempt entities.� Project exemption certificates authorize contractors to purchase materials to be consumed in projects without paying sales tax.
Tax-exempt entities are not required to file a copy of or report information related to tax exemption certificates issued with the DOR.� In addition, suppliers are under no obligation to report to the DOR project exemption certificates received from contractors.� As a result, the number of project exemption certificates issued, the contractors to which the certificates were issued, the estimated or actual costs of the projects, and the names of suppliers from which tax-exempt materials are purchased are not available.� In addition, contractors are not required to maintain records detailing which materials were actually consumed in the project.
Other items in the audit report include:
� The DOR has not determined the appropriate disposition of sales and use tax overpayments submitted by businesses that have closed their sales and use tax registration. As of June 30, 2002, DOR records indicate that approximately $9.5 million of overpayments related to filing periods older than three years for businesses that have closed their sales and use tax registration accounts.
� State law does not require vendors to return sales and use tax refunds and related interest to the original purchaser when applicable, resulting in a windfall for the vendor.� During fiscal years 2001 and 2002, the DOR disbursed sales and use tax refunds, including interest, of approximately $51 million and $55 million, respectively.� In addition to refunds, an undetermined amount of credits were applied to under payments of taxes.� For some refunds the vendor is the original purchaser and some refunds are the result of taxpayer errors, quarter-monthly filer estimates, or other circumstances in which sales and use taxes were not collected from a purchaser, and as a result, should be retained by the vendor.
� The state's General Revenue Fund does not receive reimbursement from other funds for their proportionate share of interest paid on refunds of sales and use taxes.��� Estimates indicate that interest payments totaling approximately $10.6 million are due to the state's General Revenue Fund from other state and local funds for the two years ended June 30, 2002.
All of these matters have been included in previous audits.