The New York Division of Tax Appeals ("Division") in In the Matter of Top Drawer Custom Cabinetry Corp., DTA No. 825588, recently held that a taxpayer who signed a consent to use a test period audit methodology was bound by the consent and waived its right to a detailed audit of the entire period. In November 2010, New York began a sales and use tax audit of Top Drawer Custom Cabinetry Corp. ("Top Drawer"). During the audit, New York determined the sales records provided by Top Drawer were adequate to conduct the audit. In December 2010, Top Drawer's president entered into a test period agreement with New York, which provided in part:
When my records are complete and available for the entire audit period, the Tax Department may not determine my tax based upon a test period audit without my consent. However, if I find that it may be practical to use the test period method audit, I may agree to use such method by comp[l]eting this form. [...]The agreement contained boxes that had been checked to show that the parties had agreed the test period method could be used for the audit of sales and recurring expense purchases. The Division used the test period method to audit the sales and expense purchases for a three-month test period and asserted $67,447.20 of tax, plus interest, due for the three-year audit period. Top Drawer appealed the determination. It argued that despite the signed consent, New York should have conducted a detailed audit because adequate books and records were available to the auditors. It believed a detailed audit would have resulted in decreased tax liability.
The Tax Department representative has explained to me the various audit methods listed above. If the auditor determines that my books and records are both complete and adequate, I agree the audit should be conducted using a test period method audit. It is understood that this agreement is contingent upon the adequacy of my records and pertains to the audit method to be used. It does not preclude my protest of the audit results on grounds such as the particular test period selected, the inclusion of certain transactions within the test, the taxability of certain transactions, or the method of projecting the results of the test period findings. The Commissioner of Taxation and Finance enters into this agreement on the assumption that my books and records, including computer files, are complete and adequate. [Emphasis in original]
Day Pitney Alert
Carl Merino co-authored an article, "Tax Planning for Foreign Couples Buying U.S. Homes: Ownership Through Foreign and Domestic Trusts," for Bloomberg BNA’s Daily Tax Report.
On November 9, Darren Wallace will be speaking on a panel at Private Asset Management's Breakfast Briefing at the Lambs Club in New York City.
Carl Merino co-authored an article, "Tax Planning for Foreign Couples Buying U.S. Homes: Ownership Through Foreign Corporations and Partnerships," for Bloomberg BNA’s Daily Tax Report.
Carl Merino co-authored an article, "Tax Planning for Foreign Couples Buying U.S. Homes: Direct Ownership" for Bloomberg BNA’s Daily Tax Report and Daily Report for Executives.
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Chris Stracco was quoted in an article,"Will Veto Spark Litigation Over Nonprofit Hospitals' Tax Status?" in New Jersey Law Journal. In the article, Stracco discusses Governor Chris Christie's veto of S3299 in connection to the controversial New Jersey Tax Court decision of AHS Hospital v. Morristown. Stracco says the decision in the case, in which Morristown Memorial Hospital lost its tax-exempt status because it had for-profit business attributes, is unique. Given that case's uniqueness, he expects that the ruling and Christie's veto of S3299 will not likely result in a flood of nonprofit hospitals being hit with tax bills and suits to challenge them.
Christopher Stracco was quoted in an article, “Should hospitals pay property taxes?” in the Asbury Park Press. The story is about a recent tax ruling in New Jersey, in which a judge ruled that a hospital should have been assessed property taxes like any for-profit business. In the article, Stracco explains that nonprofit hospitals have received tax-exempt status, but if they lease out space to a for-profit business they are required to pay taxes.