OVERVIEW

Audit Objectives -

Þ To check the correctness of the Borough’s records on the business;

Þ To determine the accuracy of the business's reported sales tax against their own accounting and federal income tax records;

Þ To confirm that the Borough’s Personal Property Tax records are current and accurately reflect the equipment that resides within the Kenai Peninsula Borough; and

Þ To answer any questions the business may have regarding proper accounting for sales tax, the Sales Tax Code (Code), or the Personal Property Tax Code.

Audit Procedure

Initial Written Contact
Auditor’s Visit
Written Follow-up

The Auditor is available to work with the seller and answer questions. Assisting the Auditor aids with accurate and timely audit results.

INITIAL CONTACT

Written Notification -

Þ Outlines the years which are being covered by the audit

•Three prior years to CURRENT

Þ Establishes the date, time, and place the audit will be held

•Other arrangements may be made by contacting the Borough’s Audit Division.

Þ Identifies books, files, and records regarding gross sales that may be reviewed during the audit

•The accounting records made available should include, but are not limited to: sales invoices, daily cash register tapes, sales journals/summary, general ledgers, and bank statements. Copies of the seller’s federal income tax returns will also be requested.

•The records are reviewed to determine if the gross sales, per the seller’s books and records, as well as those reported to the IRS, are consistent with the amounts reported to the Borough.

Þ Identifies what records and files regarding personal property tax may be reviewed

•These records should include, but are not limited to: an equipment schedule, depreciation schedule, and a balance sheet reflecting equipment that was owned, possessed, controlled or managed by the seller on January 1, of each year, for the years being audited.

VISIT

Auditor’s Visit -

Þ Introduction

•The Auditor explains how the business was selected for the audit and why the audit is being performed.

•The Auditor gains background knowledge of the seller’s business through a series of basic questions and highlights portions of the KPB Code that apply to the seller’s business.

•The Auditor provides the seller the opportunity to ask questions.

Þ Review of Accounting Practices Used

•Review of various exemptions allowed under the KPB Code and explanations of how they are verified.

•Review of how the seller’s business accounts for various exemptions allowed under the KPB Code.

Þ Review of Seller’s Records

•Sales Tax - The seller’s accounting records and federal income tax statements are examined to determine if the sales tax liability the seller reported on filed sales tax returns is consistent with the seller’s accounting and income tax records.

•Personal Property Tax - A physical review of the Business Personal Property listed with the Borough is conducted to certify that the personal property filing is correct.

FOLLOW-UP

Post Audit -

A written determination will be mailed to the business upon completion of the audit.

Þ Sales Tax

No Change - Indicates the Auditor determined the seller’s filed sales tax returns are reflective of the business activity recorded in the seller’s business records.

Incorrect Filing of Returns - Indicates the filed sales tax returns did not accurately reflect the business activity reviewed by the Auditor. An estimation of the amount of sales tax discrepancy will be included in the correspondence. If taxes have been under reported the tax estimate may also include any penalties, interest, fees, and other associated costs. If taxes have been over paid a credit balance will be applied to the seller’s account or refunded to the seller.

(If the seller does not agree with the estimate, a protest may be filed as outlined in Section 5.18.580 (A), (B), and (C) of the Borough’s Sales Tax Code).

Þ Personal Property Tax

Advisement of Findings and Suggestions - The findings of the physical review of the Business Personal Property will be noted on the post-audit written determination. Suggestions to assist the seller with keeping Business Personal Property records current will also be noted.

YOUR RIGHTS

If the seller disagrees with the Borough’s final audit result, estimate result, exemption determination, or other sales tax determination, the seller has the right to appeal the final determination to court within 30 days.

1) If the seller disagrees with the written determination of the Borough Auditor, a protest may be filed with the Finance Director, KPB 5.18.580. The Director will review the methods used, documents presented, and results of the audit or estimate. The Director will issue a written decision regarding the validity of the audit or estimate. If the determination involves estimate results, as opposed to audit results, the Borough may require the seller to submit to an audit. If the seller disagrees with the Director’s final written decision, the decision may be appealed within 30 days of distribution to the Superior Court in Kenai, Alaska.

2) If the seller or consumer believes a sale is exempt, either the seller or the buyer may protest taxing the sale by filing a protest with the Borough within 60 days of the date of the sale. The Mayor will issue a written determination regarding the exemption. The seller must continue to collect the tax until the Borough issues a determination regarding the exemption. If the exemption is allowed, the sales tax paid will be remitted to the consumer with the determination. The determination may be appealed within 30 days of distribution to the Superior Court at Kenai, Alaska, KPB 5.18.250.

3) If a written decision has been issued by the Mayor regarding application of the KPB Code to a particular factual situation, the decision may be appealed by the seller or taxpayer within 30 days of distribution to Superior Court at Kenai, Alaska, KPB 5.18.140(C).