United States: Taxpayer Challenges Pennsylvania Board Of Appeals' "Remand-For-Audit" Program For Sales Tax Refund Claims

The Pennsylvania Department of Revenue's Board of Appeals has issued about 45 orders remanding refund claims to the Bureau of Audits. As we discussed last October, there are questions regarding the Department's authority to do so. An appeal of a remand has now made its way to Pennsylvania's Commonwealth Court.

The Pennsylvania Department of Revenue's Board of Appeals has issued about 45 orders remanding refund claims to the Bureau of Audits. As we discussed last October, there are questions regarding the Department's authority to do so. An appeal of a remand has now made its way to Pennsylvania's Commonwealth Court.

The Pennsylvania Board of Appeals has issued about 45 orders dismissing sales tax refund petitions and directing the Department's Bureau of Audits to open field audits. These orders are the result of a new program that the Department announced in April 2017.¹  In that announcement, the Department indicated that it may "dispose of a refund petition by issuing a decision" requiring a field audit.

We have advised taxpayers to consider appealing these orders to the Board of Finance and Revenue because it is unclear how this process fits within the statutory scheme.²  Now, at least one taxpayer has had success in doing so.  In that case, the Board of Finance and Revenue accepted jurisdiction of the appeal and also granted partial relief to the taxpayer. The taxpayer has filed a petition with the Commonwealth Court of Pennsylvania seeking relief on the remaining refund issues. ³

It will be interesting to see whether the court appeal resolves the refund matter on the merits, thereby paving a path for avoiding the Department's new "remand-for-audit" process. In the meantime, the Board of Finance and Revenue has indicated that the traditional appeal path remains viable for taxpayers that do not wish to have their refund petition handled through audit.

We encourage anyone who receives a remand order to contact the authors of this alert or the Reed Smith lawyers with whom they work to discuss their options.

Footnotes

1 Pennsylvania Department of Revenue Sales & Use Tax Bulletin 2017-01 (April 10, 2017).

2 See "Pennsylvania Board of Appeals Sends Sales Tax Refund Claims to Audit: What Do You Do?" Reed Smith Client Alert (October 5, 2017).

3 Swank Construction Co v. Cmwlth, 221 F.R. 2018.

This article is presented for informational purposes only and is not intended to constitute legal advice.