AB 219

This bill provides that, before commencing any income or sales tax field audit

of a person regarding a year for which the person filed a return, the Department of

Revenue (DOR) must send a notice to the person by certified mail or personal service.

The notice must specify the years that are subject to the audit, the contact

information for the DOR employee who is conducting the audit, and the deadline for

issuing a determination.

The bill requires that DOR make a determination no later than eight months

after the person being audited receives the notice unless, at DOR's request, the

person consents in writing to extending the deadline. If the person agrees to an

extension, the interest on any taxes the person owes as a result of the audit do not

accrue during the extended period.

Under the bill, DOR may, with the taxpayer's consent, make a sales and use tax

field audit determination using statistical sampling. The bill defines "statistical

sampling" as a method by which a random, unbiased sample of not more than 7.5

percent of the taxpayer's annual sales transactions or 7.5 percent of the taxpayer's

annual purchases of nondepreciable property are analyzed to determine a net error

rate. Under the bill, the "net error rate" is, generally, a computation used to

determine whether the taxpayer has properly collected, reported, and submitted the

appropriate sales or use tax for the year being audited within an acceptable margin

of error. If the net error rate is within the acceptable margin of error, the taxpayer

owes no additional tax, penalty, or interest on amounts that the taxpayer would

otherwise owe and DOR must instruct the taxpayer on methods for reducing the net

error rate.

Finally, the bill requires DOR to promulgate rules and suggest statutory

changes in order to require the use of random, statistical sampling for making sales

and use tax audit determinations.