HD73 - Federal Contractor Sales and Use Tax Pilot Audit Program Compensation Procedures


Executive Summary:
In the spring of 2003, TAX met with industry representatives and agreed to develop a pilot audit program to evaluate the effect of extending the resale sales and use tax exemption to federal government contractors who purchase tangible personal property for resale to the federal government under service contracts. The purpose of the pilot program was threefold: (1) to get a better understanding of the administrative burden that TAX auditors and federal contractors would encounter when auditing federal contracts based on the true object of individual task orders, rather than the true object of the entire contract; (2) to determine how a change in policy would affect sales and use tax revenues; and (3) to determine how a change might affect the number of contested audits.

The report summarizes the background leading to the pilot, the pilot audit approach, and the recommended appropriations language for the Government Contractor Pilot study to distribute the compensation to the pilot participants.