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10 Year Use Tax Audit Narrowed

Important!If your business is currently undergoing a use tax audit, then take notice.

The statute of limitations for use tax audits is set forth in the Revenue Act.  Specifically, MCL 205.27a states that:

A deficiency, interest, or penalty shall not be assessed after the expiration of 4 years after the date set for the filing of the required return or after the date the return was filed, whichever is later . . .  A person who has failed to file a return is liable for all taxes due for the entire period for which the person would be subject to the taxes.

Throughout the past decade, the Michigan Department of Treasury has implemented a practice whereby it has extended the audit look-back period to 10 years.  Under that practice, Treasury narrowly construed the definition of a "return" which would trigger the 4 year statute of limitations. That practice is now prohibited.

On June 27, 2012, Governor Snyder signed HB 5543 into law.  The legislation amends the Revenue Act to provide that the filing of a return includes the filing of a combined, consolidated, or composite return whether or not any tax was paid and whether or not the taxpayer reported any amount in the tax line including zero.

So, what does this mean to you?  If your business is currently undergoing a use tax audit where Treasury is implementing a 10 year audit period, then contact a Foster Swift state tax attorney to ensure that the correct audit period is being utilized.

Categories: Use Tax

Photo of Nicholas M. Oertel

focuses his practice in the areas of Michigan non-property tax disputes, business entity selection, corporate transactions, and information technology.

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