As Marylanders prepare for warmer weather, the Maryland Comptroller’s Office is targeting caterers and restaurants for what appears to be an industry-wide tax audit initiative.
At the start, the audits appear to be a routine examination focused on four different areas of a taxpayer’s business:
- Reconciliation of Tax Remittances.
Generally, the auditor will request to review the businesses’ books and records going back three to five years. This is generally set as the “audit period”. Assets and Tax Remittances are typically examined for the full audit period whereas Sales and Expenses are generally reviewed over a sample period that could be any six months within the audit period.
However, some auditors appear to be taking positions in these audits that are contrary to guidance received by the businesses in prior years and/or based on obscure judicial decisions. This practice raises concerns as to whether the recent increase in business audits is a signal that the Maryland Comptroller’s office is targeting a particular industry for a tax initiative or program.
In 2011, the Comptroller initiated an audit program targeting businesses engaged in the bulk sale of water. The Comptroller eventually negotiated a settlement initiative with businesses engaged in bulk water sales requiring those businesses to apply for the settlement by March 1, 2011.
It remains to be seen whether this new increase in audits of caterers and restaurants is a signal that the Comptroller is conducting an industry-wide tax audit initiative. However, businesses should contact a qualified tax professional as soon as possible to address matters that may be swept up in the wave.
Giovanni V. Alberotanza is a partner with Rosenberg Martin Greenberg’s nationally recognized tax controversy practice group and represents clients with respect to tax audits, appeals, and litigation. He can be reached for a consultation at email@example.com or 410-649-4990.