Q: If a customer tells you they are tax-exempt, does the burden of proof lie with the customer or with the seller?

Pattie Ormsby

A: Like most questions covering sales and use taxes, there is no single uniform answer to your question among the states. The states are behind the curve in providing guidance in many areas of tax compliance, including the area of exemption certificates. By obtaining an exemption certificate, the burden of proving that the sale was not exempt is on the state. Without an exemption certificate, the selling company will have the burden of proving on audit that the sale was exempt. Although states have become more relaxed in accepting other proof of exemption, and the customer purchase order may be acceptable proof on audit, the old-fashioned method of demanding tax exemption certificates from customers is still a safe bet.

Michael S. Burke
National partner in charge, KPMG LLP

Ask the Experts is a weekly column that aims to help finance executives like you find answers to difficult questions.

Submit your questions by E-mailing them to [email protected]. Unfortunately, we cannot answer all questions individually.

While we will enlist professionals to try to answer your questions, Ask the Experts is meant only to create a dialogue on the topics. Consult legal or financial professionals before acting on any of the advice given by our expert panel.