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Overview

In order to accommodate market demand, an international biotech firm needed to expand its manufacturing capacity. A specialized state-of-the art, $500 million facility was planned.

Numerous sales tax exemptions were available for machinery, equipment and infrastructure components necessary for the manufacturing and R&D processes.  Some of these exemptions applied to the Company’s direct purchases while others could be passed through to the construction subcontractors. As subcontractors from multiple states were engaged and construction progressed, confusion mounted among the parties regarding the scope of the sales tax exemptions. Altus Group was retained to identify overpayments of sales tax by subcontractors, and work with them and various states to gain acceptance of procedures developed to document overpayments and obtain refunds.

Challenge

Develop procedures to identify and recover sales tax overpayments by subcontractors and record the refunds as income before the end of the fiscal year.

Services provided

Our technology-enabled expert services enable commercial real estate professionals to connect to the market with greater speed, visibility and efficiency.

Solution

Altus Group conducted a thorough review of all the subcontractors involved in the facility and found that out of over two dozen subcontractors, eight were identified as having the likelihood of erroneously paying sales tax on purchases of otherwise exempt machinery, equipment, and infrastructure components. Next, we worked collaboratively with a mechanical engineer in order to identify all areas of the facility and related materials and equipment to which sales tax exemptions applied.

We then proactively approached each state involved to gain advanced acceptance of methodologies developed to identify and quantify amounts of fungible materials included in refund claims. We also developed the necessary documentation to allow the States to issue refund checks directly to our client instead of the subcontractors.

Results

In less than a year, Altus Group was able to file eight refund claims in three states totaling $1.7 million representing purchases amounting to $34 million upon which sales tax was erroneously paid. Due to our proactive approach with the states, reviews of the claims were handled quickly and refunds were granted without deduction. Our client’s timeline was met, and the recovery of sales taxes required minimal involvement of time and resources by their personnel.

Altus Group’s ability to coordinate the competing interests of the building owner, contractor and subcontractors, proactively leverage relationships with high ranking administrative tax officers, and fully comprehend and apply tax law to mechanical and electrical drawings demonstrates expertise that is unparalleled in the state & local tax consulting industry. Our ability to maximize recoveries with minimal involvement of our client’s time and resources while meeting their tight deadline through a proactive coordinated approach exceeded their expectations and keeps them turning to Altus Group for all of their of state & local tax matters.

Services provided

Our technology-enabled expert services enable commercial real estate professionals to connect to the market with greater speed, visibility and efficiency.

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Last updated on August 29th, 2019 at 12:07 pm

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