New ORST Auditors Are Making Big Mistakes - What Can You Do?
Ontario has hired a significant number of new auditors to complete Ontario retail sales tax (ORST) audits before the March 2012 deadline when the Ministry of Revenue staff join the Canada Revenue Agency. What I am seeing is inexperienced auditors who do not know the law issuing large assessments to Ontario vendors and walking away saying that they can file a notice of objection if the vendor disagrees. The audits are being rushed and the new auditors have not allocated themselves enough time to complete the task correctly.
What this means is that assessed vendors must file a notice of objection and pay the full amount of the assessed ORST while they wait for a Ministry of Revenue appeals officer to review the objection (and it takes more than two years for the appeals officer to pick up an appeal). I have an objection that I filed in 2007 that has not been moved forward by the Appeals Branch.
What can vendors do? My best recommendation is to be very prepared for any audit. As soon as you receive the letter or call that an ORST audit is to occur, organize all the relevant documents. Conduct test audit to determine if you have any problems. Find your own mistakes --- in other words, do the auditors job before the auditor. Know what the assessment should be before the auditor does.
If you have a disagreement with the auditor over the application of the law or his/her interpretation of the facts, call in an expert ASAP. Many vendors wait until after the problems have developed too far to call in an expert. If the time clock is running out on the audit, it becomes more difficult to set up a meeting with a supervisor or request that the auditor seek a tax advisory opinion.
Many vendors want to save money and ask a book-keeper or accountant without sales tax expertise to help them during the audit and in preparing notices of objection. Please remember that it may cost more if you are assessed and have to pay the full amount while waiting for an objection to be considered. Once the Ministry of Revenue has your money, they will not want to give it back and will be incentivised to delay.
Ensuring that the assessment is correct when it is issued is the best strategy to adopt. That being said, when you are audited by an inexperienced auditor for the government, it is easier said than done.
Cyndee Todgham Cherniak is counsel to and in affiliation with the International Trade Law and the Tax Law (Commodity Tax
