This Audit Comes With A Warning
Recently, I was called in to assist a vendor who had a visit from an Ontario retail sales tax ("ORST") auditor on a Tuesday and the auditor indicated that the assessment would be issued on Wednesday. What was different about this audit was that the issues were complex and it was so very quick. A year ago, this audit would have taken months to complete. A year ago, the auditor would give the vendor time to review an audit assessment before pushing the "issue assessment" button. A year ago, the auditor would have allowed the complex issues to be debated and possibly would have requested guidance from tax advisory on the complex issues. Not this year ....
What was different is that this auditor had arrived with the conclusions already formed. This meant two things: (1) the auditor was targeting a specific type of business and had seen the issue before, and (2) the auditor was rushing quickly through a list of targets.
What is different is that ORST auditors move to the Canada Revenue Agency in March 2012 and have to complete all remaining audits before they move jobs. Auditors do not have the luxury of time because the clock is ticking.
Ontario businesses need to prepare for audits and call in specialists earlier - procrastination is no longer an option. Vendors may not have time to find an ORST specialist and canvass the issues in the period between the auditor's initial visit and the auditor pressing the "issue assessment" button. Specialists may not be able to run to a vendor's aid on short notice.
Once an assessment is issued, the assessed person must file a notice of objection in order to dispute the amount assessed. More importantly, the assessed person must pay 100% of the assessment immediately or according to a payment schedule arranged with the Ministry of Revenue. Even more importantly, it takes over 2 years for an appeals officer to review an ORST notice of assessment and even longer to make a decision. I have a notice of assessment filed in 2007 that has not been dealt with yet by the Ministry. If the issues are complex, the assessment may be confirmed at the appeals stage and the assessed person must go to court to get the money back.
ORST audits are different in this final rush to close the books. Vendors who do not realize that things have changed may be surprised. Vendors who have not yet been audited, should expect a visit from an auditor. They should also plan ahead if they want to limit the negative effects of the audit.
Cyndee Todgham Cherniak is counsel to and in affiliation with the International Trade Law and the Tax Law (Commodity Tax
