BOE Audit: July 2009 - September 2012

September 26, 2017

The California State Board of Equalization (BOE) recently concluded an audit of the campus’ payments of sales and use tax for the period of July 2009 through September 2012. We were able to contest many of the BOE’s claims or identify overpayments that significantly offset the $2 million tax liability for the in-state and out-of-state contracted and invoiced purchases. Despite considerable effort, we were unable to defend against BOE’s claims regarding missed tax accruals on blu-card purchases; campus departments could not produce backup documentation for the sample set of blu-card transactions. We recognize that the time gap between the purchase and the audit was considerable and that there have been impactful organizational changes that may have contributed to the situation.

Nonetheless, without the supporting details, we were left with the only option of accepting the error rate of 4.43% of spend from the previous audit (2006-09) and extrapolating that across all 2009-2012 blu-card spend. Therefore, we will be charging these fees to Level 3 organizations on a prorated basis; review the P Card cost allocation spreadsheet for division charges. We determined the amount to charge by calculating each organization’s 2009-10 blu-card spend as a percentage of the total and applying that percentage rate against the total cost amount. Only transactions without a sales/use tax entry were included. Comparable data for 2010-12 was not available.

In comparison to the 2006-09 audit that had a total cost to the campus of $1,500,352, due to improved tax collection and assessment practices in areas other than blu-card, we were able to negotiate the cost for the 2009-2012 audit down to $581,020. Unfortunately, unlike the previous audit, the center is not able to absorb the cost. 

We anticipate the next audit cycle to commence in early fall and will likely take several months to complete. As the upcoming audit unfolds, we will be identifying transactions where sales/use tax should have been charged and wasn’t and looking to campus departments to fund that liability. We expect to see significant reductions in under-accruals, but the final liability won’t be known until the audit is concluded.

Any questions regarding the BOE Sales and Use Tax audit process may be directed to Accounts Payable Manager Dan Parnas at dparnas@berkeley.edu.