Our Results

Our unwavering dedication to our clients, knowledge, experience, and hard work allows us to obtain great results for our clients. The following are some examples of our exceptional case results. We have included a brief summary of each case, along with redacted before-and-after state documents which show the results. We are proud to point out that the following case summaries represent just a small sample of the great results we have been able to obtain for our valued clients.


 

Industry:  Recreational Vehicle Dealership
Procedural Summary:  Appeals, Board Level Hearing, Settlement

Reduction: $13,876,785.41
(94% Reduction)


This case involved two separate California audits of one of the largest RV dealerships in the nation. The audits covered locations inside and outside of California, and involved a number of complex procedural and legal issues. We were successful in overcoming erroneous audit sampling and projection methods employed by the state’s audit staff, and successfully argued our client’s case at an oral hearing before the elected Members of the State Board of Equalization.

View Results


Passenger Vehicle Rentals Result:
Procedural Summary:  Appeal; Bankruptcy

Reduction: $8,389,629, 96% Reduction


This case involved multiple audits conducted by several states of a national passenger vehicle rental business.  Following Covid shutdowns that significantly reduced travel worldwide, our client was forced to file for Chapter 11 Bankruptcy protection.  Our firm, led by Jesse McClellan, was hired as special tax counsel in the bankruptcy case to address the asserted sales, use, excise and gross receipts tax liabilities in several states, including California, Nevada, Texas, Utah, and Georgia.  One of the largest liabilities was asserted by California, with tax and interest totaling $13,674,407, for four separate liability periods.

Upon review of the underlying working papers, we were able to establish that the California Department of Tax and Fee Administration’s (CDTFA – formerly the Board of Equalization) audit approach was significantly flawed for the most recent audit period in which CDTFA asserted a liability of $8,736,854.  After examining client records and reconstructing the audit, we were able to convince CDTFA that significant adjustments to the audit were in order.  For that audit alone, we were able to obtain a stipulation to reducing the liability to $347,843 which was a 96% reduction totaling $8,389,629.

Much or our work involved audit procedural issues, but it also involved complex legal issues, including working with lead bankruptcy counsel to address whether CDTFA’s claim for older liabilities were subject to priority under the bankruptcy code.  The bankruptcy court agreed that certain claims were not subject to priority, concluding that the 9th Circuit Court of Appeals Opinion, In re Ilko (9th Cir. 2011), incorrectly concluded that California sales tax should be treated as an “income or gross receipts” tax under U.S.C section 507(a)(8)(A).  This finding was significant because it resulted in the removal of priority status for remaining liabilities totaling $4,789,476.

In the end, our client was able to reach a plan of reorganization and continue doing business.  We were fortunate to have a part in that result.

View Results


 

Industry:  Cigarette and Tobacco Wholesaler/Distributor
Procedural Summary:  Appeals

Reduction: $5,034,245
(99% Reduction)


Our firm was retained to handle the appeal of this case after a large law firm failed to obtain any reductions to the asserted audit liability. The case involved a cigarette and tobacco wholesaler/distributor, and the state audited both of our client’s accounts (cigarette and tobacco). A significant portion of the asserted liability stemmed from disallowed sales to American Indians and disallowed sales in interstate commerce. The audit also included asserted liability for alleged clerical errors in reporting. We obtained favorable decisions on both cases at the first appeals level and worked with the Audit Department through a reaudit to eliminate over 99 percent of the asserted liability.
View Results


 

Industry: Fixture Manufacturer/Retailer/Wholesaler
Procedural Summary: Managed Audit/Refund Claim

FixtureRetailer_smReduction/Refund: $2,500,000
(100% Reduction + Refund)

Our firm became involved in this case during the course of the audit process. After being presented with audit working papers which suggested that a tax liability of approximately $2 million was owed to the state, the CEO of the company retained our firm to examine the audit findings. During that review, we recognized that a significant percentage of the reported taxable sales were actually exempt from tax due to a technicality in the law that applied under the circumstances. Although the assigned auditor refused to permit the uncovered credits, we successfully worked with the audit supervisor and district principal auditor to have a refund granted in excess of $500,000.

Testimonial


Cigarette and Tobacco Case Result:

Reduction: $2,191,921, 97% Reduction


We were retained at the end of the audit process and our client was issued jeopardy determinations for tax on unreported distributions of cigarettes as well as unreported floor stock tax in total of $2,264,436. We petitioned the determinations on the basis that the audits contained factual and computational errors. Based on our presentation of our client’s additional documentation, it was ultimately determined that there were no distributions of cigarettes without the applicable stamps and that the floor stock audit was grossly overstated. Our efforts resulted in the total liabilities being reduced to $72,515.

View Results


 

Industry:  Construction Contractor – Structural Steel

Steel frame structure

Procedural Summary:  Appeals

Reduction/Refund: $1,875,169.28
(100% Reduction)

Our firm was retained following the completion of a sales and use tax audit of a structural steel contractor that resulted in an assessment of nearly two million dollars. The audit was performed using a cost accountability test, also referred to as a material accountability test, in which the auditor seeks to reconcile the cost of goods sold with the amount of tax paid to vendors and/or reported to the state. Following a thorough examination of the audit working papers and investigation into the underlying documents, facts and audit procedures, we uncovered legal and procedural flaws in the state’s audit methodology and in the issuance of the determination. Following our presentation at an administrative appeals conference, the audit staff conceded that the entire liability should be canceled.

View Results


 

Industry: Medical Products/ DME Distributor
Procedural Summary: Settlement

Reduction: Over $1,500,000


This business is a medical products and durable medical equipment (DME) distributor.  They are a multistate corporation with annual gross receipts in excess of $100,000,000.  We were retained after the audit liability had been billed to help them negotiate a settlement offer.  We identified numerous overstatements in the audit including the misclassification of exempt medical products and devices.  Through our efforts, we were able to successfully negotiate a settlement offer which reduced the total liability by over $1.5 million.

View Results


 

Industry: Personal Liability/ Corporate Liability
Procedural Summary: Appeals

Business man walking a tightrope

Reduction: $1,419,356.16
(100% Reduction)

After the technology business he worked for sold its assets, our client, and former CFO of the company, was pursued personally for the asserted unpaid liability of the corporation. The state’s corporate collection unit vigorously pursued our client for the asserted liability. Despite significant efforts put forth by the state, our firm ultimately obtained a favorable ruling through the appeals process which eliminated the entire liability.

View Results


 

Industry: Medical Product/ DME Distributor
Procedural Summary: Sales Tax Court

Reduction: Over $1,300,000


This business is a medical products and durable medical equipment (DME) distributor.  They are a multistate corporation with annual gross receipts in excess of $100,000,000.  We were retained to manage an audit selection of the business by the Florida Department of Revenue.  We identified numerous overstatements in the audit including the misclassification of exempt medical products and devices.  Through our efforts, we were able to successfully negotiate a resolution with the state which reduced the total asserted liability by over $1.3 million.

View Results


 

Industry: Medical Devices
Procedural Summary: Prepared and Filed Refund Claims

Medical DevicesRefund: Over $1,000,000 to date

Our client, a lessor and retailer of medical equipment throughout the United States, engaged us to perform a multistate sales and use tax compliance review. Our client had previously relied upon their own in-house accounting department for sales and use tax compliance purposes, but turned to us when their nationwide activities increased. During the multistate compliance study, we identified tax refund opportunities in a number of different states. We were subsequently hired on a contingency basis to recover the overpayments from states throughout the nation. Every claim for refund we filed with every state was granted in-full.

View Results


 

Industry: Lump Sum Construction Contractor
Procedural Summary: Appeals, Claim for Refund

Sales Tax on ConstructionReduction/Refund: $950,000
(100% Reduction + Refund)

This case came to us with a total liability of approximately $700,000 but ended with our client being granted a refund totaling approximately $250,000. The case included two separate audits and a separate claim for refund. Our firm became involved after the audits had been completed, and unsuccessfully contested by two prior representatives. The first audit period had an asserted liability of $390,000. We were able to reduce the liability to zero and establish a net refund of approximately $100,000 for that period. The second audit period had an asserted liability of $295,000. We were able to reduce that liability down to $40,000. Finally, we filed a claim for refund for the periods following the second audit, establishing that our client was due an additional $150,000. This case serves as a good example of the complexity and confusion that exists in construction contract law. The correct result eluded numerous experienced professionals for several years before our firm became involved.

View Results


Industry: Restaurant
Procedural Summary: Appeals

Reduction: $636,260
(100% Reduction)

Our client operated a Mexican style family restaurant and we were retained when the auditor presented the audit findings to them. The auditor had established the asserted liability by applying a markup to the purchases made by the restaurant. After reviewing the audit working papers, we determined that the markup approach was not an appropriate way of computing the taxable sales of the business. We prepared a credit card test of sales and established that the additional sales computed by the markup method should not be included in the assessment. Working with the district principal auditor we were able to get the entire audit liability canceled.

View Results


Industry: Restaurant/ Hospitality
Procedural Summary: Appeals Conference

Reduction: $626,873.37
(100% Reduction)


This case involved a popular, high-end restaurant in Beverly Hills, California. The audit staff assessed a fraud penalty against our client and drastically overstated the tax liability in the audit. We presented oral and written arguments and supporting evidence at an appeals conference which proved that our client was not fraudulent and that their reported gross receipts were actually accurately reported. In the end, our client received a refund of approximately $100,000 which was paid against the anticipated liability.

View Results


Bar and Nightclub Result:

Reduction: $562,920, 58% Reduction


We were retained at the end of the audit process and our client was issued a jeopardy determination for unreported tax in the amount of $956,850 based on a markup of cost of goods sold.  In our review we identified several computational errors within the audit and were able to demonstrate the audit liability was significantly overstated.  After several discussions with CDTFA audit staff we were able to obtain reductions to the audit liability of over $500,000.

View Results


Industry: Bar / Night Club
Procedural Summary: Appeals

Reduction: $527,000
(100% Reduction)

Our client operated a popular bar and night club and our firm was retained after the auditor had presented the proposed assessment to them. The auditor had determined that bank deposits in excess of reported taxable sales were additional gross receipts subject to tax. We were able to resolve that issue by demonstrating that a number of the deposits were related to funds that were not generated by the business i.e. loan proceeds. The audit staff then changed course and determined that the asserted liability was still valid based on a markup of the business’s cost of goods sold. Through our continued efforts, we were able to identify and correct numerous calculation errors within the audit computations and work with the audit staff to have the asserted liability canceled.

View Results


 

Industry: Construction Contractor- Personal Liability
Procedural Summary: Administrative Protest

Reduction: $524,792.65
(100% Reduction)

Our client operated a business that furnished and installed commercial doors in California for over 20 years. We were hired to dispute a personal liability determination issued against him personally for the unpaid alleged tax debt of the closed-out corporation. We successfully argued that the billing was not issued in accordance within the state’s procedural and legal parameters which resulted in a complete cancellation of the billing.

View Results


 

Industry: Cigarette & Tobacco Distributor
Procedural Summary: Managed Audit

Reduction: $369,780.23
(92% Reduction)


This case involved a tobacco distributor located in Southern California. We managed the audit from the onset, fighting more than three years on behalf of our client to overcome the audit staff’s numerous inaccurate factual assumptions and incorrect legal applications. In addition to dramatically reducing the asserted liability, we helped our client develop sound internal accounting and record retention controls to help ensure that it would accurately report and support its transactions going forward.

View Results


 

Industry:  Tobacco Products Distributor
Procedural Summary: Managed Audit/Appeal

Reduction: $350,263, 92% Reduction

Our client operated a tobacco products and cigarette distributor business. After initially handling the tobacco products excise tax audit on its own, we were retained to resolve the outstanding issues that remained in dispute. After reviewing the current audit working papers along with the working papers from previous excise tax audits, we were able to uncover and substantiate that the business was entitled to relief from tax based on written advice provided in its previous audits. The CDTFA audit staff ultimately agreed that relief was warranted, resulting in a substantial reduction to the asserted liability.

View Results


 

Industry: Medical Facilities
Procedural Summary: Refund Claim

Reduction: $189,828


This business is a medical facility with multiple locations throughout in California.  They initially hired an unrelated firm to establish use tax overpayments made by these various locations to the state of California.  After this firm finished their work, and established a small refund for the facilities, we were able to come in and establish additional refund measure that the initial firm failed to recognize.  All told, we were able to almost double the refund amount initially obtained by the other firm.

View Results


Industry: Computer Software and Related Services
Procedural Summary: Managed Audit

ComputerSoftware_smReduction: $187,000
(100% Reduction)

Our client sold proprietary specialized computer software and related products and services from its retail location in San Jose, California and at trade shows throughout the nation. We were retained after our client consulted several other firms regarding its sales and use tax reporting concerns. After conducting a thorough in-house examination of its records, we were able to explain a series of complex accounting reconciliation differences to the audit staff which resulted in zero liability.

View Results


 

Industry: Ski Resort
Procedural Summary: Managed Audit/Refund Claim

Reduction/Refund: $164,605.25
(100% Reduction + Refund)

This case began as a routine sales and use tax audit. In a prior audit of this business, the state assessed a significant liability. In the audit at issue, the state initially asserted a large liability, but our firm was able to obtain a net refund by uncovering a significant credit due for tax which was erroneously accrued on leasehold/real property improvements.

View Results


Industry: Bar / Night Club
Procedural Summary: Appeals

Reduction: $116,476
(78% Reduction)

Our client operated a bar and night club and our firm was retained after the auditor had presented the proposed assessment to them. The audit staff estimated the taxable sales of the business by applying a markup to their alcohol purchases. Through our efforts, we were able to identify and correct numerous calculation errors within the audit computations which reduced the asserted liability significantly. We also were able to get the district office to recommend the removal of the 10% negligence penalty.

View Results


 

Industry: Automotive Repair
Procedural Summary: Appeals

Reduction: $109,762, 98% Reduction


Our client operated a wholesale vehicle battery business and we were retained after the audit had been completed and a notice of determination (bill) had been issued. The audit staff disallowed a number of the claimed sales for resale on the basis that a valid resale certificate was not on file. After carefully reviewing the transactions at issue, we attended an appeals conference and we were able to demonstrate that the batteries had in-fact been resold and were not subject to tax, pursuant to seldom used nuance in the law. The audit staff and Appeals Bureau agreed with our analysis, and as a result, the vast majority of the liability was cancelled.

View Results


 

Industry: Automotive Repair
Procedural Summary:  Appeals

Reduction: $109,540, 100% Reduction


Our client operated a franchised automotive repair business and we were retained after the audit had been completed and a notice of determination (bill) had been issued. The auditor established the asserted liability by applying a markup to the purchases of the business. After reviewing the audit working papers, we determined that the markup approach was flawed and not an appropriate way of computing the taxable sales for this particular business. We successfully argued that the audit should be performed by computing sales using credit card data. By using the audit method proposed by our firm, we were able to demonstrate that the auditor’s markup approach was unreasonable. We ultimately worked directly with CDTFA’s Principal Auditor to present our contentions and were able to have the audit assessment cancelled as a result!

View Results


 

Industry: Automotive Dealer
Procedural Summary: Appeals

Reduction: $94,196, 96% Reduction


Our client operated a used car dealership that sold salvage title vehicles. We were retained after the audit had been completed and a petition for redetermination had been filed. Our primary argument was that vehicles subject to dispute had been registered with DMV and that tax was paid directly by the purchasers at the time of registration. We attended an administrative Appeals Conference and successfully compelled the taxing agency to review the registration history of the disputed vehicles to confirm that tax had in-fact been paid by the vehicle purchasers. The audit staff and Appeals Bureau ultimately agreed that no additional tax was due on the questioned transactions and the majority of the liability was cancelled as a result.

View Results


 

Industry: Automotive Repair
Procedural Summary: Managed Audit

Reduction: $83,902, 100% Reduction


Our client operated a franchised automotive repair business and we were retained well after the audit started at point where the auditor had reached and presented preliminary audit findings. The auditor established the asserted liability by applying a markup to the purchases of the business. After reviewing the audit working papers, we were able to identify errors in the markup analysis. We also provided alternative audit analyses that indicated that the reported taxable sales were accurate. After working with the auditor and her supervisor over a period of time, we were able to have the audit waived with zero ($0) liability.

View Results


 

Industry: Restaurant
Procedural Summary: Appeals

Reduction: $74,299
(78% Reduction)


Our client operated an American style restaurant and we were retained after a notice of determination had been issued and petitioned. The auditor established the asserted liability by observing the business for three separate days. The results of the three days of observation were used to conduct a credit card test of sales to estimate the taxable sales of the business during the audit period. After reviewing the audit working papers and discussing the results of the observation test with our client, we determined that one of the observation days was not representative of the business’ normal operations. We attended an Appeals Conference and presented this information, and despite objections from the audit staff, we were able to obtain a favorable decision from the Appeals Bureau.

View Results


 

Industry: Medical Devices
Procedural Summary: Managed Audit

Reduction: $53,057.17
(97% Reduction)

Our client, a multi-national retailer and wholesaler of medical devices retained us to manage their audit which focused primarily on supporting claimed exempt sales for resale and sales in interstate commerce. Despite having virtually no resale certificates or supporting shipping documents available due to poor record retention policies, we were able to work with the audit staff to produce a sufficient amount of evidence to prove that our client’s claimed exempt sales were substantially valid. Our ability to establish supporting facts without standard documentation resulted in a significant reduction to the audit liability and a waiver of our client’s subsequent audit by the state.

View Results


Industry: Restaurant
Procedural Summary: Appeals

Reduction: $46,268
(67% Reduction)

Our client operated an American style restaurant and we were retained after the audit had been completed and a notice of determination (bill) had been issued and petitioned. The auditor had established the asserted liability in part by applying a markup to the alcohol purchases of the business. After reviewing the audit working papers, we determined that the markup approach was not an appropriate way of computing the taxable sales of the business. By conducting a credit card test of sales, we were able to demonstrate that the additional sales computed by the auditor’s initial markup approach was unreasonable. We worked with the district principal auditor and were able to get the additional taxable sales established by the markup approach removed from the audit assessment.

View Results


Industry: Restaurant
Procedural Summary: Appeals

Reduction: $40,410
(44% Reduction)

Our client operated a pizzeria that also sold cold sandwiches and salads and we were retained after the auditor presented our client with the initial findings. The auditor established the asserted liability by applying a markup to the purchases made by the business. After reviewing the audit working papers, we determined that the markup approach was not an appropriate way of computing the taxable sales of the business. We were able to compute the taxable sales of the business by using the federal income tax returns that were filed during the period of review. Working with the audit staff, we were able to get them to adjust the audit result based on the federal income tax returns that were filed, (which included a provision for exempt, cold food sold on a to go basis). We were also able to get the audit staff to abate the negligence penalty.

View Results


Legal Disclaimer

The case results presented on this webpage are not a guarantee that the same or similar result will be obtained in every matter accepted by our firm. Case results can and do vary depending on a number of factors. You should not assume that the same or similar result as those presented above will be obtained for you or your client’s case.