Case Study: Sales Tax Credit

Client Snapshot
Region Southeast
Headquarters Tennessee
Employees 2000
Beds 253
Patient Revenue $1.3 Billion

Sales Tax Credit:
Sales tax is a consumption tax imposed by state and local governments on the sale of goods and services. Use tax is a similar tax levied on the use, storage, or consumption of goods and services in a state where no sales tax has been paid. Both types of taxes are typically collected by vendors and suppliers from their customers and remitted to the appropriate taxing authorities.

problem

During the course of a full-scale AP recovery audit, Premier Cost Recovery discovered a multi-billion dollar regional healthcare system had not maintained its sales-exempt certificate with several utility providers. This oversight on behalf of the client resulted in overpayment of sales taxes and lost funds. Premier Cost Recovery was able to recover more than $290K in sales tax charges for our client.

results

As part of the accounts payable recovery audit, our auditors analyzed the taxes paid to vendors and taxing authorities to validate that all exemptions or credits had been claimed, identify opportunities for refunds, and negotiate tax refunds. During our invoice review, we reviewed the non-profit status for each entity for which the invoice was paid and submitted documentation of erroneous sales tax charges to applicable utility providers. For each non-profit entity, PCR’s team provided the vendor with a sales tax exempt certificate to eliminate erroneous sales tax charges on future invoices. If left unchecked, the client would have continued to pay sales tax on services that should have been sales tax exempt, resulting in overpayments for years to come.

benefits of working with pcr

  1. Premier Cost Recovery isolated and recovered over $290K in sales tax funds paid for sales to a tax-exempt entity.
  2. Clear communication and a non-biased review ensured the process was completed professionally so well-established supplier relationships remained intact.
  3. The client not only recouped overpayments, but they also protected their company from future erroneous sales tax charges saving them hundreds of thousands of dollars in the long run.

As part of a full-scale AP recovery audit, a sales and use tax analysis can be a valuable tool for healthcare systems to optimize their sales tax-related financial transactions, recover overpaid sales taxes, and maximize their credits due to overpaid sales taxes, ultimately leading to cost savings and improved financial efficiency. However, it’s crucial to conduct these audits with care and compliance with all applicable tax laws and regulations. Choosing a firm that specializes in the extensive and ever-changing sales and use tax rules within the healthcare industry can help healthcare systems accurately identify issues and opportunities and put in place a plan to effectively mitigate these overpayments in the future.

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