Handling overcharged Sales tax Invoices

Find out interesting insights with Claudia Mejia, Managing director at Ikigai Edge

Moderated by Kate, Financial Technology Advisor at Hyperbots

Don’t want to watch a video? Read the interview transcript below.

Kate: Hello, everyone. My name is Kate, and I’m a financial technology advisor here at Hyperbots. Today I’m absolutely thrilled to have the amazing Claudia Mejia with us. Hello, Claudia! How are you doing today?

Claudia Mejia: Hi Kate, nice to see you again.

Kate: Yeah, nice to meet you. It’s so wonderful to have you here. For those tuning in, Claudia is the managing director at Ikigai Edge Consulting. Today we are diving into a crucial topic, handling overcharged sales tax invoices. Let’s get started. So, Claudia, let me ask you the first question. What should a company’s first step be if a vendor has overcharged sales tax on an invoice?

Claudia Mejia: Well, the first step is to contact the vendor. Obviously, we want to have a really good relationship with vendors and ensure they have proper tax controls and follow tax regulations. That said, you contact the vendor, ask for a new invoice, and ensure the correct tax amount is applied. It’s essential that the taxes align with state and local regulations. You never want to underpay or overpay; you just want to pay what is right according to the state regulations. If you’ve been overcharged by whatever percentage, you simply request a reissued invoice.

Kate: That makes sense. Moving on, why is it best to ask the vendor to issue a corrected invoice rather than paying the overcharged tax amount?

Claudia Mejia: Well, you never want to overpay tax, right? It also creates a lot of administrative burden when trying to get a refund from the state or cleaning up those transactions. The cleaner way is to have accurate books on both sides, ensuring there’s no unnecessary cash flow leaving the company. It’s just important to have accurate records and follow regulations.

Kate: I completely agree with you on this. So, if the vendor is unable or unwilling to issue a corrected invoice, what options does the company have?

Claudia Mejia: The company can pay the invoice and then file a refund or credit with the state tax authority. Obviously, that’s not ideal. It involves administrative work and a lot of follow-ups to get the credit. You can get a refund if the state permits, but it’s a process you’d ideally want to avoid.

Kate: Understood. Coming to the next question, could you explain why overcharged sales tax might require state-level intervention if the vendor doesn’t correct the invoice?

Claudia Mejia: The state has the authority to issue a response. If the vendor doesn’t issue a new invoice, the buyer can request a refund directly from the state. The state can also intervene and respond to the vendor if needed. For the state to process refunds, documentation must be very well-presented, showing evidence of the overcharge.

Kate: That was very insightful. So, Claudia, why is it important to keep records of communication with the vendor and any refund requests made to the state?

Claudia Mejia: Well, as we’ve discussed before, it’s crucial to maintain clean records and transactions for audit and compliance purposes. Ideally, you’re proactive about addressing overcharges or undercharges. Documentation is key to making a case with the state if the issue isn’t resolved through the vendor. Having thorough records makes it much easier during audits, showing that you’ve been proactive in handling these processes.

Kate: I understand. We’ve reached almost the end of our discussion today. The last question is: What is the best long-term approach if overcharging becomes a recurring issue with a vendor?

Claudia Mejia: You always want to maintain a good relationship with your vendors. Communication is key. If a vendor has overcharged you multiple times, you need to understand what’s happening. Are their tax rates not updated in their systems? What controls do they have in place? You can have an honest and constructive conversation to address the issue. However, if the problem persists and solutions aren’t forthcoming, as a buyer, you may need to consider switching vendors. Recurring issues create administrative burdens, so it’s essential that vendors follow tax regulations and compliance requirements.

Kate: That’s a very interesting point. I agree with you on that. Thank you so much, Claudia, for joining us and sharing your insights, and a big thanks to all our listeners. I’ll see you soon. Have a great day ahead.

Claudia Mejia: Thank you, Kate. Nice to see you.

Kate: Nice to see you.