AIM says DOR should bear burden of proving tax liability

Associated Industries of Missouri believes taxing authorities should bear the burden of proof in all disputes with taxpayers when the taxpayers can provide proof that dispute exists.

That’s the aim of House Bill 1455, sponsored by Rep. Denny Hoskins (R-Warrensburg).

Current law provides the burden of proving tax liability of a taxpayer shifts to the Department of Revenue (DOR) if the taxpayer produces evidence there is a reasonable dispute and the taxpayer has provided DOR access to all pertinent records. But this shift currently only applies to smaller companies.

Hoskins bill extends the shift to all of the state’s businesses, large and small.

“If a taxpayer has a genuine dispute with the DOR regarding its taxes, and the taxpayer has adequate records and provides such records to the DOR, the burden of proving any additional tax should be on the DOR, regardless of the size of the company,” AIM president Ray McCarty said in testimony before the House General laws Committee.

McCarty also told the committee that the DOR is currently delaying many sales and use tax refund claims by continually asking for information in different formats and causing so much red tape that many taxpayers give up on valid claims for refunds. McCarty said AIM supports a change to the bill that will eliminate language that prevents application of the burden of proof shift to exemptions and credits.

“Exemptions are the subject of most disagreements between taxpayers and the Department of Revenue,” said McCarty.  “If a taxpayer has established they are entitled to the exemption and the Department of Revenue believes they are not, the Department should bear the burden of proving the taxpayer is not entitled to the exemption.”

When asked by committee members about the exclusion in the current law, McCarty testified he was actually involved in the drafting and passage of the language in 1999 that is now being amended.  He said the exclusion and limitation of the burden shift was simply a political decision.  At the time, the Department of Revenue and the Carnahan administration were afraid the burden of proof shift would be abused by taxpayers.

“We believe the fact there have been no abuses of the existing statute that has been on the books for 15 years speaks for itself,” McCarty said. “Taxpayers simply want to be treated fairly – to be considered innocent until the Department proves they are guilty.