Sales & Use Tax Checklist for Multi-State Enterprises

DON'T LET COMPLEXITIES CATCH YOU OFF-GUARD

Managing Sales & Use Tax across multiple states is complex. Different rules, documentation standards, and exemptions leave plenty of room for costly mistakes—or missed savings.

This checklist highlights the areas where gaps most often surface so you can strengthen compliance and uncover opportunities before an auditor does.

1. Core Exemptions

Confirm that common exemptions are properly applied and supported:

• Machinery & equipment directly used in production 
• Utilities such as electricity, natural gas, or process water (requires a utility study in many states) 
• Industrial gases such as propane, acetylene, nitrogen, etc. 
• Packaging materials that become part of the product sold 
• Safety supplies used in production environments 
• Operating supplies such as lubricants, coolants, and cleaning agents 
  

2. Documentation & Records to Review 

Check that records are complete, accurate, and easy to retrieve:

• Accounts payable invoices (look for tax charged on exempt items) 
• Purchase orders & shipping documents (verify tax treatment and destination) 
• General ledger accounts, especially operating supplies, repairs and maintenance, equipment lease/rent 
• Fixed asset records, including capital equipment purchases and related installation costs 
• Sales & Use Tax returns and supporting documents 
   

3. Red Flags & Common Errors

Be proactive in spotting issues that can trigger audits—or hide refunds:

• Sales tax paid on exempt machinery or component parts 
• Tax charged on installation or setup costs that may qualify for exemption 
• Tax not paid on non-exempt items such as computer equipment & software, office furniture and fixtures, and maintenance shop equipment 
• Expired or invalid exemption certificates 

4. Sales vs. Use Tax Explained

A quick reminder to keep your team aligned:

• Sales Tax: Paid directly to vendors on purchases 
• Use Tax: Self-assessed when tax wasn’t charged at the time of purchase 
• Overpaying = refund opportunity 
• Underpaying = audit risk and penalties 

5.  Reverse Audits & Audit Representation

Consider proactive steps to protect your position:

• Reverse audits can uncover overpayments and generate refunds 
• Experienced representation minimizes liability and defends exemptions 
• A net review balances refund opportunities with potential exposures 

6. ARE YOU WELL POSITIONED?

Certain situations increase the likelihood of refund opportunities or audit questions. Ask yourself:

• Do you have high utility or energy consumption? 
• Have you undergone recent audits—or expect one soon? 
• Is your accounts payable process centralized, making reviews easier? 

NEED SUPPORT?

If you’re unsure about any of the above—or if you’d like us to walk through the checklist with your team—just reach out.

We’ll help you resolve issues now so you’re protected later.

Schedule a Free Consultation to see how Baden Tax Management can help protect your business in 2025.