PART II. INVESTIGATIONS AND HEARINGS

§1541. Secretary's duty to determine correct tax

A. As soon as practicable after each return or report is filed under any of the provisions of this Title the secretary shall cause it to be examined and may make such further audit or investigation as he may deem necessary for the purpose of determining the correct amount of tax.

B. The taxpayer and the secretary or his designee may enter into a binding agreement to use a sampling procedure as a basis for projecting audit findings, which may result in either an underpayment or overpayment of tax. Sampling audit methods are appropriate if:

(1) The taxpayer's records are so detailed, complex, or voluminous that an audit of all detailed records would be unreasonable or impractical.

(2) The taxpayer's records are inadequate or insufficient to the extent that a competent audit of the period in question is not otherwise possible.

(3) The cost to the taxpayer or the state for an audit of all detailed records will be unreasonable in relation to the benefits derived, and sampling procedures are expected to produce a reasonable result.

C.(1) Before using a sampling procedure to project the findings of an audit and establish a tax liability, the secretary or his designee shall notify the taxpayer in writing of the sampling procedure he intends to use, including, but not limited to, how the tax will be computed, the population to be sampled, and the type of tax for which the tax liability will be established.

(2) The sampling procedure used shall produce a sample which shall reflect as nearly as possible the normal conditions under which the business was operated during the period to which the audit applies. If either the taxpayer or the secretary can demonstrate that a transaction in a sample for a particular time period is not representative of the taxpayer's business operations during that time period, the transaction shall be eliminated from the sample and shall be separately determined in the audit.

(3) If the taxpayer demonstrates that any sampling procedure used by the secretary was not developed or applied in accordance with generally recognized sampling techniques, that portion of the audit established by a projection based upon the development or application of the disputed sampling procedure shall be replaced by a projection based upon a new sample that conforms to generally recognized sampling techniques.

(4) Generally recognized sampling techniques and standards set forth by the American Institute of Certified Public Accountants shall be used as guidance in developing audit sampling techniques for purposes of this Section.

D.(1) The secretary may, in a written agreement, authorize a taxpayer to conduct a managed audit pursuant to this Subsection. The agreement shall specify the period to be audited and the procedure to be followed, and shall be signed by an authorized representative of the secretary and the taxpayer.

(2) For purposes of this Subsection, the term "managed audit" shall mean a review and analysis of invoices, checks, accounting records, or other documents or information to determine the correct amount of tax. A managed audit may be limited to certain categories of liability under this Chapter, including tax on:

(a) Sales of one or more types of taxable items.

(b) Purchases of assets.

(c) Purchases of expense items.

(d) Purchases under a direct payment permit.

(e) Any other category specified in an agreement authorized by this Subsection.

(3) The decision to authorize a managed audit rests solely with the secretary. In determining whether to authorize a managed audit, the secretary may consider, in addition to other facts the secretary may consider relevant, any of the following:

(a) The taxpayer's history of tax compliance.

(b) The amount of time and resources the taxpayer has available to dedicate to the audit.

(c) The extent and availability of the taxpayer's records.

(d) The taxpayer's ability to pay any expected liability.

(4) The secretary may examine records and perform reviews that he determines are necessary before the audit is finalized to verify the results of the audit. Unless the audit or information reviewed by the secretary discloses fraud or willful evasion of the tax, the secretary may not assess a penalty and may waive all or a part of the interest that would otherwise accrue on any amount identified to be due in a managed audit. This Paragraph does not apply to any amount collected by the taxpayer that was a tax or represented to be a tax, but that was not remitted to the state.

(5) The taxpayer is entitled to a refund of any tax overpayment disclosed by a managed audit under this Subsection and in accordance with R.S. 47:1621.

Acts 2001, No. 201, §1, eff. May 31, 2001; Acts 2011, No. 171, §1, eff. June 24, 2011.