The Sales and Use Tax Simplification Task Force has introduced a bill to establish uniform confidentiality standards for third-party auditors conducting sales or use tax investigations on behalf of local taxing jurisdictions. Key provisions of the bill include:
Prohibition on Disclosure: Third-party auditors are generally prohibited from divulging or disclosing any information obtained during a sales or use tax investigation.
Permitted Disclosures: Exceptions to the prohibition allow disclosure to:
Authorized officials, employees, hearing officers, attorneys, or public agents of the local taxing jurisdiction involved in the investigation.
The taxpayer or the taxpayer's authorized agent concerning their own tax filings.
The Department of Revenue for purposes of statistical analysis and publication, as authorized by current law.
The Department of Revenue and the Internal Revenue Service as necessary for taxpayer compliance with state or federal tax laws.
Penalties for Violations: Unauthorized disclosure by third-party auditors is classified as a misdemeanor, punishable by a fine of up to $1,000 per violation.
Clarification of Information Sharing: The bill clarifies the authority of the Executive Director of the Department of Revenue to share taxpayer information with local governments, special districts, and home rule jurisdictions to facilitate dispute resolution, coordination, intergovernmental agreements, and information sharing, consistent with existing laws prohibiting disclosure to third parties.
This legislation aims to protect taxpayer information during local tax audits and ensure that third-party auditors adhere to strict confidentiality standards.
Summary
Sales and Use Tax Simplification Task Force.Section 1 of the
bill establishes uniform confidentiality standards for the protection of taxpayer information used or obtained in connection with a sales or use tax investigation performed by a third-party auditor on behalf of a local taxing jurisdiction. Third-party auditors are generally prohibited from divulging or making known in any way to any person information that is obtained from a sales or use tax investigation on behalf of a local taxing jurisdiction or disclosed in any document, report, or return filed in connection with local sales or use taxes. Third-party auditors are permitted to disclose taxpayer information in certain limited circumstances, including disclosure to:
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An official, employee, hearing officer, attorney, or other public agent of the local taxing jurisdiction who is authorized to receive such information in connection with the local taxing jurisdiction's sales or use tax investigation performed by the third-party auditor;
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A requesting taxpayer, or the taxpayer's authorized agent, of the taxpayer's own tax filings;
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The department of revenue (department) for purposes of statistical analysis and publication as authorized by current law; and
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The department and the federal internal revenue service as necessary and pertinent to a taxpayer's compliance or failure to comply with state or federal tax law.
Violation of the confidentiality provisions in section 1 is a misdemeanor punishable by a fine of not more than $1,000 per violation. Section 2 clarifies the authority of the executive director of the
department to share taxpayer information with statutory local governments, special districts, and requesting home rule jurisdictions as necessary to facilitate dispute resolution, coordination, intergovernmental agreements, and information sharing between the department and such local governments consistent with current law, which prohibits the disclosure of any such shared information to any third party.
