Ask any executive of an oil or gas company and they'll likely tell you that there are two factors that are constantly weighing on their minds. One is keeping their workers safe. Another is keeping the costs associated with remaining in compliance with regulators in check.
The costs that on and offshore oil and gas companies must pay in local, state and federal taxes are steep. States like Louisiana even have their own set of guidelines specifically written for companies in these industries to abide by.
Any failure to collect and report sales taxes can result in an audit. There are other tax obligations that make companies vulnerable to being audited depending on their role in the supply chain.
Companies that refine or distribute crude oil are most likely to be audited if they charge the incorrect sales tax for the location. This often results from them either attempting to have a consumer pay too much or too little for the area in which they're doing business.
Exploration or production companies often charge the incorrect sales or value added tax (VAT) because they're not informed about what aspects of the services that require them to charge which tax. Companies operating in this sector of the industry tend to incorrectly submit tax payments in the wrong jurisdiction also.
Energy storage or pipeline transportation companies tend to be audited because they don't adequately apply the correct rules for paying taxes on maintenance or transportation, especially for mutlistate projects. Oftentimes, where the confusion sets in is whether the tax should be paid where the purchase was made or where the shipment was from.
Fracking companies are often subject to leases, which lead many to assume that they're not required to pay sales taxes. They often don't realize that they're required to pay VAT for drilling rights and environmental offset costs.
With multinational oil companies, operating in multiple countries can make keeping track of different tax policies difficult. Oftentimes, these companies have difficulty remembering where to send payments to, what the tax rates for each jurisdiction are and what types of taxes are due.
Tax audits can be an administrative nightmare and penalties associated with making errors can be hefty. When you're facing a tax audit, you'll want to have a knowledgeable Lafayette tax law attorney who understands the ins and outs of local, state and federal regulations on your side.