Mississippi State Tax Audit Response

MISSISSIPPI DOR AUDIT RESPONSE — IDR RESPONSES AND POSITION STATEMENT

TABLE OF CONTENTS

1. Cover Letter to Auditor
2. Identification and Power of Attorney
3. Scope and Period of Audit
4. Statute of Limitations and Closed Periods
5. Response to Information Document Requests
6. Confidentiality and Trade-Secret Protection
7. Records Retention Statement
8. Position Statement on Disputed Issues
9. Taxpayer Rights and Procedural Objections
10. Request for Closing Conference
11. Reservation of Rights
12. Signature and Service
13. Mississippi Practice Notes
14. Sources and References

1. COVER LETTER TO AUDITOR

[DATE]

VIA EMAIL AND U.S. MAIL

[AUDITOR NAME]

Mississippi Department of Revenue

[Income Tax Bureau / Sales and Use Tax Bureau / [BUREAU]]

500 Clinton Center Drive

Clinton, MS 39056

Re: [TAXPAYER NAME] — DOR Audit / Account No. [________________________________]

Audit Periods: [TAX PERIODS]

Tax Type(s): [Mississippi Income Tax / Sales Tax / Use Tax / Withholding / Franchise]

Dear [AUDITOR NAME]:

This firm represents [TAXPAYER NAME] ("Taxpayer") in the above-captioned Mississippi Department of Revenue audit. A signed Mississippi Power of Attorney (Form 21-002) is enclosed at Tab 1. Pursuant to that authorization, please direct all future communications, IDRs, and proposed adjustments through the undersigned.

This letter responds to the Department's [engagement letter dated [DATE] / IDR No. [____] dated [DATE]] and sets forth Taxpayer's preliminary position on the matters identified in the engagement letter.

2. IDENTIFICATION AND POWER OF ATTORNEY

2.1. Taxpayer: [LEGAL NAME], [entity type], FEIN [________________], Mississippi taxpayer ID [________________], principal address [ADDRESS].

2.2. Authorized representative: [NAME], [Mississippi Bar No. / CPA No. / EA No.] [####], [FIRM], [ADDRESS], [PHONE], [EMAIL].

2.3. Form 21-002 (Mississippi Power of Attorney) is attached and authorizes the representative to receive confidential return information, attend conferences, sign waivers and consents, and execute any closing agreement on Taxpayer's behalf.

2.4. Communications. Taxpayer requests that all correspondence, including audit work papers, audit narratives, and proposed adjustments, be transmitted in writing to the representative by email at [EMAIL] with a copy by U.S. mail. Oral discussions are welcome but should be confirmed in writing.

3. SCOPE AND PERIOD OF AUDIT

3.1. The Department's engagement letter identifies the following tax type(s) and period(s) under examination:

3.2. Taxpayer requests confirmation that the audit is limited to the foregoing tax types and periods. Any expansion of scope should be communicated in writing in advance.

3.3. Taxpayer [has not / has] previously executed a written waiver of the statute of limitations under Miss. Code Ann. § 27-7-49 or § 27-65-42. Taxpayer [declines / will consider] any waiver request and reserves the right to assert all applicable limitations defenses.

4. STATUTE OF LIMITATIONS AND CLOSED PERIODS

4.1. Mississippi imposes a 36-month statute of limitations on assessments of income tax (Miss. Code Ann. § 27-7-53), sales tax (Miss. Code Ann. § 27-65-42), and use tax (Miss. Code Ann. § 27-67-15), measured from the later of (a) the date the return was filed or (b) the original due date.

4.2. The following periods are or appear to be closed by the statute of limitations and are not subject to assessment unless an exception applies (e.g., fraudulent return, no return filed, or written extension):

4.3. Taxpayer expressly preserves the limitations defense as to all closed periods and objects to any audit inquiry, IDR, or proposed adjustment that exceeds the open limitations window.

5. RESPONSE TO INFORMATION DOCUMENT REQUESTS

5.1. Taxpayer responds to the Department's IDRs as follows:

IDR No. [____] — [TITLE / SUBJECT].

• Status: [Produced / Partially produced / Objected to].
• Documents produced: [Bates [START] – [END]], attached at Tab [__].
• Custodian: [NAME, TITLE].
• Objections: [None / Overbroad / Outside limitations period / Privileged / Trade secret].
• Privilege log: [Attached at Tab [__] / Not applicable].

IDR No. [____] — [TITLE / SUBJECT].

• Status: [___].
• Documents produced: [___].
• Custodian: [___].
• Objections: [___].

5.2. General objections. Taxpayer objects to each IDR to the extent it (a) seeks records outside the open limitations period; (b) seeks attorney–client privileged communications, attorney work product, or accountant–client privileged communications recognized under Miss. Code Ann. § 73-33-16; (c) is unduly burdensome; or (d) seeks information not reasonably calculated to determine Mississippi tax liability.

5.3. Format of production. Unless otherwise agreed, Taxpayer will produce records in their ordinary course of business, electronically where available, with each production accompanied by a Bates index.

5.4. Continuing production. Taxpayer will supplement its production if responsive records are subsequently identified.

6. CONFIDENTIALITY AND TRADE-SECRET PROTECTION

6.1. All records produced are confidential return information protected under Miss. Code Ann. §§ 27-3-73, 27-3-77, 27-7-83, and 27-77-15, and are exempt from disclosure under the Mississippi Public Records Act of 1983 (Miss. Code Ann. § 25-61-1 et seq.).

6.2. Certain records contain commercially sensitive trade secrets, including [describe categories — pricing methodologies, customer lists, source code, formulas]. These are designated CONFIDENTIAL — TRADE SECRET and may be used solely for the purpose of this audit and any subsequent administrative or judicial appeal.

6.3. The Department is requested to (a) limit access to the audit team and supervisors with a need to know, (b) refrain from copying or distributing the records to third parties absent prior written consent or a "proper judicial order" within the meaning of Miss. Code Ann. § 27-3-73, and (c) return or destroy all copies upon final closure of the audit.

7. RECORDS RETENTION STATEMENT

7.1. Pursuant to Miss. Code Ann. § 27-65-43 (sales tax) and corresponding DOR guidance, Taxpayer maintains its books and records for not less than three (3) years from the later of the date the return was filed or its original due date.

7.2. Taxpayer's records-retention practices are summarized in the schedule below:

7.3. To the extent any responsive record is no longer in Taxpayer's possession because the limitations period has run and the record was lawfully purged in the ordinary course of business, the absence of such record does not give rise to an inference of underreporting.

8. POSITION STATEMENT ON DISPUTED ISSUES

8.1. Issue 1 — [DESCRIPTION].

• Taxpayer's treatment: [describe and quantify].
• Statutory basis: Miss. Code Ann. § [____]; 35 Miss. Admin. Code Pt. [__], [REG.].
• Federal corollary (if applicable): I.R.C. § [____]; [Treas. Reg., Rev. Rul., or case].
• Department's contrary position (if known): [describe].
• Taxpayer's response: [argument and supporting authority].
• Documentary support: Tab [__], Bates [___]–[___].

8.2. Issue 2 — [DESCRIPTION].

• Taxpayer's treatment: [___].
• Statutory basis: [___].
• Department's contrary position: [___].
• Taxpayer's response: [___].

8.3. Issue 3 — [DESCRIPTION].

• Taxpayer's treatment: [___].
• Statutory basis: [___].
• Department's contrary position: [___].
• Taxpayer's response: [___].

8.4. Penalty position. Taxpayer requests that no negligence, late-filing, or fraud penalty be asserted. Taxpayer acted with ordinary business care and prudence, relied on [professional advice / published DOR guidance / federal determination], and disclosed all required information on the return as filed.

9. TAXPAYER RIGHTS AND PROCEDURAL OBJECTIONS

9.1. Taxpayer asserts the following rights, which the Department has historically recognized in its published audit guidance and which collectively function as Mississippi's Taxpayer Bill of Rights:

• ☐ Right to professional and courteous treatment;
• ☐ Right to representation by an attorney, CPA, or other authorized representative;
• ☐ Right to know the basis for any proposed adjustment;
• ☐ Right to receive a copy of the audit report and supporting work papers;
• ☐ Right to a closing conference before issuance of any Notice of Assessment;
• ☐ Right to administrative appeal to the Board of Review and the Board of Tax Appeals (Miss. Code Ann. § 27-77-5);
• ☐ Right to judicial review in chancery court (Miss. Code Ann. § 27-77-7);
• ☐ Right to confidentiality of return information (Miss. Code Ann. §§ 27-3-73, 27-3-77, 27-7-83, 27-77-15);
• ☐ Right to abatement of penalties for reasonable cause;
• ☐ Right to assert the 36-month statute of limitations.

9.2. Procedural objections, if any.

• ☐ Failure to issue a written engagement letter identifying the scope and period of the audit;
• ☐ Excessive or duplicative IDRs;
• ☐ Failure to provide reasonable time to respond;
• ☐ Failure to provide a closing conference;
• ☐ Other: [describe].

9.3. Taxpayer reserves the right to raise additional procedural and constitutional objections at the appropriate stage.

10. REQUEST FOR CLOSING CONFERENCE

10.1. Taxpayer requests a closing conference under DOR audit policy before the Department issues any proposed assessment. At the conference, Taxpayer requests the opportunity to:

• Review and discuss the auditor's draft work papers;
• Present additional documents or testimony bearing on each adjustment;
• Negotiate corrections to factual errors;
• Discuss penalty abatement; and
• Explore resolution of the audit by closing agreement.

10.2. Taxpayer also requests that any proposed adjustments be communicated in writing with citations to the statutes, regulations, and audit work papers relied upon.

11. RESERVATION OF RIGHTS

11.1. Nothing in this letter or the accompanying production is intended to (a) waive any privilege or other protection from disclosure; (b) waive the statute of limitations under Miss. Code Ann. §§ 27-7-49, 27-7-53, 27-65-42, or 27-67-15; (c) concede any liability; or (d) waive any procedural, substantive, statutory, or constitutional right.

11.2. Taxpayer expressly preserves its right to file a written appeal to the DOR Board of Review within sixty (60) days of any Notice of Assessment, to the Mississippi Board of Tax Appeals, and to the appropriate chancery court, all as provided by Miss. Code Ann. §§ 27-77-5 and 27-77-7.

12. SIGNATURE AND SERVICE

Date: [DATE]

Respectfully submitted,

[LAW FIRM NAME]

By: [________________________________]

[ATTORNEY NAME], Mississippi Bar No. [####]

Counsel for Taxpayer

[STREET ADDRESS]

[CITY, STATE ZIP]

Telephone: [NUMBER]

Email: [EMAIL]

Enclosures:

• Tab 1 — Form 21-002 Power of Attorney
• Tab 2 — Bates-stamped IDR production index
• Tab 3 — Privilege log (if applicable)
• Tab 4 — Position statement exhibits

cc: [Audit Supervisor Name], Mississippi Department of Revenue

13. MISSISSIPPI PRACTICE NOTES

• Three-year retention floor. Mississippi sales-tax law (Miss. Code Ann. § 27-65-43) requires taxpayers to retain records sufficient to determine liability, and DOR guidance specifies a minimum three-year retention. Best practice is seven years to align with the federal lookback for omitted-income cases and to cover any extended-limitations scenario.
• No formal "Taxpayer Bill of Rights" statute. Unlike many states, Mississippi has not codified a stand-alone taxpayer bill of rights. The functional equivalent is found in (i) the Department's published guidance on Audit Procedures and Appeal Process and Hearings, (ii) the appellate-review framework in Miss. Code Ann. Chapter 77, and (iii) the confidentiality regime in §§ 27-3-73, 27-3-77, 27-7-83, and 27-77-15. Cite each as appropriate.
• Confidentiality citations matter. Section 27-3-77 governs confidentiality of records in the DOR's possession (it exempts individual tax records from the Public Records Act). It is not a records-retention statute. The retention obligation is on the taxpayer under Section 27-65-43 (and federal law where conformity applies).
• Out-of-state record audit. Miss. Code Ann. § 27-3-65 authorizes the Commissioner to audit out-of-state records and to designate agents to conduct that audit. A taxpayer with records outside Mississippi may negotiate a virtual or remote audit; the cost of audit travel may be borne by the taxpayer in some circumstances.
• Statute of limitations. 36 months is the general rule; six years applies for a substantial omission of more than 25% of gross income; unlimited for fraudulent or non-filed returns. Miss. Code Ann. §§ 27-7-49, 27-7-53.
• Penalty leverage. Mississippi penalties for negligence (10%), late filing (10%), and fraud (50%) are subject to abatement for reasonable cause. A well-developed reasonable-cause record at the audit stage often forecloses penalty escalation at the Board of Review.
• Closing agreements. A closing agreement under DOR practice can resolve all open issues for the audit period. Confirm the scope and finality language carefully; Mississippi closing agreements bind the parties absent fraud, malfeasance, or material misrepresentation of fact.
• Preserve appeal rights. If a Notice of Assessment is ultimately issued, the 60-day appeal clock to the Board of Review starts on the date the Department mailed the notice (Miss. Code Ann. § 27-77-5). Calendar the deadline immediately and use the companion protest template for the next step.

14. SOURCES AND REFERENCES

• Miss. Code Ann. § 27-3-1 et seq. (Department of Revenue) — https://law.justia.com/codes/mississippi/title-27/chapter-3/
• Miss. Code Ann. § 27-3-65 (Audit of out-of-state records) — https://law.justia.com/codes/mississippi/title-27/chapter-3/section-27-3-65/
• Miss. Code Ann. § 27-3-73 (Confidentiality of returns) — https://law.justia.com/codes/mississippi/title-27/chapter-3/
• Miss. Code Ann. § 27-3-77 (Individual records exempt from public access) — https://law.justia.com/codes/mississippi/title-27/chapter-3/section-27-3-77/
• Miss. Code Ann. § 27-7-49 (Examination; assessment of additional tax) — https://law.justia.com/codes/mississippi/title-27/chapter-7/
• Miss. Code Ann. § 27-7-53 (Statute of limitations) — https://law.justia.com/codes/mississippi/title-27/chapter-7/
• Miss. Code Ann. § 27-7-83 (Confidentiality of income-tax returns) — https://law.justia.com/codes/mississippi/title-27/chapter-7/article-1/section-27-7-83/
• Miss. Code Ann. § 27-65-42 (Sales-tax statute of limitations) — https://law.justia.com/codes/mississippi/title-27/chapter-65/in-general/section-27-65-42/
• Miss. Code Ann. § 27-65-43 (Taxpayer record-keeping) — https://law.justia.com/codes/mississippi/2020/title-27/chapter-65/subchapter-ingeneral/section-27-65-43/
• Miss. Code Ann. § 27-77-5 (Administrative appeals) — https://law.justia.com/codes/mississippi/title-27/chapter-77/section-27-77-5/
• Miss. Code Ann. § 27-77-15 (Confidentiality before BTA) — https://law.justia.com/codes/mississippi/title-27/chapter-77/section-27-77-15/
• Mississippi DOR — Audit Procedures — https://www.dor.ms.gov/forms-resources/taxpayer-guidance/audit-procedures
• Mississippi DOR — Record Keeping & Document Retention — https://www.dor.ms.gov/forms-resources/taxpayer-guidance/record-keeping-document-retention
• Mississippi DOR — Appeal Process and Hearings — https://www.dor.ms.gov/forms-resources/taxpayer-guidance/appeal-process-and-hearings
• 35 Miss. Admin. Code Pt. 1 (DOR Administrative Rules) — https://www.sos.ms.gov/adminsearch/ACCode/00000157c.pdf
• 35 Miss. Admin. Code Pt. 101 (Board of Tax Appeals Rules) — https://www.law.cornell.edu/regulations/mississippi/title-35/part-101

Disclaimer: This template is provided for informational purposes only and does not constitute legal advice. An attorney licensed in Mississippi must review and customize this document before use. Statutes, regulations, audit policies, and procedural rules change frequently; verify all authorities at the time of use.