Tax typo that cost Suffolk $5M investigated

State Department of Taxation and Finance has started a review of its practices to determine how a $10 million mistake on a state tax return ended up with Suffolk County erroneously getting a $5 million sales tax check.

"We're looking at the process from top to bottom," said Brad Maione, tax department spokesman in Albany, adding the mistake "gives us an opportunity to learn and tighten up our system to make sure this kind of mistake is not replicated."

State officials confirmed Suffolk officials' version of events, saying a Suffolk taxpayer's electronically filed state return incorrectly listed that $10 million in sales tax was owed from out-of-state Internet purchase. The state then sent $5 million to the county in March. The state deducted the money from a sales tax check Suffolk received this week.

Maione would not say specifically how the state uncovered the problem, but said such mistakes are found after the state sends out a notice to taxpayers that more tax is owed than what was paid.

In 2008, the last year available, state tax officials said that 515,000 state taxpayers listed owing $42 million in sales tax on their returns.

Most sales tax are collected in a separate procedure, monthly from large retailers and quarterly from smaller vendors. County officials noted that the taxpayer would have had to make $116 million in purchases to owe $10 million in sales tax. Maione also could not say how many state residents report owing sales tax on state tax forms or how much sales tax is collected that way.

"We receive 9 million personal returns annually," Maione said. "And there are systems to try to spot deviations in returns, but for one reason or another this one didn't get the scrutiny it deserved."