Auditing a nonprofit hospital in New Jersey on PSE&G. They should be exempt from the gross receipts tax but it's showing on every bill. Turns out their exemption certificate expired 3 years ago and nobody renewed it. PSE&G started charging the tax when the certificate lapsed. The hospital controller had no idea the certificate needed renewal. Is this common?
Gross receipts tax exemption certificate expired — utility kept charging
Very common. Exemption certificates have expiration dates and the utilities don't send reminders. When the certificate expires, the billing system automatically starts applying the charge. I've found expired exemptions on churches, government buildings, schools, and nonprofits. The good news is that once you renew the certificate, most utilities will backdate the exemption to the expiration date of the old certificate if you can show the entity was continuously eligible. PSE&G has done this for me twice. File the new certificate and request retroactive application.
This is one of the most overlooked audit items and one of the easiest to fix. Every tax-exempt client should have their exemption certificates tracked with expiration dates. As part of your audit, always pull the current certificate and verify it's active. If it's expired, renewing it and getting the retroactive credit is straightforward in most states. For New Jersey specifically, the Division of Taxation processes exemption renewals and PSE&G will typically honor a retroactive request for 2-3 years. Include certificate expiration tracking as a standard item in your audit checklist — it takes 30 seconds to check and can recover thousands.
Filed the renewal with NJ Division of Taxation and submitted the new certificate to PSE&G with a request for retroactive application for the full 3 years. The gross receipts tax was about $280/month so the potential recovery is over $10,000. Will add certificate expiration tracking to my standard audit process going forward.