Common Sales And Use Tax Audit Traps
Here’s a lesson in business management for you: taxes are important. When businesses forget to track sales tax on their products, they can end up paying more than expected – which could be devastating!
One of the most common mistakes businesses make is failing to calculate sales tax correctly. Six in ten small business owners don’t even know how much they owe, according to a recent survey done by Entrepreneur Magazine and greater than 50% are at risk for an audit because their company’s financials show less income from actual revenue than what was reported on state forms or returns filed with them – this means that you’re almost guaranteed trouble if your paperwork isn’t accurate!
What Is Use Tax?
This is the most common tax that lawyers have to deal with. It’s also called use tax and applies when an item has been sold from one state without any sales taxes. However, there are still taxes on goods in some other states like California or Texas, for example, because they charge a margin over what it costs them as wholesalers before distribution of those products happens. As such, you should always be sure your calculations are correct, so this doesn’t happen!
Consumer use tax is the responsibility of consumers to pay back in their local economy, but states are starting to blame sellers for this.
According to research, you might think that the use tax is a minor issue, but this can land you in hot water. Without an appropriate policy for your business and understanding between sales vs. purchases, it could confuse how much tax needs to be paid at all! We want our clients happy with what they owe, so let us help create something simple – or more robust if needed.
Products For Resale
If you sell products meant for resale, they can be taxed without sales tax as long as a valid resale certificate is given. Without an effective process to track and manage these types of sales revenue, it becomes susceptible to fraud which will eventually lead your company into financial ruin!
It can be difficult for businesses with jurisdiction in multiple states to keep track of which tax regulations you are exempt from and how much revenue is owed. To avoid any issues or potential audits, ensure that your resale certificates have all relevant information (like exemption status) on file. Hence, there’s no room for confusion when dealing directly with the government official who may come looking.
Sales Tax Pitfalls
There is no such thing as a general sales tax in the United States. In fact, there are over 11,000 US jurisdictions that implement their own rates, and changes to these taxes frequently happen.
If you sell products in more than one state, it’s important to keep up with applicable taxes. Sales tax can vary by jurisdiction, so make sure your paperwork reflects the correct amount and filing requirements for each location where products are being sold or delivered. If necessary, use sales-tax software or services to calculate accurate amounts based on customer ZIP code and help prepare returns crediting customers correctly according to their own respective jurisdictions’ laws.
If your business is collecting sales tax, it must remit the money owed in that state. Failure to pay taxes can result in more legal trouble than just an audit; think of all those fines and jail time!
What If You're Audited Fos Sales And Use Tax Compliance?
You might be surprised to know that any business has the potential to be audited. This can happen in several ways, including an unexpected audit or when you suspect there are some discrepancies in your sales tax practices that may have led up towards getting one after all, and if it does go down this route, then please get help from someone with experience who specializes in representing businesses during these types instances.
Auditing a business can be an intimidating and stressful process. You deserve help from someone who knows how to make sense of this mess so that you don’t have any more stress than necessary when mistakes are made during your company’s tax practices, which is why we are here!.