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millenium_123
04-13-2011, 10:46 AM
Just wondering if any of you guys have gone through a sales tax audit? I have been lected for one. What kinds of questions do they ask and what kinds of things do they have to dig through. I filed this year to begin paying sales tax, so they will probably get me for the previous 4 years!!

Any tips yall have would be helpful Thanks!!

MOturkey
04-13-2011, 11:27 AM
I have, several years ago, when I owned a retail business (small grocery store). I don't know your situation. Here in MO, there is no sales tax on services, only merchandise, so I don't have to have a sales tax number, or collect any tax for my mowing business. I don't know about Texas.

If you are selling any goods (mulch, for example), if you paid sales tax on the material when you purchased it, you generally will be OK. In other words, if you simply pass the price of the mulch along to the customer, and any upcharge is labor, then the sales tax is already being paid by you. It is like the customer is buying the material, and you are just charging to install it.

If you bought materials wholesale, and paid no tax, and took those materials off your taxes, you are gonna get nailed, but no one should have sold them to you tax free without you having an ID number or exemption anyway.

dougaustreim
04-13-2011, 11:31 AM
I am sure every state is a little different. WE just finished another one this winter. They usually come every 3-4 years and look at everything for the last 3 years. They basically looked at all sales and checked every invoice to make sure we charged and reported the right tax and then checked against our returns to make sure we reported and paid it all. They also looked at every expenditure that we made to be sure that we paid the right tax on everything we bought. For instance we had some purchases from out of state that didn't charge use tax, so now we owed the use tax on those items. All in all, they weren't bad to work with, but we weren't hiding anything either. Yes we will owe a little tax for things here and there but there was nothing unfair about what they came up with.

TJLANDS
04-13-2011, 05:29 PM
I have been thru it. Not a big deal if you are legit.
If not there will be fines and penalties. They got us for use tax also. And they will go thru everything.
I know of a couple of lawn service guys in NJ that were screwed for not collecting( sales tax). They were forced to pay on all past years they didnt collect, plus big fines.

Good Luck

WheatBookkeeping
04-20-2011, 05:21 PM
As long as your bookkeeping system is current and accurate, your golden.

By that I mean:

Always collect sales tax due
Record the collected taxes in the Sales Tax Payable account for all credit and cash transactions
Record at the lowest individual transaction level (Invoice or cash receipt).
Deposit the sales tax amounts in the bank as the cash comes in.
Record all sales taxes paid to the taxing agency.
Keep each and every supporting document that pertains to your business financial life.


If a litigation ensues youíll probably need to show the original source documents, so keep everything.

Let us know how you make out on your audit so we can all learn.

Good luck

JB1
04-20-2011, 05:41 PM
where they like to hammer you is the use tax.

snomaha
04-20-2011, 07:49 PM
where they like to hammer you is the use tax.

Agreed - my experience has been that they will want to see your depreciation schedule. If you have bought any equipment that you didn't pay sales tax on they will want use tax.

JB1
04-20-2011, 08:10 PM
all I can say is they are never any fun.

TuffWork
04-20-2011, 10:52 PM
Let me know what happens. I will probably have to go through the same thing as you soon as I'm filing to pay sales tax this year as well. I also live in Amarillo so I will probably be dealing with the same people. Do they send it to you through the mail or anything? or do you do an interview in person or something?

JB1
04-20-2011, 11:03 PM
Let me know what happens. I will probably have to go through the same thing as you soon as I'm filing to pay sales tax this year as well. I also live in Amarillo so I will probably be dealing with the same people. Do they send it to you through the mail or anything? or do you do an interview in person or something?


I had a visitor for two days.

zimmatic
04-21-2011, 11:20 PM
They owed me money after it was all done. Only $100.00 but they looked for the use tax.

Make sure you are going off the most current sales tax compliance forms/info sheet on the states website. My cpa was in a issue with another audit. The state didnt update thier website and the client and cpa were working off a "current" compliance/info sheet and then the auditer came in and told them that those forms where the "old" ones and should have been using the updated ones. The argument was how can a tax payer use the updated forms when they were not posted on the website or even in notification for updates. In the end the cleint won and state lost.

Dr.NewEarth
04-22-2011, 01:02 AM
Stressful isn't it?

I was never audited for taxes. One year I paid a bit too much into the employee deductions.

They combed through my books when I wanted the money back.
This is in Canada.

The auditor checked his blood sugar in my bathroom. There was blood splatter all up the wall where he stood by the toilet to prick his finger. Bloody payback!

Roger
04-22-2011, 06:39 AM
Just wondering if any of you guys have gone through a sales tax audit? I have been lected for one. What kinds of questions do they ask and what kinds of things do they have to dig through. I filed this year to begin paying sales tax, so they will probably get me for the previous 4 years!!

Any tips yall have would be helpful Thanks!!

Let me know what happens. I will probably have to go through the same thing as you soon as I'm filing to pay sales tax this year as well. I also live in Amarillo so I will probably be dealing with the same people. Do they send it to you through the mail or anything? or do you do an interview in person or something?


millenium, ... are you saying you have avoided the Sales Tax collection function for four years?

TuffWork, ... have you been in business before this year? Or, are you requesting a license to collect Sales Tax because you are just starting your business?

If you have not been compliant, you will owe what is due, plus penalties and interest. The cost for being non-compliant could be large.

With so much talk on LS about "lowballers," "illegals," and the like, I find it hard to understand why somebody would choose to work outside the regulations. Did you think you were not required to deal with the issue? Ignorance does lot let one off the hook. Where was your accountant in providing you with advice when your taxes were prepared, and not finding anything about Sales Tax?

zimmatic
04-22-2011, 07:54 AM
Here is a idea.
Turn those lowballers, newbies into the state sales tax division. I am going to this year. I am not worried about "carma" I pay my employee's well, pay my sales tax along with federal and state, plus insurance, plus workmans comp. Why shouldnt the new guy/kid down the street.

It will do several things.

1. keep him out of the business by making it so hard to repay the tax.
2.Or he will stay in the business becoming "possibly" a productive collegue that pays taxes and will be compliant with laws that we all have to follow.


When I was audited for sales tax. I had a client that refused to pay their sale tax. I kept there invoices open. When the tax man asked me why this was I told them that they refused to pay sales tax and he left it at that---or so I thought.

I get a call in february of this year from that former client. They needed copies of invoices from 2 years ago. You guessed it--they were being audited for sales tax.
Now that is carma!

I told my cpa about this and he informed me that any homeowner or business that is not paying sales tax when charged or not charged they are still on the hook. So all you on this site not paying sales tax---remember when you get audited or your client gets audited it can be bad for both of you.

TuffWork
04-23-2011, 06:56 PM
I did mostly real estate investment properties before now. This year I've grown into being more than just a one man show, and am doing way more than what I thought. I admit I'm a little behind on getting my stuff together, but I'm fully prepared to pay what I owe. I have a meeting with my acct. on Tues. to finish everything up.