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Sales tax audit

Discussion in 'Business Operations' started by millenium_123, Apr 13, 2011.

  1. millenium_123

    millenium_123 LawnSite Member
    Messages: 186

    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!!
  2. MOturkey

    MOturkey LawnSite Silver Member
    Messages: 2,782

    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.
  3. dougaustreim

    dougaustreim LawnSite Senior Member
    Messages: 488

    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 LawnSite Bronze Member
    Messages: 1,668

    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
  5. WheatBookkeeping

    WheatBookkeeping LawnSite Member
    Messages: 108

    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 youÂ’ll 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
  6. JB1

    JB1 LawnSite Fanatic
    Messages: 5,904

    where they like to hammer you is the use tax.
  7. snomaha

    snomaha LawnSite Bronze Member
    from midwest
    Messages: 1,247

    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.
  8. JB1

    JB1 LawnSite Fanatic
    Messages: 5,904

    all I can say is they are never any fun.
  9. TuffWork

    TuffWork LawnSite Senior Member
    Messages: 506

    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?
  10. JB1

    JB1 LawnSite Fanatic
    Messages: 5,904

    I had a visitor for two days.

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