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Sales Tax Help

This is certainly the season for tax talk.  Everytime I mention I'm in the sales tax business, I hear "Ohhhhh, you must really be busy right now!"  I go to great lengths to explain that sales tax is a year round compliance issue and generally get left with a blank stare that tells me they don't have the foggiest idea of what sales tax compliance entails.  The scary part is that some of these folks actually have businesses that collect and remit sales tax.  Suffice it to say, sales tax just seems a bit more mysterious than other taxes...and a bit uglier.

This reputation of sales tax disturbs me, as you might expect.  It is a tax, albeit a pass-through exercise.  But most CPAs look down their nose at the compliance activity as if it's just not as important as getting your income tax returns bundled up and out the door.  I'll admit, it is different than income tax, but do it wrong for long enough, and the consequences are just as severe as turning in an inaccurate Federal return.  The difference is, you could have dozens of States looking to throw shackles on you.

It's important for a multi-state business to have their sales and use tax returns in order.  Granted, few CPAs study "The Art of Sales and Use Tax Compliance" in their Masters of Tax curriculum, but they clearly could have benefited from it.  At least they wouldn't dismiss the activity and would do more to embrace it and prepare their clients for it. 

I talked with a client last week who is about to be audited.  His CPA suddenly got nervous about the upcoming audit, and began to point fingers at the client because they had not self-assessed tax on a large volume of purchases.  The client contends that the CPA is doing the books, and should have at least asked the question.  I couldn't agree more, but it won't really matter to the auditor since they just found a nice stream to pan gold in.

My advice...don't ignore sales tax responsibilities.  If you don't get strong advice from the CPA who files your income tax returns, don't fall asleep at the wheel.  Call a sales tax expert and get a minute or two of informed opinion.  Sales tax doesn't have to be the ugly duckling of tax, and it shouldn't be misunderstood for so long that it gets you into trouble.

Oh, by the way, sales tax doesn't have a busy season - unless the auditors all find you in April.

Doug Starr

Written by Doug Starr