Sales Tax Audit, and Relationship of Inflation on NY Sales Tax

Is there a relationship between sales tax and inflation in New York?

May 2024

The annual inflation rate is currently 3.4% based on statistics from the past 12 months. Normally you would think that the sales tax collections amount would increase as well to keep in line with inflation. You buy the same stuff, but the same stuff costs more, so you pay more in sales tax. However, surprising to some but maybe not to others, sales tax is growing much slower than inflation.

Are sales tax collections in line with rising inflation?

During the first four months of January through April 2024, sales tax collection amounts in the State of New York rose only 1.6% compared to the same time last year.  While spending seemed to remain in line with inflation in New York City, spending decreased in Long Island as well as in the majority of counties in upstate New York.

People must still buy the necessities like bread, milk, meat, vegetables, and fruit.  But these food items sold in a “grocery state” are not subject to sales tax in New York.  Therefore, these purchases, though they may remain the same, have no impact on sales tax collections.

Why is sales tax collections not in line with inflation?

Many people have cut back on extravagancies since COVID.  Less eating out at restaurants (food and drink served at restaurants are always subject to sales tax) and more streaming movies over Netflix (which is not subject to sales tax).  Less clothes shopping (although clothes costing under $110 per article are only subject to the local county sales tax in most counties) and more staying home to read a book (read those books on your Kindle, electronic books are not taxable!).

The State of New York relies heavily on sales tax revenue. One can only wonder how the State will react in the future if the downward decline of sales tax collections continues.  However, in the meantime, if you have a sales tax question, contact Sales Tax Defense LLC! We are here to help!

Sales Tax Audit Solved

We each have our unique preferences. While most people adore puppies, there might be someone out there who doesn’t share the sentiment (if you search diligently enough). Some prefer vanilla ice cream over chocolate, and some people love olives, while others gag at the sight of them. Our differences are apparent, yet there are certain universal truths. One of them being – It’s rare to find someone who remains unfazed upon receiving a sales tax audit letter from the government.

One such instance occurred with a client of ours who received a notice from the New York State Department regarding a sales tax audit. We can empathize with their apprehension, having fielded numerous panicked calls from clients in similar situations. Fortunately, they took the right step by promptly consulting their accountant, who wisely directed them to contact Sales Tax Defense LLC. Collaborating closely with their accountant, we facilitated the necessary documentation and dove into action.

With our extensive experience solely in sales and use tax over the past 17 years, we possess the expertise to advocate for our clients, and strive for the most favorable outcome. In this case, we found sufficient evidence that the client was in compliance with New York State’s sales tax requirements. The resolution of this sales tax audit was highly favorable, and everyone emerged victorious. The client was understandably delighted with the outcome, the referring accountant elated to welcome back their relieved client, and Sales Tax Defense LLC pleased to add another satisfied client to our roster.