The Fifth Annual Sales Tax Defense Awards

September 2021

It is the tradition like no other: The Sales Tax Defense Awards! This is the fifth year for the awards. These awards are only becoming more prestigious with economic nexus becoming a major area of taxation in general.

Without any further ado, here are this year’s winners:

The winner for most confusing and often overbearing tax concept is… nexus! Nexus is now 5 for 5 in this category and no other concept is even close. No other concept can require a business to have to research nexus, register with a state, research the taxability of its sales in a state, maintain exemption certificates, file returns and potentially subject a business to an audit. The impact of nexus includes every area of sales and use tax. Nexus can even lead to voluntary disclosures if a business had nexus in other states but failed to act accordingly.

The winner for the thing that does not exist no matter how many people claim it does is… “I’m a wholesaler so I can’t have any sales or use tax issues!” This idea has won previously and has reemerged due to economic nexus since businesses are often subject to the sales tax laws in more states than they previously were. This is the winner for two reasons. First, the term “wholesaler” doesn’t exist in the tax law of many states. Those businesses are businesses that are making sales that would generally be subject to sales tax but are exempt because of a resale exemption. In that situation, maintaining exemption certificates becomes paramount. The second reason is that a business selling tangible personal property can still have use tax issues. That business still needs to pay sales tax (or self-assess use tax) on taxable purchases.

The winner for the simplest solution to a common audit issue is… register for sales and use tax purposes in any state you have nexus regardless of whether you have taxable sales. If you’ve heard us speak before, you know this is a common piece of advice we give. The greatest benefit to registering is that you start filing returns. Filing returns is important because it starts the statute of limitations. Absent fraud, once the statute of limitations expires, a state cannot issue an assessment for that period. This substantially limits your exposure, especially for new businesses which may have made a large amount of taxable purchases during the startup period.

If you were unfamiliar with any of the tax concepts discussed above or think you may have a sales tax issue, contact us by phone at (631) 491-1500 or by email at [email protected].

Success Story

Payment Plan for $1,200/month on $1 Million Assessment!

A Taxpayer came to Tax Defense with a liability of $1 million with the IRS. However, they did not have the funds to pay it. Tax Defense met with the taxpayer and went through all their financial information to determine what the IRS would say the taxpayer was able to pay. We then contacted the IRS to gather information regarding the assessment.

After determining the best approach to stop collection action, we compiled the financial forms and went back and forth with the representative to finally agree upon a disposable income number and an asset value. It was ultimately determined that the taxpayer would pay $1,200 a month for the remaining time left in the statute (which is less than 3 years)! This will ultimately result in the taxpayer paying less then $36,000 on their total liability of $1 Million!