It is the tradition like no other: The Sales Tax Defense Awards! This is the fourth year for the awards and also the craziest year. Frankly, this year has been so crazy we all deserve an award just for making it this far.
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 4 for 4 in this category, which is pretty amazing when you consider how nuanced sales and use tax can be. Equipped with economic nexus, which allows states to force businesses to comply with their sales tax rules without a physical presence and facing massive budget deficits, states will likely be auditing out-of-state businesses at record rates. This makes nexus the frontrunner to win this category next year and basically ever year thereafter for all eternity. If you are unfamiliar with the concept of nexus, we strongly recommend contacting us immediately.
The winner for the thing that does not exist no matter how many people claim it does is… “The government should cancel my audit because Covid-19 has hurt my business.” As a business, we get it. We really do. This pandemic has been hard for all of us. However, the government does not care. If you’re supposed to collect sales tax, the tax should be sitting in a bank account just waiting to be remitted and just like you want to get paid from your customers, the government wants to get paid from you. Let us just hope Covid-19 isn’t still a problem for the awards next year.
The winner for the simplest solution to a common audit issue is… file sales tax returns even if what you currently sell is not subject to sales tax. This is a very common issue because A) you start a business and there’s a lot going on so you forget about sales tax altogether or B) when you started business your sales weren’t taxable but now they are or C) you weren’t selling taxable items but now your business expanded into new areas and those areas are taxable but you haven’t thought about sales tax since what you previously sold is not taxable… or a million other reasons. HOWEVER, you need to file the return to start the statute of limitations because that limits the period you can be audited for (absent fraud of course). This limits your potential exposure for any mistakes, often by more than 50%! That’s right, you can reduce your potential exposure by more than 50% just by filing sales and use tax returns. Just file, you will thank us later.
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].
Audit Assessment Reduced by $2 Million Dollars!
A Company came to us with a liability from the New York State Department of Taxation and Finance that was over $2.2 MILLION DOLLARS!
Some of the liability stemmed from fixed assets as the Company did a large renovation of their building. While all of this work qualified as a capital improvement, it took a lot of documentation and back and forth with the auditor before the auditor agreed that no tax was due on the fixed assets.
The rest of the liability stemmed from use tax due on various expenses. We worked with the company to gather any documentation to show that tax was paid on these expenses or to show it was reasonable to assume tax was paid on these invoices. After everything was presented to the auditor and after eventually attending for a BCMS Hearing, the audit was finally settled for less than $100,000 due!