Business owners subjected to a sales tax audit can take proactive steps to ease the process. Some tips that apply to most in this situation include:
- Cooperate. A recent publication in the CPA Practice Advisor notes a top mistake made during a sales tax audit is giving the auditor a hard time. Although it is important to contact an attorney and have legal counsel to help better ensure your rights are protected during the process, business owners should avoid intentionally making the process difficult. Examples to avoid include providing messy, unorganized records or an intentionally uncomfortable workspace.
- Organize. Building off the last tip, business owners can reduce the headache associated with an audit by having organized records. The New York State Department of Taxation and Finance may require the business owner provide documentation to support income, credits and deductions claimed on tax returns during an audit, such as sale and purchase invoices as well as purchases for fixed assets.
- Collect. Another top mistake noted by the CPA piece: failing to pay sales taxes in the first place. Unfortunately, the rules guiding when a sales tax is due to a state are not as clear as they once were. In the past, any business with a physical presence within a state likely owed a tax. This is no longer true. The Supreme Court of the United States recently held states may also require tax payment from businesses with an online presence in the state. As such, businesses may need to review their tax plan and adjust as needed to align with the requirements of these changes.
Whether reviewing a business' tax plan or undergoing a sales tax audit, business owners are wise to act to protect their rights. This can include having representation at a sales tax audit and protecting the right to appeal any action taken by the New York State Tax Department. The attorneys at Goldburd McCone offer legal counsel that can help meet these needs.