Taxpayers normally become alarmed when they receive notification from the Department of Taxation requesting records to conduct a sales and use tax audit of their business. While this correspondence may be a stressful, taxpayers should be cognizant that the purpose an audit is to ensure sales and use tax compliance; not to shake them down for money. Since the laws and regulations are often very complex, it is imperative to hire a knowledgeable and experienced professional to manage all facets of your sales and use tax audit.
Although I may enter the audit process at any stage to assist in the management of your audit, it is best when I manage the audit from the beginning. Prior to the audit, I review relevant records and documents to identify tax exposure. Once the audit commences, my main objective is to have the audit completed in a timely manner. Any tax assessment made by the Department is reviewed thoroughly to ascertain that the assessment is in compliance with applicable sales and use tax laws and regulations. In the event I determine that the assessment is not correct, I will perform the necessary steps to challenge the assessment.
My sales and use tax audit representation services benefits clients by minimizing time required in preparing for and working through the audit. Sales and use tax audits are normally a quick process if the records are organized in a manner that allows an auditor to quickly review the relevant information requested. I believe that all audit issues should be addressed at the audit level to minimize cost and time to finalize the audit.
My experience in advocating taxpayer positions and tactful negotiations with auditors are essential components in the management of your sales and use tax audit. Using my experience as a sales and use tax professional will ensure that any assessment of sales and use tax is legal and proper, and that audits are over quickly.
An analogy I like to use for this service is similar to visiting your doctor for a physical. When you visit your primary care physician for a wellness check your doctor performs routine tests to check your overall health.
The importance of the proper presentation of sales tax itemized on customer’s sales invoice, documentation to support use tax remittances, and general compliance with regards to exemption and resale certificates are often overlooked by businesses. Oversight of items of this nature will be detrimental in the event that your business is selected for a sales and use tax audit.
A sales and use tax reverse audit conducted by Southwest Sales Tax Solutions, LLC prior to receiving a notification of audit is a responsible was to be certain that your business is in sales and use tax compliance. If not fully compliant, corrective measures may be put into place to minimize sales and use tax exposure for your business. The compliance portion of the sales and use tax reverse audit includes, but is not limited to determining if the accounting records support the activity reported on the sales and use tax returns, verifying that sales tax is properly charged to your customers, vendors are correctly handling sales tax on purchase invoices, and that use tax is properly being captured and remitted. In addition, we will review resale and exemption certificate compliance. A written report is issued to document findings. The correction portion of the sales and use tax reverse audit consists of preparing necessary paperwork to recover any overpaid tax, and to correct any reporting errors that may be occurring.[back to the top]
Compliance Issues and Outsourcing
The sales and use tax compliance system of taxpayer responsibility relies on individual taxpayers to report their sales and purchases freely and voluntarily, calculate their tax liability correctly, and file a timely tax return. Meeting this challenge can be very labor intensive for your company. Whether your business operates in one jurisdiction or in multi-states, maintaining adequate sales and use tax compliance as an in-house function requires ongoing staff education and a continuous review of records to ensure accurate and timely filing of sales and use tax returns.
Outsourcing the sales and use tax compliance function is a cost effective way to create insulation from employee turnover. In today’s business world, employee turnover is often frequent, and new hires require specialized technical knowledge when working in sales and use tax compliance. These employees are often difficult to find, especially for non-professional positions. Accordingly, the learning curve may be very steep. The cost of non-compliance due to in house errors is often not realized until a sales and use tax audit is conducted, costing a business thousands in tax, interest, and penalties.[back to the top]
The purpose of Voluntary Disclosure is to provide an opportunity for taxpayers who become aware of their tax obligations to come forward and meet such obligations. Depending on the jurisdiction, benefits of Voluntary Disclosure may include a written agreement to restrict the statute of limitations, waiver of penalties and interest, elimination of the risk of being discovered under audit, and avoiding criminal prosecution.
In Nevada, the Tax Commission has the final approval to waive penalties and interest. To qualify for the voluntary disclosure waiver, the taxpayer (or his representative) must file an application for voluntary disclosure before the Nevada Department of Taxation initiates an audit or investigation. Southwest Sales Tax Solutions can represent you on a anonymous basis until an acceptable agreement is arrived at.
Sales and Use Tax Reasearch
Sales and use tax laws and regulations are often confusing, contradicting, or vague. Sales and use tax research can be a very frustrating process for business owners. In addition, your business may not have the resources required to research an issue thoroughly. Calling a tax help line is not a safe way to receive an answer to sales tax questions because oral advice is not binding.
My approach to conduct sales and use tax research contains the following steps:
- Discussing your concerns and establishing the facts;
- Review Laws, Regulations, and Publications for appropriate authority;
- Developing conclusions and making recommendations;
- Documenting findings.
Although the research process is a thorough approach, sometimes the best way to address tax concerns is by requesting an Advisory Opinion from the Tax Department. When an Advisory Opinion is prepared, your anonymity is maintained since the Advisory Opinion is requested by Southwest Sales Tax Solutions, LLC.[back to the top]