The Real Reasons Behind Sales Tax Audits – Why Was I Audited?

Описание: Hi everyone,

Today’s tip is about sales and use tax audits and why a business was chosen for a sales and use tax audit by the taxing authority.

Here are just a few reasons why businesses are scheduled to be audited by the taxing authority.

1. The Tax Laws and Rules are confusing. The taxing authority knows that sales and use tax compliance can be confusing. They also know that some of their laws and rules can be very difficult to follow, especially when dealing with services. If they know that a lot of businesses get it wrong, they are going to audit those types of businesses.

2. Your customer was audited. The taxing authority may have audited your customers and noticed that your business did not charge tax appropriately. In Texas, this is called an audit lead. The thought is that if you didn’t charge that customer tax correctly, you probably made the same mistake on all your sales.

3. Random. This is the reason that drives most business owners crazy. The audit can be completely random. It could be the auditor saw a sign for your business and it is located near their home. It could be that someone turned in your business. It could be that they are tired of auditing contractors and want to go to a nice part of town to audit a business with a posh location. Sometimes, it is a random thing.

The point is not to frighten business owners. The point to is know that the Taxman can come at any time. There are red flags (like not reporting any taxable purchases) that businessowners do that can increase their chance for audit. But somethings (like those mentioned above) are completely out of their control.

It is best to be prepared just in case. That means retaining your sales and use tax return workpapers, confirming the taxability treatment of your sales, verifying the correct tax rate is being charged, obtaining, and retaining any required documents relating to tax exempt sales, journal entries, fixed assets, taxable purchases, etc.

And that is your tip of the week.

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