Warning! It is critical that you pay attention to your sales tax accrual account. One of the first things an auditor does when reviewing company records is reconcile your sales tax accrual account. The auditor must make sure that all sales tax collected is remitted to the state tax authority.
If sales tax was collected and not remitted, fraud has occurred. Taxing authorities are not forgiving of fraud. When you collect sales tax, that is the taxing authority's money...not yours.
Make sure that you do the following:
- Give all collected money to the appropriate state taxing authority.
- Exclude sales or use tax collections from your sales or revenue figures.
- If you take early filing or pre-payment discounts, document that clearly so that any auditor can follow the trail.
- Review the sales tax accrual account to make sure all collections are remitted periodically. Don't leave it to one person. If you own the business or serve as a responsible party, check it!
There are accounts that are HOT spots in all businesses. Your sales tax accrual account is one of those accounts. Don't expect mercy if the account is not handled appropriately. You may be treated kindly but the taxing authority wants the funds. Turn the money in when your customers give it to you.