I Don't Know!.. Year-End and Adjusting Journal Entries and Sales Tax

 At the end of year, everyone closes the books.  Your accountant goes over the records, you explain unusual transactions, and you enter year-end and adjusting journal entries.  Everything is great and you're ready to go.  Right?!  Wrong!...very wrong!

TRICK or TREAT! ...Here's a Sales Tax Treat

I recently spoke with a client who asked the million-dollar question:  Why do I get a different answer every time I ask someone the same tax question?  It's maddening isn't it?  Here are my top three reasons this happens:

Extra! Extra! Pay Attention Remote Sellers

 

Since the Wayfair case became the law of the land, remote sellers have been as jumpy as a sinner in church about whether they must register to collect a jurisdiction’s sales or use tax. While each jurisdiction has different requirements, there are important updates. One update is the requirement that remote sellers who meet a Texas sales threshold must register to collect Texas sales and use tax.

Back-to-School Isn’t Just For Your Kids! Educate Yourself.

 

I can always tell when fall is around the corner. It isn’t because of the cool weather (which rarely appears when school is starting) or my internal Spidey sense, it’s all the Back-to School ads on TV. That, coupled with notices about tax-free weekends, always signals that school is starting soon.

How Do I Avoid Owing the Tax Authority Money When an Audit Occurs?

I love this question.  The answer is simple.  Learn the tax rules as they apply to your business.  And prioritize compliance with the rules BEFORE an audit is generated.

By the time an audit is generated, your records are either good or they’re not.  You have taxed the transactions in the audit period correctly, or you haven’t.  You have paid sales or use tax due on your purchases, or you haven’t.  You have receipts and other documentation needed to conduct the audit, or you don’t.

I Hired a State Tax Consultant…They Just Took My Money And Ran (away from me)!

It is so disheartening to have someone tell me they paid someone to “handle” a sales tax audit for them and they feel cheated because nothing happened.  They have a bill and no one will speak with them about it.  For everyone who is going through an audit, I have a few things that you should question when hiring an advocate. The next blog will address what YOU can do to secure your best audit result.

Why Do Companies Have a Second Set of Books, i.e. Financial Records?

I went to a conference and the speaker encouraged business owners to have a second set of books.  I heard the suggestion and thought, “what is this craziness?!” The rationale was as follows:

  • The first set of books would be given to your CPA, and serve as the basis for tax filings etc.  It would accurately reflect expenses, revenues, etc.
  • The second set of books would remove select items to show “how the firm was really doing.”  The second set of books would eliminate expenses, such as owner salaries, owner-related expenses, and revenue that was deemed extraordinary.  It was advised that the second set of books be kept under lock and key and never confused with the “real” set of books.

As people began to make plans to institute this plan, I was struck by the level of risk associated with this practice.  It is truly dangerous to have two sets of books.

Even Glinda Can't Make a Valid Audit Deficiency Disappear

I recently came across a recording of Wizard of Oz in my DVR and I immediately started drawing parallels between those characters and the state tax world. Some clients are like Dorothy, thrown into a strange world (state and local tax), but willing to follow the yellow brick road on what can be a harrowing journey. Others are like the Lion, praying for courage or like Oz, hiding behind a curtain and making up stories to keep everything running smoothly.

5 Things Business Owners Should Know about State Taxes

When you are a business owner, there are a million things that you must understand to run a successful business.  Understanding your state tax responsibilities is normally not high on your radar.  While every jurisdiction is different, there are questions that all business owners should ask about state taxes.

Do I Need to Register My Out-of-State Construction Company To Collect Sales Tax In California?

A really nice guy named Richard called because he was awarded a construction project in California. He stated emphatically that he wanted to do the right thing. He wanted to do his job, comply with state tax law, and rest easy knowing that he covered both his bases and those of his client.

As a construction company owner, Richard has it tough. Not only does he struggle finding skilled labor, he is also challenged with high levels of competition, decreasing profit margins and sales and use tax law complexities.

Just Tell it to Me Straight: Am I Required to Register in New States Because of the Wayfair Case?

You turned on the TV, looked at your email, surfed the internet and everyone was talking about the Wayfair case and nexus.  You listened (a little) and now you are left wondering what it means for you and your business. For some people, it means very little.  For other people, the world exploded.

Get it in Code! The Frustrations of Contacting the Comptroller or DOR.

News flash! Understanding the Tax Code is not the easiest thing to do. The good news is that almost jurisdictions provide resources to help taxpayers. Websites with publications, FAQs, the Tax Code and Comptroller or DOR agents are all ready to assist you. 

But, sometimes complex issues cannot be resolved by reading the FAQs section of the website or with a call to the taxing jurisdiction. Websites are only as good as the information on them. I have found old, superseded information on DOR websites. I have also found information that was just plain wrong.  

Tabasco is Not the Same as Hot Sauce! Neither are Exemption and Resale Certificates.

There are some things in this world that appear to be interchangeable, but really aren’t: diamonds and cubic zirconia, Tabasco and hot sauce, Drew and Jonathan Scott.  While these things (and twin TV host brothers) may look the same, they are different.   They are as different as Texas Sales and Use Tax Exemption Certificates and Texas Sales and Use Tax Resale Certificates.

It is Risky to Take a Tax Credit on a Return

There are taxpayers who pay consultants to look for and retrieve overpayments of sales and use tax. There are several ways to perform this service. One option is to reduce sales tax remittances or request a refund from the vendor without the approval of the state taxing authority. Another option is to submit a refund request directly to the state taxing authority.

Interim Reviews:  Friend or Foe?

The first thought that comes to mind when explaining to someone that they have no reasonable basis on which to challenge a tax bill is, "An interim review could have stopped this tax bill in its tracks."  A few events should trigger the thought that an interim review might be a good idea.

STOP!  No Properly Completed Exemption Certificate = Charge Sales Tax

In Texas, yes, with few exceptions, sales tax should be charged on taxable products and services until the client issues the properly completed exemption, resale or direct payment exemption certificate.  (Nexus is assumed.)

A seller should obtain a properly completed exemption, resale or direct payment exemption certificate at the time of the sale with a few exceptions. If the seller is audited and the appropriate resale, exemption or direct payment exemption certificate is not obtained, the sales tax and corresponding penalty and interest can be levied against the seller.

The Tax Man Cometh. Ignore Him at Your Peril.

There is nothing worse than a taxpayer who reaches out for help with a sales and use tax deficiency after all deadlines for an administrative appeal have been missed. There is very little to be done. The process typically works like this:

Detrimental Reliance … Why “Relying” on the Taxing Authority is a Loaded Proposition

Most people think if a representative of the state taxing authority makes a statement that is incorrect and they owe tax as a direct result of following inaccurate advice, they can challenge a deficiency based on a detrimental reliance argument. This is not true. Detrimental reliance is a legal term of art that has been defined. In order to mount a successful challenge to a deficiency finding in Texas, you must satisfy all of the following requirements:

What Is The "Taxable Purchases" Section of My Texas Sales and Use Tax Return?

This is the section of the Texas sales and use tax return that is used to report taxable purchases. When a vendor does not charge sales tax on a purchase that is taxable under Texas law, the taxpayer should accrue and remit use tax on the sales and use tax return.

Why Would Anyone Pay for an Interim Review of Sales and Use Tax Compliance?  (Part 1 of 2)

Most companies do not pay for interim reviews but there are special situations when they, arguably, should participate in these reviews. These situations include, but are not limited to:

“The content of this website is intended to convey general information only and does not represent accounting, tax or legal advice or opinion. Because tax laws, policies, and applications are dynamic and fact-specific, please consult with a state tax professional for a complete analysis of law as it may apply to your specific situation at a particular time. If you require an in-depth review of a specific fact situation, please contact our offices to establish a client relationship for opinion and advice.”