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

Posted by Mary Thomas, CPA-Attorney on Oct 15, 2019 12:15:36 PM

stop-an-audit

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:

1.  It's the same question but people hear it differently.  There are times when a sales tax question is simple and there are times when it's not.  When you ask a question, some people will give you a general rule of thumb.  That general rule of thumb may dictate one answer.  Your unique fact pattern may not fit that general rule.  There may be some "tiny" fact that changes your tax responsibilities.  One person may hear a nuance that changes the response and the other person may not.  The answer hasn't really changed...you're getting a customized response.

2.  It's the same question but the rule has changed.  I can't tell you how many people argue with me about their understanding of tax rules.  In some instances, the person is reciting tax rules that were changed years ago.  One gentlemen went war about the applicable tax rate.  He recited rules that were correct at one point.  They had no current application.  It's not enough to research an issue once and rely on that research.  The laws and policy change.  Review your policies periodically to ensure continued compliance.  In this case, the answer was updated.  Okay, it changed!

3.   The rule works in one state but not in another.  Different states have different rules.  The rules in Texas don't work in Louisiana (all the time).  When you are expanding (a real goal!), take the time to research the rules in the state you are entering.  Some people are frustrated when the rules for one state don't apply everywhere.  I know it can be frustrating but train your brain!  I think of each state as a bucket.  Put each transaction in the right bucket and apply the correct set of rules.  In this case, did the answer change?  I love Star Wars...The answer didn't change "from a certain point of view."

After reading the 3 reasons answers "change," have you figured out that I gave you a treat and a really big TRICK!  The answers aren't really changing (except in example 2).  There is a correct answer.  Take ALL the facts into account to catch pesky exceptions to the rule.  Stay abreast of law and policy changes.  And always apply the laws of the governing jurisdiction.  

Happy Halloween from the TT&T team!

Topics: Sales Tax, Use Tax, sales and use tax, Education, Business Management, State Tax

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