Navigating sales tax compliance can be tricky, and knowing what catches the attention of taxing authorities is essential. In this video, we discuss 3 common red flags that could trigger a sales tax audit and what you can do to stay ahead. Watch now and learn how to protect your business from potential compliance issues.
Key Takeaways:
Large Number of Exempt Sales: Taxing jurisdictions require businesses to report total sales, taxable sales, and taxable purchases on their sales and use tax returns. Significant differences between your total sales and taxable sales numbers often indicate a large number of exempt sales.
Sales can be exempt for various reasons, including sales to out-of-state customers, sales of nontaxable items, or sales to tax-exempt customers. Whatever the reason, it’s crucial to clearly document why certain sales were not taxed. This includes maintaining all appropriate records to substantiate the tax-free nature of the transactions.
Amended Sales and Use Tax Returns: Amended tax returns can alert taxing authorities to potential compliance errors. Always retain a clear explanation for amendments, as auditors will scrutinize these returns closely.
No Taxable Purchases Reported: Taxing authorities expect all businesses to report taxable purchases. Failing to report these can signal noncompliance. Address taxable purchases to avoid raising red flags.
Stay informed and prepared to tackle any compliance challenges!
Our mission to provide a resource so business owners, accountants and bookkeepers can understand sales & use tax compliance. We know that sales and use tax laws are not the easiest to understand. Our focus is on empowering you with a framework and general understanding, so you know what questions to ask and where to go to get the information you need to stay on the right side of sales and use tax compliance.
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