Jonathan: I recently spoke to Mark Stone, the founder of Sales Tax Defense about how to best handle sales tax issues and how to prevent them from occurring. Below is an edited version of our conversation:
Jonathan: Mark, why don’t you share a little bit of your background dealing with sales tax issues?
Mark: I am the Managing Partner of Sales Tax Defense LLC since 2006. We specialize in Sales, Use and Transaction taxes. I have worked as a New York State sales tax auditor as well as a Tax Manager at several prominent accounting firms over the past 25 years. I am frequently invited by various organizations to speak on Sales & Use Tax issues and I have served as an expert witness testifying in tax court on behalf of my clients.
Jonathan: Excellent. What are the best practices a business should employ so that the proper amount of sales tax is paid on-time?
Mark: First you want to register for Sales & Use Tax, so you have the legal right to collect sales tax. Sales tax is collected on retail sales, leases or rentals of most goods, and any taxable services in the state required. Use tax is due when a seller hasn’t properly charged a purchaser sales tax. Businesses should understand when they need to charge sales tax and what documentation they need from their customers if the customers are not paying tax.
Then you want to make sure you file on time, even if no tax is due. Lastly, mail your returns by certified mail with a return receipt requested so that you have proof it was received on-time, or file electronically.
Jonathan: OK, what should you be doing in your business?
Mark: You need to know what you are supposed to charge tax on and charge it. Too many sellers make excuses as to why they didn’t charge their customers tax. The State comes back years later and make the seller pay what they didn’t collect, plus interest and penalties. Your business should keep adequate and complete records for at least 3 years and make sure your customers pay the tax when they are due. You also want to collect Exemption Certificates from the customers you don’t charge sales tax.
Jonathan: It sounds like a POS system would solve many of these issues. Also, you mentioned Exemption Certificates? How do I get that?
Mark: Exemptions certificates are provided by the customer and given to the seller. They are blank forms downloaded from the NYS Tax Department’s website. The purchaser completes the forms and gives them to the seller to document why the purchaser is not required to pay the seller sales tax on the transaction.
Jonathan: Anything else?
Mark: Generally, NYS gives a person or business 90 days to respond to a notice. If you don’t respond within 90 days, then the amount claimed to be due becomes “fixed and final” and the Taw Department can now begin seizing your assets to pay the assessments. If you get a bill from the government, you should call your tax professional immediately. The bill is not going to go away on its own!
Jonathan: Mark thank you for your time. Mark can best be reached at: Sales Tax Defense, LLC
673 Deer Park Avenue, Dix Hills, NY 11746, 631-491-1500 x.11, www.salestaxdefense.com