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Sales Tax – It’s the Things You Don’t Know to Fear…

Mark Stone, CPA, MST
Published Date:
Dec 1, 2023

Over 30 years, the problems that clients experience with sales tax tend to repeat themselves, over and over and over again. Most of those problems are easily preventable if someone would just spend 15 minutes discussing sales tax with them when they started the business, or at least one year or two later—when the business started to get traction and really took off.

Therefore, we created the Sales Tax Checklist

Let’s look at these Top 10 items to know and address to help stay out of the sales tax fear zone!

1 & 2. Where does the Company need to file?  Anywhere it has sales tax nexus. Nexus can come about from having a physical presence in a state or exceeding certain economic thresholds such as $100,000 in sales or 200 transactions in a 12-month period. If you have nexus, be sure to register in the appropriate state(s) and file those sales tax returns.

3. Now that you know which states matter, determine if the Company’s revenue is subject to tax.  Don’t make any assumptions based upon what a different state does. Because every state has its own sales tax rules, making an assumption based upon a different state might be a disaster.

4. Understand which record keeping requirements exist. Create an accounting system that meets or exceeds those requirements, and be sure to back it up. If exemption certificates are required, be sure to get those, too.

5. Understand “use tax.” Just because the seller didn’t charge your company tax, does not mean you do not owe that tax directly to the state. The state just calls it use tax (in this case) rather than sales tax.

6. The tooth fairy is real—refunds do exist!  Most states have various sales tax exemptions for Resale, Manufacturing, R&D, Printing, Packaging, IDA projects and more.  If you are in the right place, or have the right customers, or do specific types of work you might not have had to pay sales tax on your purchases. If you did, you generally have three years to get that money back with some interest from the state. Nothing beats finding a dollar under your pillow in the morning!

7. Once you register, timely file those returns even if nothing is due. If you do not, the states make up estimated assessments showing you owe a whole lot more than nothing.

8. If you are being audited, get the right professional help from Day One. Don’t wait for the audit to go bad or when you get a big bill—get help from the day you get the audit notice. The tax departments do not give “do-overs” if you mess up handling your own audit.

9. If you owe anyone money, find a way to pay or settle the liability. Assessments are not fine wine; they do not get better with age, and they take decades to go away. There is not much of a difference between a tax assessment and toxic waste; the sooner the problem is resolved, the better.

10. If you do not owe them the money, fight the assessment. Be sure to timely protest the assessment, get copies of the auditor’s files, do your tax research, prepare your rebuttal calculations and be ready to present them. Be sure to get competent help when you are going to a hearing. My favorite saying is: Fight like you’re the third monkey on the ramp to Noah’s Ark, and it’s starting to rain!

Mark L. Stone, CPA, MST, is the managing partner of Sales Tax Defense LLC since 2006.  The firm specializes in sales and use taxes. Mark's work as a New York State Tax auditor as well as a tax manager/principal at several prominent accounting firms over the past 30 years has earned him a reputation as one of the top professionals for multi-state sales and use taxes. He is a frequently invited by various organizations to speak on sales and use tax issues and serves as an expert witness testifying in tax court on behalf of clients Mark was also an adjunct professor at Long Island University–C.W. Post. Mark began his career in 1991 as a New York State sales and use tax auditor, going out and asking businesses for money. Many years ago, he left state service, earned his CPA license and now exclusively helps accountants and their clients prevent or reduce sales tax problems.

If you have a question, please reach out to him at Sales Tax Defense LLC ; 2000 Deer Park Ave, Deer Park, NY 11729. (631) 491-1500 x 11;