PART 3: BECOMING COMPLIANT WITH STATE TAX LAWS
This FAQ continues our three-part series of Frequently Asked Questions: Sales and Use Taxes
Q: If we have not been compliant with state tax law, is there anything we can do to become compliant?
A: Yes. Use the Voluntary Disclosure process, whereby you come forward before you are contacted by the state and you will pay tax and interest for a limited look-back period and the state will generally waive penalties.
Q: What if I receive an Audit Questionnaire from a state?
A: Do not IGNORE IT. Answer the questions based on the entity on the questionnaire and note the questionnaire is signed under the penalties of perjury.
Q: I have never been audited for sales tax, I should be safe?
A: No. Taxing jurisdictions across the country are increasing the frequency and volume of sales tax audits and becoming more aggressive due to budgetary deficits.
Q: What questions should we ask when evaluating our internal sales tax compliance?
A: Here are a few questions:
- Are we registered and filing sales tax returns in all the jurisdictions where we have nexus?
- Are we charging the correct state and local sales and use tax rates?
- Are we underpaying or overpaying sales tax on expense, inventory, or asset purchases?
- Do we have all the exemption and resale certificates for our exempt customers?
Q: How often should we review our internal processes for sales tax to make sure we stay in compliance?
A: We recommend evaluating internal sales tax processes several times a year or at a minimum, every quarter. These checkups help to identify potential issues, such as whether sales tax returns are being timely filed, exemption and resale certificates are being collected from customers, and you are registered for sales tax in the correct jurisdictions.
Freeman Law works with tax clients across all industries, including manufacturing, services, technology, oil and gas, financial services, and real estate. State and local tax laws and rules are complex and vary from state to state. As states confront budgetary deficits due to declining tax revenues and increased government spending, tax authorities aggressively enforce state tax laws to recapture lost revenues.
At Freeman Law, our experienced attorneys regularly guide our clients through complex state and local tax issues—issues that are frequently changing as states seek to keep pace with technology and the evolution of business. Staying ahead requires sophisticated legal counsel dedicated to understanding the complex state tax issues that confront businesses and individuals. Schedule a consultation or call (214) 984-3000 to discuss your local & state tax concerns and questions.