Store POS System Blog

Getting The Attention of a Sales Tax Auditor

It varies from state to state and probably from auditor to auditor but there are certain things that are bound to get the attention of sales tax auditors. A tax exempt charge account that has a large volume of cash sales is one of those things that gets the attention of sales tax auditors. The reason is simple. Suppose a friend of one of your sales clerks comes into your store looking for a good deal. The sales clerk figures that he can run a cash sale through a tax exempt account and give his friend a lower price with no harm done. If it happens just a few times, then probably nothing will come of it. However, things like that don't just happen a few times. If there is a continuing pattern of cash nontaxable sales to a charge account, this begs to be investigated if you get a sales tax audit. If you are audited and found to have not paid some sales tax, then you will have to pay the sales tax plus interest and penalties. The interest and penalties can be more than the tax. A tax audit can come from multiple directions. I will mention a couple that I have heard of in the past. For example, suppose Joe's Repair Shop buys about $1000 a month in charge sales and your sales clerks are running another $1000 a month in cash nontaxable sales through Joe's account. If Joe is audited and they look at his part sales, then they are going to know something is wrong when his sales are about half of what they would expect from his purchases. Also, an audit is likely to come from a former employee looking for a whistle blower's fee. I remember a customer of ours telling me about one of his employees that had formerly worked for a mass retailer. The employee knew that the mass retailer was cheating big time on their taxes. Our customer and his employee went to the IRS and reported the tax cheat. The two of them split a very large whistle blower's fee.

The bottom line is watch cash nontaxable sales to a charge account on your Store POS System to be sure that these sales are actually for the account in question.

Labels: cash nontaxable sales, Sales tax audit, Store POS System

posted by MIB @ 8:51 AM