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Sales Tax. Are you at risk during an audit?
Recently we were working with a group of dealers and noticed several bills from vendors without sales tax. One in particular was a vendor who supplied shirts for a breast cancer event at the store. The shirts were given away to the team for the event, not resold.
Under their tax laws we discovered that the burden is placed on the end user to pay the sales tax. This is the case in many states. A good rule of thumb, when purchasing items not for resale, is to require your vendors to charge you sales tax. Sometimes this is easier said than done.
We all know that a sales tax audit can be extremely painful. It is easy to put a process in place that will eliminate your liability in this area. Anytime a bill is received from a vendor without tax, gross up the expense or asset to include that sales tax and post to the appropriate accounts. Stamp the document (get a custom stamp) that the tax has been set up. Make a copy of the invoice and keep in a separate file that will accompany your monthly sales tax documentation. If/when the time comes you can share with an auditor to prove compliance.
Keep this in mind for any Amazon, out of state, EBay, etc., purchases for items that are going to an expense or fixed asset account. Just because the vendor did not charge you sales tax does not relieve your responsibility to calculate and pay tax as the end user.
This link can provide you with more information on your state's sales tax laws.
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