Terry Barrett, Keiter Tax Senior Manager and Leader in Keiter’s State and Local Tax team, shared her sales tax compliance insights in her article, “Why sales tax compliance is important”, featured in VSCPA’s Disclosures magazine.
Excerpt from Terry Barrett’s VSCPA Disclosures magazine article:
Some businesses take sales tax compliance in stride – they collect and remit the taxes due to the appropriate state(s); others not so much. Much to my dismay, I occasionally hear from businesses that audits by taxing jurisdictions are their means of compliance. Certainly that is one way to pay the taxes that are due but I would not necessarily call it “compliance“. After experiencing an audit resulting in an assessment of tax and interest/penalties, some businesses are more willing to focus the efforts and resources on sales and use tax compliance; others, still not so much. They opt to wait until the next audit.
Sales tax compliance is important, not only because the taxing jurisdictions require it and will penalize uncompliant taxpayers, but also because compliance affects opportunities that may come along. Consider a business that has been postured for sale; its owners are finally ready to sell, cash in on all their hard work, and retire without any worries. A due diligence review reveals they had not collected sales/use tax on taxable sales in 15 states where they had “nexus” — a connection sufficient to require tax collection and remittance. This oversight goes back three to four years or longer. If the business has not registered and filed, legally the statute of limitations is not in effect. Was this oversight intentional? Possibly they knew what they should do but did not want to bother with it; or possibly they really did not know about the other states’ requirements. In either scenario it could be costly. The prospective buyer decides it does not want to deal with the issue and walks away or requires a significant purchase adjustment. Sales tax is one of the biggest deal-breakers in business sale transactions. Access full article
Source: VSCPA Disclosures Magazine
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