Jonathan Medows, CPA, Managing Member of MEDOWS CPA, PLLC provides the following insights to help convenience store and bodega owners better understand the critical role of accurate sales tax reporting and timely sales tax returns in their businesses.
What do convenience store and bodega owners need to know about how the NYSDTF views sales tax reporting?
JM: Simply said, sales tax reporting is an area of growing interest for the NYSDTF —and if it is not done correctly, or sales tax is underreported, it is a serious offense. Inaccurate reporting or underpayment may lead to a sales tax audit of a convenience store or bodega which may progress to tax assessments and interest and penalties owed. These ramifications apply not only to the business, but officers of a company and its owners can also be held personally liable. To add to the issues related to problematic sales tax reporting (intentional or inadvertent) a criminal investigation by tax authorities may also be a consequence of inaccurate sales tax reporting. The bottom line here is that New York and NYC sales taxes must be reported accurately, on time and in accordance with the most current tax laws.
What are the key issues do convenience store and bodega owners face when it comes to New York State and New York City sales tax returns?
JM: While it seems pretty straight forward at first, reporting and remitting an accurate amount of sales can actually be quite challenging because of the different rates for various New York State counties and cities. Many convenience store and bodega owners—especially those owning multiple stores in different locations—find it difficult to accurately interpret and calculate the sales tax they owe based Form ST-100 (the New York State and Local Quarterly Sales and Use Tax Return form).
This is because Form ST-100 has 47 different rates listed for various geographic areas. If you do business in several different locations within New York State, the calculations can become quite complicated. Adding to this complexity is the fact that you must not only use correct tax rates to calculate the sales tax you owe, and you must also provide records of your sales transactions and sales tax payments to substantiate your totals.
Providing adequate proof to support sales tax owned is not a request by the NYSDTF—it is New York State tax law. The law requires that every business subject to sales tax must keep a record of every sale so the amount of tax due can be determined. Convenience stores, bodegas and other cash-based business owners who fail to do this will have a catastrophic situation on their hands if their business is subject to a NYSDTF sales tax audit.
What is the best course of action for convenience store and bodega owners who are facing a sales tax audit?
JM: The best advice I can give any convenience store, bodega or cash-based business owner in New York City who has received a sales tax audit notice is to consult with a CPA firm that is experienced is handling sales tax for their type of business. Things can get complicated quickly and it is also very time-consuming to work through a sales tax audit, especially when you’re still trying to keep your business operating. Not to mention, there can be personal financial implications if a sales tax audit is mishandled. An experienced professional who deals with these issues every day—they know and understand how the laws applies to your business and will be an invaluable partner for you to mitigate the impact of a sales tax audit on your business. Any monetary investment you make in their services will pay for itself in terms of resolving sales tax audit issues for your business.
If your NYC convenience store, bodega or family-owned or cash-based business needs assistance with taxes, accounting, sales tax audits or payroll tax audits, contact MEDOWS CPA, PLLC.