When your convenience store or bodega is faced with a sales tax audit, the NYS auditor will look at a multitude of items and conditions to try to increase the amount of sales tax you must pay. However, the following are some New York sales tax audit errors that are quite common and easily remedied—even if you’re not facing a sales tax audit, it’s a good idea to review to and to take proactive steps to correct them:
- Incorrect or absent exemption and resale certificates. If you do not possess proper exemption certificates, some auditors may allow you to attempt to get them retroactively, but that is not something you should rely on. As for resale certificates, if they are not on file, the auditor will typically determine an error rate and project backwards to assess tax and penalties—which can be substantial.
- Unreported sales. As a cash-based or accrual based business owner, it is your responsibility to ensure that you have the processes and policies in place to capture your sales as accurately as possible—otherwise, you may be subject to a cost of goods audit and significant fines and penalties.
- Charging the wrong sales tax rates. New York State has nearly 50 different geographic areas listed in its sales tax schedule, all with varying sales tax rates. It is very difficult to stay on top of these rates and changes to them—having a tax professional available to you to keep you current and in compliance is the best way to avoid this error.
- Not recognizing unique sales tax rules and regulations. There are many goods and services that your convenience store or bodega sells such as food, beverages, gambling tickets, tobacco, and fuel which are subject to special taxes. It can be very difficult to follow these special tax situations—and tax authorities know it. You may be audited specifically for these types of taxes periodically and if you are found to be non-compliant it can open you up to a full-blown sales tax audit. Having a New York CPA sales tax expert on your side can save you the pain and penalties associated with a increased NYSDTF scrutiny.
- The accrual of sales tax. Many convenience stores and bodegas do not properly remit the sales taxes they have collected from their customers. If you are subject to a sales tax audit, your tax returns, general ledgers, invoice registers and actual invoices, sales journals and summaries of sales will be scrutinized. Auditors will use these records to calculate the sales tax that you should have remitted. To avoid having the NYSDTF do these calculations for you, get professional sales tax preparation help from an experienced CPA—before you report and remit your sales tax.
- Business acquisitions. If you have acquired another convenience store or bodega, you will need to be extra vigilant about sales tax compliance. If you acquire a business in a different market, you may have a new tax nexus and new tax liabilities to contend with—which may trigger a sales tax audit. Specialized expertise is generally required to ensure that you are properly reporting your pre- and post-acquisition taxes—so contact an experienced NYC CPA for assistance.