A previous post on this blog talked about how an iconic store in New York City was facing allegations that it evaded collecting and remitting the state’s sales taxes for years. The store is now staring down an over $7 million delinquent tax bill that is now pending in the state’s courts.
The story serves as a good opportunity to remind businesses in and around White Plains about their obligations to collect and remit sales tax to New York’s taxing authorities. Likewise, depending on one’s local jurisdiction, additional local sales and other taxes may also apply.
For a consumer, sales tax may seem like a pretty simple affair, as it is just a percentage over and above the sales price that’s just an additional cost. However, for the merchant, who is ultimately responsible for paying the tax, collecting and then paying sales tax can be really complicated.
For instance, there are very specific recordkeeping and accounting requirements which a merchant must follow. If they fail to do so or are sloppy, the merchant could wind up having to pay additional tax which it otherwise would not owe.
Like other types of taxes, a merchant’s sales tax returns are subject to audit by the New York Department of Taxation and Finance. The Department uses both desk audits as well as field audits, that is, visits to a merchant’s place of business to inspect the books and to make sure the business is following the law. The end result of an audit which goes poorly could be a hefty tax bill as well as penalties and interest.
While sales tax might not be the top priority for businesses when compared with income taxes and payroll taxes, tax controversies in this respect can prove costly. A business facing a sales tax issue should consider seeking legal advice.