Don’t Let Your Home State “Use” You
The economy is in bad shape, and your home state is feeling the effects just as much as you or me. States are over budget and out of luck when it comes to raising taxes and further budget cuts. So how are they footing the bill?
States are searching for ways to broaden the tax base. Some have turned to expanding sales tax to cover services, but most have turned to the stricter enforcement of sales and use tax on internet purchases. This “stricter enforcement” is resulting in new laws and legislation and increasing sales and use tax audits. The new laws and legislation are aimed at the internet vendors in an attempt to require them to collect and remit sales tax to states, but the increasing sales and use tax audits target the purchaser.
States are mainly auditing small businesses because most individuals do not exceed the exemption amount. Audits can be random and are becoming more frequent and more intense. Auditors are trying to look well into the past in an attempt to recover as much tax as possible. Businesses need to know their rights during these audits. If you receive a notice regarding this issue, contact your accountant immediately. In the meantime, keep good records (save all receipts) and make sure sales and use tax returns are being filed, even with zero balance due. This will minimize your exposure in the unfortunate event that you face a sales and use tax audit.