Four billion to seven billion dollars. That is how much New York State Comptroller DiNapoli told New York State Governor Cuomo will be the decline in 2020 tax revenue from the Executive Budget. Let me say that again: A $4,000,000,000 to $7,000,000,000 shortfall!
And New York State is not alone. Suffolk County, NY claims to be short $1.5 BILLION dollars in the next year and a half. Illinois is predicting a shortfall of $2.7 billion. Maryland is predicting a shortfall of $2.8 billion. Pennsylvania’s April sales tax collections were 49.8% below projections.
Addressing these shortfalls almost guarantees additional compliance measures which means more tax audits.
This means findings more taxpayers that can be audited. As a result of a 2018 Supreme Court decision, this includes audits on out-of-state businesses that have economic nexus in the state. While every state has its own economic nexus standard, if your business has $100,000 or more of sales into a state where you are not currently filing sales tax returns, due diligence should be completed to determine if you should be filing sales tax returns in that state. Furthermore, this may also include new legislation that imposes sales tax on previously nontaxable transactions. There are entire industries that would be ripe for audit with a change in the tax law, especially in areas like cloud-based services, which were not subject to sales tax in many states.
This means conducting more audits. It is easy to see how just conducting more audits will lead to more revenue for a state.
This also means states interpreting the tax law more aggressively. While increasing the number of businesses that can be audited and how many audits are conducted are both rather straightforward, interpreting the tax law is much greyer. Tax audits are never fun but tax audits where the tax law is aggressively interpreted against taxpayers are even worse. An especially aggressive interpretation can even require a court proceeding to resolve.
There is a lot going on in the world today. Don’t let sales tax become yet another issue that you have to deal with.
Contact Sales Tax Defense LLC if you are being audited for sales tax or if you want to be prepared for a sales tax audit!
Audit Reduced From 6 to 3 Years!!
A security company came to Sales Tax Defense LLC when they received a notice stating that they were under audit by the NYS Department of Taxation & Finance for sales and use tax purposes. The company had never filed a sales tax return and therefore their audit period was 6 years.
Sales Tax Defense was able to communicate with the auditor that the Company did not realize their sales were taxable and the company never actually collected sales tax because of it. After going back and forth several times and speaking with the auditor’s supervisor, the Tax Department agreed to reduce the audit period from 6 to 3 years! In addition to reducing the audit period, Sales Tax Defense was able to help the company write letters to its customers to obtain documentation to show that 80% of its sales were not subject to sales tax!
The potential sales tax liability was reduced by 90%, penalties were abated, and interest was reduced to the lowest rate allowed by law!