Sales and use taxes is a complicated and tricky issue to handle. The recent developments regarding the scams and fine definitions proves it very well. Sales Tax is a tricky world in America. The state has a complicated tax system which can be difficult to navigate. Sales tax is a complicated issue, and one that can be difficult to navigate when you are an entrepreneur. The main problem with sales tax is that it varies from state to state. States have their own set of rules and regulations, which can make it difficult for entrepreneurs to know what they need to do in order to stay compliant.

How Lack of Knowledge Can Cause You Loss

Recently a company based in New York was denied eligibility for sales tax refunds on several purchases of concrete by the court’s order. In the case, petitioner argued that the purchase made by the company for the concrete was for a nontaxable service provided by the seller. The service would also give the installation of capital improvement to real property instead of a taxable delivery of the concrete. Even the appeals court agreed with the initial ruling and restored the denial, further confirming that the transactions were retail sales of personal property. To clarify further, the appeals court even stated that if the concrete had been purchased in conjunction with the installation, instead of individually then the sales tax would have been exempted. Invoices showed concrete purchases instead of installation services and this slip of evidence would have damaged the petitioner’s argument a little further.

Understand the Sales Tax System

What does this entire New York sales and use taxes story tell us? The New York sales tax system is one of the most complex in the country, with four major types of sales taxes: general sales tax, county and city sales taxes, school district taxes and special district taxes. The general state-wide sales tax rate is 4%. However, there are some exceptions to this rule; for example groceries and prescription drugs are exempt from this 4% rate. There are currently 60 counties in New York State with their own rates for county and city sales. Recently the North Carolina Department of Revenue clarified that the purchasers of machinery and equipment for manufacturing plants are not exempt from state sales and use tax.

The taxpayer in the above case was in the business of collecting goods and processing them into products sold to customers. The goods have to go through the process of sorting, baling and weighing before they are declared as finished products. Still, the court’s decision was that the taxpayer did not qualify as a manufacturing industry or a plant to be given exemption. In the case of manufacturing, exemptions are generally based on the use of equipment or the type of entity. Definitions of manufacturing and manufacturers in state laws should be examined before acquiring any equipment. Business owners are even scammed with the letters saying that they are from the State Departments with the fake Department of Revenue logo and name.

The world of sales tax for any business is a tricky one because of these scammed letters as well. These letters give the impression that the recipients are under investigation for failing to pay taxes.  The main purpose of these scam letters is to make the recipient prove his or her accounting records prepared by a licensed professional to the fake ‘Resolution Officer’ mentioned. This way, scammers can extract sensitive information from the records. There are suspicious and inaccurate details such as no return address, fake names of state enforcement units, a generic salutation and no particular information about the taxpayer’s account.

Conclusion

Sales tax crimes are on the rise. As a business owner, you should never fall for a sales tax scam even while panicking to be clear on your legitimate taxes. Financial trail and communication should always be verified. If you think that your business is also affected by the sales and use tax audit procedures, you can always take the services and information from HRSS. HRSS can help its clients mitigate risk of overpaying sales taxation, as well as the stress related to being subjected to a sales tax audit.