Common Pitfalls in the Administration of Sales and Use Tax

Posted on: August 25th, 2017 by BDO USA Tax Publications Feed

In the increasingly complex world of sales and use taxes, there are many traps for the unwary and the unprepared.
 

1) NOT MONITORING NEXUS DEVELOPMENTS 

Nexus is the trigger for your company’s state tax compliance obligations. Whether developments in a company’s business activities or developments in nexus laws and policies, many companies often fail to monitor nexus.  Recently, a wave of new state economic nexus provisions have entered the nexus arena and we expect more states to follow in the near future. Are you ready? Through a nexus study, BDO can help you navigate traditional physical presence nexus, affiliate nexus, “click-through” nexus, and the recent, controversial wave of economic nexus. If on-line Marketplace sales and related fulfillment activities is causing your nexus, act now and eliminate all historical liabilities in several states through a special disclosure program that ends on October 17, 2017.
 



2) AUDIT MANAGEMENT (OR MIS-MANAGEMENT) 

Is the audit managing you or are you managing the audit?  Effective planning and development and execution of an audit program creates efficiency during the audit process, lowers assessment risk and improves prospective compliance. Leverage the depth of BDO’s experience to assist you with planning for and defending sales and use tax audits and developing an audit program for your sales and use tax function.


3) FAILING TO RECOVER USE TAX OVERPAYMENTS 

Businesses are generally aware of their use tax obligations when vendors fail to collect sales tax, but many companies fail to take full advantage of available exemptions or request refunds within the statute of limitations.  BDO can perform a Refund Review (or “Reverse Audit”) of your company’s sales and use tax records, focusing on situations in which you overpaid tax and file refund claims to recover the taxes.  Such review can be performed at any time, but is particularly appropriate at the time of a state audit.


4) ASSESSMENT OF SALES AND USE TAX PROCESS & CONTROLS

Have you taken BDO’s Sales and Use Tax Process and Controls Survey and measured your company’s process and controls against best practices (access the survey below)? 
 
Still unsure how your sales and use tax function measures up to compliance obligations?  With a one to two day Diagnostic Review, BDO can review your sales and use tax process and controls and provide findings and recommendations to guide your next steps toward ensuring substantive compliance.
 

5) NEW DEVELOPMENTS! USE TAX NOTICE AND REPORTING REQUIREMENTS 

Specifically, the failure to comply with new notice and reporting requirements, i.e., invoice notices and annual reporting to customers and or taxing authorities. For out-of-state retailers that do not have an obligation to collect sales or use tax, several states are introducing and enacting use tax notice and or reporting requirements upon the retailer. Some of these provisions are imposing per transaction fines for failure to comply.  Some of these provisions became effective on July 1, 2017.  BDO can help you understand and meet your obligations in the states in which you do business.
 

For more information, please contact:
 
Bill Jozaitis
Managing Director
Central Region
  Tom Smith
Partner
Southwest Region

 
Steve Oldroyd
Managing Director
West Region
  Dennis Sweeney
Managing Director
Northeast Region

 
Katherine Gauntt
Senior Manager
Southeast Region
   

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