Florida Audit: Total Amateur Hour
So the Flordia sales tax auditor presented her preliminary findings. She believed that I had under-reported revenues and sales taxes by half! Hundreds of thousands of dollars over three years. I told her it was absolutely impossible. No way we were off by that much.
And we were not. It turns out that the FL sales tax report we fill out has five categories of revenue one must report in. One is general sales. Another is lodging. We have revenue in both and report on both lines. She had apparently only pulled the data from her system from the general sales line. Total amateur hour. Incredible. (Several years ago there would have been a good "Bush League" pun but since the governor's office has turned over the opportunity is lost).
The other finding is that we had about 8-10 expense invoices (out of hundreds I had to pull yesterday by hand, ugghh) without any sales tax broken out on the invoice. This may mean the vendor did not charge sales tax, or that the vendor just did not break it out. Of course, she takes the former position, without any evidence.
This expense invoice audit is an irritating result of the "use tax" rules that states are imposing to try to make one pay tax on out of state sales. But these were not out of state vendors, they were all Florida vendors. I told her that if she thought they were not charging sales tax, to go audit them. She said I had to pay.
This is absurd. If I am found to have under-collected taxes from my customers, then I have to pay. She is not going to go to all my campground customers and charge them back use tax. But when I am the customer and the vendor potentially undercharges me, I have to pay as the customer? There is no consistent rule to explain why this makes sense, except for the general rule of government that they will take money from whomever they can whenever they think they can get away with it.
oneteam:
And of course, no one will take them to court to get clarification on the issue, either. This is why people hate government.
October 22, 2013, 10:09 amCurtis:
Are you going to let them get away with that?
October 22, 2013, 11:09 ampegr:
Of course it's amateur hour. Anyone with professional skills is earning decent money in the private sector.
October 22, 2013, 11:47 amStephen_Macklin:
One almost gets the sense that this has nothing to do with sales taxes. Because... Shut Up!
October 22, 2013, 11:55 amAnna:
Having previously dealt with state level bureaucrats in the medical field, i can honestly say these people are just looking for a reason to validate their existence. They have to find anything to justify their intrusion. At one point, finding nothing that violated the law, one criticized the labels on the binders. They're idiots for the most part. It's amazing how you've resisted the temptation to name and shame your Florida bureaucrat.
October 22, 2013, 12:13 pmAnObserver:
Oh, sales tax. The WORST of all the possible audits. Concerning yesterday's post and my comment, we see (in NY) sales tax audits stretching on for days as the auditor climbs further and further up the colon. Anyway, in NY, like you said, the tax collecting responsibility in on the in-state vendor and that auditor should be adding another name to her hit list. The receipt must specifically show the sales tax charged in NY. Use Tax is due from the purchaser for these transactions outside the state. Sounds like another poorly trained bureaucrat with an enlarged sense of power....
October 22, 2013, 1:31 pmIncunabulum:
And, what do you want to bet that the auditor, auditing your *vendors* is telling them that they *also* need to pay the sales tax they didn't itemize on their invoice?
October 22, 2013, 5:50 pmWhite Rock Mike:
I once sold an airplane while I was working at a small community bank. The sales tax auditor asked why we didn't pay sales tax on the sale of the repossessed airplane. I claimed that it was an "occasional" sale. She said that banks were retailers of "repossessed" property.
Guess who won?
October 22, 2013, 7:42 pmRick from Roswell:
While I almost always agree with Coyote, I have to disagree on this one. They call it a "Sales & Use" tax for a reason. The vendor is supposed to collect & remit if he has nexus. But - if he doesn't, the customer must self-assess and remit. Every well-run payables dept knows this - and does this. If they don't, they're going to have to pay on audit. This also is a KEY POINT in the Internet Sales Tax debate that is rarely understood.. Just because a customer is not charged tax by a vendor does not excuse him from self-assessing and remitting. Of course, no one does it, but that's because the states don't enforce it.
October 23, 2013, 6:49 amirandom419:
I wish that you had the right to record any government employee that interacts with the public.
October 23, 2013, 6:54 amJohn O.:
What a bunch of crap. The biggest problem with a overwhelming majority of the states' sales tax codes is that the ultimate liability for the tax is the consumer/purchaser. So if the vendor was committing sales tax fraud by applying wrong rates or not even collecting it, you're still liable. The only jurisdiction I know where the vendor is ultimately responsible for collecting and remitting the sales tax is Arizona. The Transaction Privilege Tax was built do avoid these problems.
October 23, 2013, 8:07 ammarque2:
Is it worth contacting the 10 vendors and ask them to give you a new receipt with the tax breakdown?
October 23, 2013, 8:43 amI guess in the future you are now always going to look for that tax itemization on your bills.
Joe_Da:
two points with regard to the sales tax audit
1) simply request a corrected copy of the receipt from the vendor. Rick from Roswell below has a good summary of the applicable sales tax law.
October 23, 2013, 7:18 pm2) Anyone arguing for a consumption tax in place of an income tax is delusional. Each states sales tax statutes are currently 100 -150 pages in comparison to the internal revenue code which is currently around 4-5k pages. However, once there is a national sales tax, those 100-150 pages will quickly morph into 4-5k pages
Joe_Da:
That is actually quite common, at least from the standpoint of who to select for audit. Extremely common in the construction industry where the small contractors tend very unsophisticated in financial, accounting and tax compliance. I have handled several sales tax audits in the small contractor arena, and most have been referrals from other contractors, subs, suppliers, etc, based on substandard invoicing which is an indication of either non compliance or not understanding compliance.
October 23, 2013, 7:24 pmV:
Mmm, audits. I just got a notice from the IRS that they think my form 1040 from 2011 is wrong. They're claiming that I paid no mortgage interest, I claim I paid the 7k which my credit union reported to me on a form 1098. Mysteriously, they got the two form 1099s from that credit union just fine, and aren't trying to give me money back because they don't think I earned that interest income . . .
This is, of course, the same mortgage and account which I paid interest on in 2010 and 2012. And I just spent two hours dealing with this. It took 5 minutes to pull the form 1098 from my records. It took an hour and 45 minutes reading their form, researching how to deal with it (they've got a couple nasty tricks to make it more likely that you'll end up owing them the money), and writing up my response. Then 10 minutes to scan and print copies of everything (no way are they getting originals).
I'm currently trying to decide if its worth the hassle of going to the post office to mail this with some sort of return receipt or evidence that I sent it . . . probably is, they want almost $2k back from me.
October 24, 2013, 6:22 amnorse:
Ugh. This is infuriating. Might I suggest the arbitration process? Your argument that this is not your liability is solid; at the very least, an explanation on why you ought to pay is due.
October 25, 2013, 8:57 am