Blog Tax News Overlooked Use Tax Triggers Large Tax Assessments

Overlooked Use Tax Triggers Large Tax Assessments

One area often overlooked by tax professionals is the accrual of use tax on taxable purchases on which the vendor did not charge tax.  Many states these days are looking to generate revenue by targeting taxpayers and assessing tax liabilities.  Unreported use tax is particularly ripe for audits.  We’re seeing more aggressive use tax audits and more aggressive penalties being assessed for non-compliance.

There are numerous tools, processes and solutions that your company can use to stay compliant with use tax accruals.  Here are a few of the different options that are available to identify items on which use tax is due and to track use tax accruals.

Third Party Automated Tax Systems – Automated tax systems provide a number of benefits for accruing use tax.  They limit the risk of error and ensure that consistent decisions are made.  An automated tax engine solution will typically include tax rates, including the effective dates of any rate changes, special rules like maximum taxes in most cases and taxability rules.  These solutions will allow you to map data elements to create tax rules.  Some allow “if-then” rules to allow for assumptions when data is unavailable. When determining if an automated tax system is the best fit for you, you’ll want to perform a cost evaluation and an evaluation of tax software functionality and partners.  If you are using a bolt on tax engine for your sales tax, you should be able to use the same solution for use tax in most cases – normally at no additional charge (unless you are paying a per transaction fee for a hosted solution).  This type of solution is best for companies with more complex use tax determination needs.

ERP Systems – Most ERP systems have some sort of tax functionality.   Depending on the needs of your company, this could be sufficient for tracking use tax accruals.  If you’re using an ERP system’s functionality to track use tax, you’ll typically rely on Accounts Payable staff to make the taxable/exempt determination and select the correct tax code.  Note that using this method for use tax accruals will likely require maintenance of tax rates within the ERP system.  You also are limited in setting up taxability by item since in the ERP you typically can’t do this by state.

Manual Review and Identification – Alternately, you can manually track use tax accruals by maintaining a spreadsheet of use tax owed and maintaining copies of any applicable invoices.  In this case, you’ll want to mark applicable invoices with a stamp or your use tax accrual account number.  Manual review and identification will likely work best if your use tax accrual needs are not large or complex.

If you need help with Sales Tax Accountants can provide you with FREE consultation on use tax matters. Please call us today at 404-855-7000.

Thanks to Sales Tax Accountants our company was able to avoid an expensive audit and save tens of thousands
James Turner - Retail Supply Services

How To Contact Us

twitter facebook google

Contact Us Today!

CPA Atlanta   ,   Atlanta Tax Resolution   ,   State Sitemap   ,   County Sitemap   ,   Atlanta SEO & Web Design