I Serving Clients Nationwide I
Sales & Use Tax Tips for April 2008
SALES TAX PENALTIES & INTEREST
Staggering Amounts!
Made a Mistake or Didn’t Collect or Remit Properly? - There’s more at stake than just Sales and Use Tax!
Penalties & Interest
Penalties and interest are usually assessed in addition to any taxes deemed as due. They can quickly accumulate to staggering figures and jeopardize a business’ ability to survive. The problems are often compounded because the underlying failure to properly charge, collect or remit sales or use tax has been ongoing for years.
Penalties
Penalties can exceed 100% of the tax due and generally fall into three classifications: Failure To File, Failure To Pay and Intent To Evade. The rates vary by state and classification. Though “Intent to Evade” is often most severely penalized, penalty rates for failure to file often have a 25% maximum.
Penalties can often be abated if the taxpayer can demonstrate that the failure to pay or file was due to reasonable cause and not due to willful neglect. Penalties can also often be waived by agreement if the taxpayer voluntarily discloses its liability prior to discovery by the respective taxing authorities. We strongly caution businesses to use an independent 3rd party to anonymously negotiate such an agreement.
Interest
Interest rates for underpayment of taxes vary by state, but often range between 7% and 18%. Few states waive or even reduce interest charges. This makes it all the more important to ensure your sales and use tax procedures are up to date and that significant areas of prior exposure are resolved quickly. Some states are authorized to reduce and/or abate interest if the taxpayer voluntarily discloses its liability prior to discovery by the respective taxing authorities. Some states also are authorized to reduce the interest rate if the taxpayer can demonstrate that the underpayment was due to reasonable cause and not due to willful neglect.
Keep in mind that there is generally no statute of limitations for a company that has not been filing Sales & Use Tax returns. In such cases, the liability for Sales & Use Taxes extends back to the first day you were considered to have nexus within a particular state. This can mean the day the first sale in the state was made subsequent to establishing nexus.
Our professionals can help minimize potential penalties and interest and make sure your company is in compliance with sales and use tax laws. We can also assist in proactively obtaining voluntary disclosure agreements in the event your company has undiscovered sales and use tax liabilities. Voluntary disclosure agreements are an effective way to minimize penalties and interest and can also often limit the look back period. For more information please see the Exposure Resolution section of our website.
Click here for more Sales Tax Tips or visit our website www.oatax.com.
For additional insight on common sales tax concerns, please see the Did You Know? section of our website.
Should you have questions or require assistance please Contact us today or call 1-888-466-2829 to speak with an Olivier &
Associates Sales and Use Tax professional for a no-obligation consultation about your Sales & Use Tax issues.
* This tip is intended to provide general information only and is not to be considered as a substitute for professional advice.
