Monthly Archives

June 2010

Jun 27
0

Georgia DOR Forces Retailer To Close over Sales Tax

By | Retail

The Rexall Grill of Duluth Georgia was forced to close its doors recently over a $500,000 sales tax liability (tax interest, penalty).  According to the news article, the tax was due for the period January 2004 to October 2009.  That’s over 5.5 years of delinquent sales tax.  The restaurant had been open since 1982.  This story is sad for two reasons.

1.  It took the Georgia DOR 5.5 years to contact a business that had not paid its taxes.  I am not at all surprised by this.  I’ve had dealings with several businesses over the years who have fallen 3, 4, 5 and 6 years behind in paying sales tax and the DOR had never contacted them once. Not a call not a letter.  In many cases, such as the Rexall Grill, I’m assuming that the tax was collected from customers and not paid. Georgia taxpayers deserve better administration of the sales tax.  It should not take the DOR 4 years to contact someone who owes sales tax.

2. Unfortunately, this situation is not that unusual.  This one just made the paper because the restaurant was popular.  Situations like this usually arise when a taxpayer gets one or two months behind.  At that point, they start to panic and don’t know what to do.  They know it will be bad they become paralyzed.  More months go by and months turn into years.  At this point, its too late to just pay the tax and they don’t know what to do.  They are on a collision course with disaster.  Someone should have intervened on behalf of this owner early on in the situation.  Here accountant or someone should have asked some basic questions or wondered why there were no payments for sales taxes being made.

There are hundreds maybe thousands of businesses like this in Georgia and in every state.  Small problems that can be corrected early are allowed to grow and create a financial catastrophe for the business and the owner.

Ned Lenhart
President
Georgia Tax Liability closes business

Jun 24
0

Oklahoma Retailer Compliance Initiative–Best Deal of the Year

By | Amnesty Programs

Oklahoma House Bill 2359, if signed by the Governor, could provide one of the best deals of the year to resolve unpaid use tax due the state.  This applies both to  retailers and to consumers.

For retailers, there will be a total forgiveness of any use tax that you may owe the state so long as you come forward and register under the new Retailer Compliance Initiative.  This will run from July 1, 2010 to June 30, 2011. You have to do this before you get audited and you must remain registered for at least 36 months after registration.  This program is similar to what the SSTP states did with their amnesty.  The state will even waive their registration fee for companies that register under this program.

For consumers who owe Oklahoma use tax, the state is limiting the look back to 12 months and is waiving the penalties and the interest related to the tax that is paid.  The consumer cannot be under audit and cannot have been contacted by the state.

These are very good opportunities for taxpayers who owe Oklahoma tax.  The Governor is expected to sign the bill which will become effective July 1, 2010.

Ned Lenhart
Oklahoma Amnesty

Jun 23
0

New Sales Tax Rate for Kansas July 1

By | Legislative, Retail

The Kansas state level sales tax rate is increasing from 5.3%  to 6.3% effective July 1, 2010.  This is almost a 19% increase in the sales tax rate over the previous 5.3%.

The Department has issued some instructions for companies that may be cash basis taxpayers or have service contracts that cover periods under the 5.3% tax rate.  To avoid companies remitting more sales tax than they collect from customers the Kansas DOR has issued instructions on how companies can adjust their sales tax returns to ensure that only the amount of tax collected is remitted.  State law does not allow for more than one return to be filed for any taxpayer, so if a company properly collected tax at 5.3% and at 6.3% the company will need to use a factor to reduce the taxable sales so that the tax calculated at 6.3% is equal to the tax collected at 5.3%.  This downward adjustment is shown on Part II Line N “other allowable deductions”.

Ned Lenhart
President
Kansas Tax Rate

Jun 21
0

Huge Sales Tax Overpayment-How did this get through?

By | Tax Audit

A company recently overpaid its New York state and Suffolk County New York sales tax in one month by $10,000,000!!!!  How do you do this?

Apparently company paid over $10 million in use tax when it should have only paid $1,000.  The company reported out- of-state purchases of $116,000,000 which was taxed at 8.625% for a total tax of $10,005,000.   The county is having to refund over $5 million and the State is having to refund over $4.6 million.

What type of company would just pay $10 million in tax without some deeper investigation?  Who would prepare a sales tax return and not understand that this is not right?

Ned Lenhart
President
New York Tax Overpayment

Jun 16
0

Corporate Officer Escapes Liability-This Time!!

By | Tax Audit

Most states have a very powerful tool to collect unpaid transaction and withholding taxes.  It’s called “officer liability”.  The statutes vary widely between the states.  Regardless of how they may apply, the end game is the same…hold one or more officers of the organization personally liable for unpaid taxes.  If they can’t pay, put a lien on their property and force them to a judicial sale to satisfy the tax.

Virginia recently issued a letter ruling that determined that the CEO of the company was not personally liable for unpaid use tax and some withholding tax because he didn’t have day to day control of these activities and didn’t have any actual knowledge that the taxes were not getting paid.  Even though his name was on the account as a responsible party, the company used a check writing machine to apply his signature to the checks and he didn’t pay any attention to what was being paid and what was not being paid. In some states, this fact pattern would not have been beneficial to the CEO.

The application of officer liability rules vary by state.  Some states apply this only to taxes that are collected but not remitted.  Some states apply this to all taxes, whether collected or not.  Some states apply the standard to an “responsible party” whether they are an officer or not.  You get the idea. There is no uniform standard as to when this rule will apply.  The part that is uniform, is that states have the ability to enforce these provisions when they need to and are not afraid to do so.

If your company has unpaid sales or use tax and your officers are not adequately protected or at least informed of this potential liability, then there could be serious issues to deal with if taxes are not being paid.

Ned Lenhart
President
Voluntary Disclosure Negotiations

Jun 15
0

Unregistred Business Identification-Georgia’s New Approach

By | Sales Tax, Uncategorized

Georgia House Bill 1093 was signed into law recently.  This bill is in response to some legislators’ belief that tens of millions of tax dollars are going uncollected in Georgia because of unregistered state domiciled businesses.  In an effort to cooperate with the local governments, the state is now requiring that each city and county that has a local business tax ordinance to gather and submit additional information to the Georgia Department of Revenue.  The goal is to identify businesses that are registered for business tax that should also be registered for collection and remittance of sales tax.

During the hearings, someone legislators speculated that over $300 million of sales tax was going uncollected because of unregistered local businesses and that if the counties and cities would help identify these law breakers, there would be a windfall for them also.  If you do the math, at 7% sales tax rate that is over $4 billion in untaxed but taxable revenue.  I have serious doubts that this is a legitimate number.

The bill requires that the municipalities gather the following information from taxpayers:

1. Name and address
2. Sales tax ID if one exists and if the business is required to have an ID

The municipality then will submit this information to the Georgia DOR.  That’s it.

The bill does not require any action on the part of the DOR.  There is no call to action once the data arrives or any mention as to what follow up steps the state or the municipality will take.  There is no matching required to take place to ensure that the unregistered businesses actually register.  Nothing.

This bill also dodges the biggest problem completely.  It assumes that the business knows whether it is required to have a sales tax ID.  If the business is required to have an ID but does not know it has such a responsibilty, what good is this program?

Ned Lenhart
President of Sales Tax Advisors of Georgia
Georgia Tax Enforcement

Jun 14
0

Nevada Amnesty Program-A “Good Bet”

By | Amnesty Programs

Keep your eyes peeled for a Nevada tax amnesty program starting July 1 and running through September.  In talking with the Department this week, they mentioned that the state was finalizing the plans for an amnesty program that would have penalty and interest abatement with full payment of tax.  That’s hard to beat.  The program would be for any tax due prior to July 1, 2010.

Once the details are public, I’ll report back.

Ned Lenhart
President
Nevada Amnesty Program

Jun 14
0

Florida Tax Amnesty-Look Before You Leap!!

By | Amnesty Programs

So Florida has announced an amnesty program for state taxes.  The program is scheduled to run from July 1 to Sept. 30.   In most amnesty programs, you find a balance between the carrot and the stick.  You will pay the back tax and some interest but that’s about it (the carrot).  For companies that don’t participate in the amnesty program you may be denied favorable treatment and penalty abatement on future audits (the stick).  Florida has done something that I have never seen before they are offering the carrot and the stick as part of the same program.  Here’s the deal.

1. Pay all the taxes owed
2. Pay interest of 50%
3. Pay no penalty
4. Pay a 10% administrative fee on the taxes due, the pre-abated interest, and the pre-abated penalty.
5. If you need a payment plan, you can get a 7 month plan with 12.5% down payment
6. Applies to businesses that are under audit

I have never seen an administrative fee assessed on an amnesty program before.  What is Florida thinking? 10%–That’s a deal breaker there.

To make matters even more confusing, the Florida DOR is still running its voluntary disclosure program.  Here are the details:

1. 3 year look back on tax
2. No penalty
3. No administrative fees
4. Reduced interest (just like amnesty program)
5. 12 month stipulated payment plan

This seems like a no brainer to me unless you are under audit or have some other reason why the VDA won’t apply!!  Why pay more tax, more interest, and a 10% administrative fee just to participate in the amnesty program?

If you have any unpaid Florida sales tax, please call me to discuss whether the VDA process or the amnesty program is right for you.  Don’t just assume that the amnesty is best program.

Ned Lenhart
President
Florida Amnesty Program