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If you own a small business, you will likely have to get a business license at some point in your endeavors. Once you obtain your license, you will have to start collecting sales tax and paying that to the state. As a result, filing your taxes may become more complicated, and your risk of being audited may be increased. Because of this new complexity in your life, it would be a wise move for you to be prepared in the event of a sales tax audit. As daunting as that sounds, there are a variety of things that you can do to decrease this possibility and also be prepared in the event that you are one who has to undergo this process.
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First and foremost on any small business owner’s mind are a few steps that you can take to practically ensure that you will not be selected for a sales tax audit. While nothing is one hundred percent foolproof, are a couple of things to consider.
Consider your sales tax nexus.
While that term can a bit intimidating, all that you need to do is proper research to determine if you meet the qualifications in your state to charge sales tax. Every state is a bit different, but if you have any questions, you need to do your research so that you know that you are in compliance with the sales tax laws of your state. Also, make sure you keep yourself and your company regularly up-to-date with any changes in the legislation.
File your taxes promptly.
Do not wait until the last minute! Use some kind of tax filing software or have a professional do it for you. In our digital age, it’s not worth it to file your taxes by hand. Furthermore, don’t take deductions that seem unrealistic. I know we all want to get the most for our money, especially when we own a small business, but no one wants to pay extra money after an audit.
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If you do happen to be selected for the dreaded sales tax audit, it doesn’t have to be a frightening experience. While it may not be a pleasant process, there are some tips you can take to help you survive a sales tax audit.
Make sure you have all necessary documentation.
If you keep accurate records, this process is going to be a lot less painful. Compile all your transaction documentation, especially those that were exempted from sales tax, and make sure you also have all your certificates, invoices, direct pay permits, and anything else that the auditors may need to complete the process. It’s always best to be overly prepared rather than slightly unprepared.
Recognize the audit triggers.
One of the things that will help you even before you face this potential process is to make careful note of what may trigger a sales tax audit. While many of these situations are legitimate for most businesses, it is worth taking the time to familiarize yourself with these various matters beforehand. Then in the event that you are audited, you can be prepared to explain these and show your proof as to why these issues are perfectly acceptable for your business practice.
Don’t be afraid to turn to the professionals.
There is nothing wrong with investing in a good firm or team to represent you in case you do face a sales tax audit. Sometimes it’s better to prepare for the unexpected and not have it happen than to neglect to prepare and find yourself in a situation that results in precious capital and time loss.
