# Sale tax audit ??



## zackman (Jan 11, 2009)

I wanted to ask how you bill out and receive sale tax for plowing services, and for purchasing material.. 

" Let me tell you what I am going through."

When I bought supplies/ salt/ sand I did not pay sale tax I then did the job and billed it out for sales tax for the whole bill including my labor. I have done that for some years now since I started my own business. I have worked in the industry for someone for many years, and decided to do it for myself I went by the book for everything ( or I thought) 

Everything we needed to do to start a business we did. Sale/use tax number business entity tax etc... I have paid so much to start this business I can't believe they want more!! 

I am now going through a sales tax audit and feel like I am being told so many different things.

All I know is that I tried to do EVERYTHING the right way and now I am being told it all was wrong. I feel like having a business is just not worth it.. I have been going through this audit for almost a year now. I am so stressed about it. I just want it to end and then maybe throw in the towel because this is just ******** right now.. 

Has anyone else been through something like this ?? Any info would be helpful as I am pulling my hair out right now..


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## Kwing1120 (Aug 13, 2011)

I am not sure what State your in but from what i understand in MA where i have worked and i have lived you only pay/charge sales tax on goods not services. this is my understanding. i will let the pros chime in here for the rest.


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## grandview (Oct 9, 2005)

You live in NY.! NY is going to audit every business in the state over the next couple of years. What part are they trying to get you on?


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## Super Mech (Sep 6, 2011)

Rat bastards got me good this past year! Nearly wanted to commit suicide, but we got through it-had to pay but what are you going to do.


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## Brian Young (Aug 13, 2005)

EVERY FRIGGEN DAY I wonder why we do what we do! You either have to roll with the punches or get out. Life would be sooooo much easier if we worked for someone else but now can't afford to. We went through an audit last year and my Wife who owns and does all the "business" end of things was stressing out for 2 weeks. The lady came over, went through everything and said there were a few things that needed work on but 98% of it was done. It sounds like you've done just about everything you can so I wouldn't be that worried about it. If it gets that bad fold up and start from scratch if there's no other option. BTW, why has this been going on for a year? We got our letter and 3 weeks later it was over.


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## zackman (Jan 11, 2009)

I was called out of the blue! She said my named was just picked... Lucky me !!

When I first started my business I called everyone so I could find out everything that needed to be done..I guess I should have called more people..

I called my state and was informed even as of TODAY to not pay sales tax on my supplies but to charge sales tax on the whole invoice to the customer (labor & supplies) I did not get the correct information ( well what there saying is the correct information) until I told them that I was being audited. Then he put me on hold to ask his supervisor and then I was told the information he told me was wrong that you have to pay sales tax for supplies and not to tax the customer . Again if I did not push for the correct information I would still be misinformed. What are you suppose to do??

Long story short from my phone call today I'm screwed.. To much info to write..

My other problem is resale certificates. They said they were filled out wrong.. It has to have BLANKET on it!! I got that fixed and submitted, and now there saying they are still filled out wrong and want me to pay for all taxes on this. My bill is around $12,000 right now. 

Oh yea they also want sale tax for purchased that were bought online. Which I have no problem paying my BAD for not calming it..

I am so sick of this and just want to throw in the towel , but another side of me wants to FIGHT this and say you have the freaking money already it was just paid in a different way..

I don't know! right now I have my accountant helping me but I think my next step is a tax lawyer but I don't know if I can pay everything/ everybody at once. I already owe my accountant $500.00 

I gut is telling me to fight this and not to let the state get anything extra they don't deserve..

Any advise ???


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## zackman (Jan 11, 2009)

Brian Young;1310492 said:


> EVERY FRIGGEN DAY I wonder why we do what we do! You either have to roll with the punches or get out. Life would be sooooo much easier if we worked for someone else but now can't afford to. We went through an audit last year and my Wife who owns and does all the "business" end of things was stressing out for 2 weeks. The lady came over, went through everything and said there were a few things that needed work on but 98% of it was done. It sounds like you've done just about everything you can so I wouldn't be that worried about it. If it gets that bad fold up and start from scratch if there's no other option. BTW, why has this been going on for a year? We got our letter and 3 weeks later it was over.


I have No idea why it's taking so long... We have gone back in forth a few times but now it's being sent to another person.. I just received an email that I had to agree with them or request and informal meeting so I requested the meeting..


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## grandview (Oct 9, 2005)

Why do they want sales tax on your wholesale purchases? The tax on it was paid when you collected from the customer.The reason they are trying to collect at the whole is a lot of fly by night guys are not paying the tax ,then they collect cash for the job. Right was the tax man is doing is hitting you up for just enough so they hope you will sttle and not get a professional tax solution person to fight them.


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## Brian Young (Aug 13, 2005)

Well every state if different but in PA you have your tax ID number which in short, says basically we pay tax on things like mowers, rakes etc. but things like grass seed, shrubs, mulch etc. we are tax exempt but we charge the customer tax. In PA there is no tax on snow plowing, however, there is tax on salt. Its really weird, someone has way too much time on their hands. In PA we can not charge tax on mulch installation but the mulch is taxable if done in conjunction with other services such as pruning, mowing and a few other's. Honestly, I charge tax on everything but plowing, if they want to complain they can call a State Representative!!!!!


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## grandview (Oct 9, 2005)

Oh ya, in NY if you don't have one piece of info they want then they can start a full audit on your company.


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## zackman (Jan 11, 2009)

what bothers me is that they got there sale tax money anyway. I think they are just looking for any reason to slam me. I have always paid my sale tax. I just hope I can fight this and win...I know I have to pay some money and I will pay what I was suppose to pay but NOTHING more..

This really takes a toll on a person/ family !!!


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## grandview (Oct 9, 2005)

zackman;1310513 said:


> what bothers me is that they got there sale tax money anyway. I think they are just looking for any reason to slam me. I have always paid my sale tax. I just hope I can fight this and win...I know I have to pay some money and I will pay what I was suppose to pay but NOTHING more..
> 
> This really takes a toll on a person/ family !!!


That's why they are hamming you,you might pay more just to end it.


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## zackman (Jan 11, 2009)

Well I know I have to pay for the purchases that I bought online and did not pay sales tax. Some were big purchases too!! but I should have known better and claimed it when I did my sale tax..

But the other stuff I think court is in my future..Because there not getting a dime more..


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## SullivanSeptic (Nov 30, 2008)

If you charge sales tax on your product (salt) to your customer, then you need to pay that to the state and feds. It sounds like you might have been charged sales tax when you bought the salt, then charged it when you sold it (or spread the salt). If this is true, then you need to pay this to the state/feds. You have to keep all tax money seperate and make quarterly payments. At least every quarter, if not more often. Its is very hard to keep track of, but thats why I have accountants that do it. But it does almost seem not worth it. Its very difficult to keep a business running the right way now a days. Most people are not doing it right, and by the time they figure it out, they owe too much money. Hence, the low balling in the snow plow business.


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## zackman (Jan 11, 2009)

I do sealcoating also and some of the supplies are from that also..


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## grandview (Oct 9, 2005)

SullivanSeptic;1310523 said:


> If you charge sales tax on your product (salt) to your customer, then you need to pay that to the state and feds. It sounds like you might have been charged sales tax when you bought the salt, then charged it when you sold it (or spread the salt). If this is true, then you need to pay this to the state/feds. You have to keep all tax money seperate and make quarterly payments. At least every quarter, if not more often. Its is very hard to keep track of, but thats why I have accountants that do it. But it does almost seem not worth it. Its very difficult to keep a business running the right way now a days. Most people are not doing it right, and by the time they figure it out, they owe too much money. Hence, the low balling in the snow plow business.


If sales tax was paid at the time of purchase he's not responsible for that part. On his resale if he bumped up the cost of salt then he owes tax on that part only and what he charged for labor.


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## SullivanSeptic (Nov 30, 2008)

Right. I thought he said he was charging sales tax to his customers when he plows and salts. If so then the second part of your satement is right on. He owes it. But the easy fix is, dont charge sales tax. Just charge more as a whole.


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## grandview (Oct 9, 2005)

SullivanSeptic;1310545 said:


> Right. I thought he said he was charging sales tax to his customers when he plows and salts. If so then the second part of your satement is right on. He owes it. But the easy fix is, dont charge sales tax. Just charge more as a whole.


No can do. Sales tax must be listed on a separate line on the invoice.


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## SullivanSeptic (Nov 30, 2008)

But that'd id he is resellonf just the salt. If you atually plow a lot and lay down salt, there is no need to charge sales tax.


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## grandview (Oct 9, 2005)

SullivanSeptic;1310576 said:


> But that'd id he is resellonf just the salt. If you atually plow a lot and lay down salt, there is no need to charge sales tax.


In NY yes you have to.


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## SullivanSeptic (Nov 30, 2008)

Really. Dang that sucks. NY really makes it hard to operate a business


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## Super Mech (Sep 6, 2011)

zackman;1310499 said:


> I have No idea why it's taking so long... We have gone back in forth a few times but now it's being sent to another person.. I just received an email that I had to agree with them or request and informal meeting so I requested the meeting..


I own a repair shop/gas station and it took a year. 39 large later it was over.


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## Mr.Markus (Jan 7, 2010)

I pay an accountant to file. He keeps up to date on changes. If anything seems awry he gives me a heads up and will even handle the audit. I sleep better since taking this step.


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## zackman (Jan 11, 2009)

thanks, I will let you know what happens after are meeting .


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## dfd9 (Aug 18, 2010)

SullivanSeptic;1310545 said:


> But the easy fix is, dont charge sales tax. Just charge more as a whole.


I agree and can do that in my state.

Sales tax for materials is built into the price.

OP, it may be too late, but let your *CPA* handle this. I went through a sales\use tax audit a few years back and never even spoke to the auditor. The only one who came out ahead with my audit was my *CPA.* They never stepped foot on my property, as then they can ask to see all records, not just what they are auditing. The auditor found $1200 in credits so I ended up paying about $1500.

Really though, your CPA should have had this all taken care of for you. Not an accountant, not a book keeper. A CPA. From what you owe sales tax on to the audit, that is what they are there for. It sucks, but the way the tax code is written, you are a fool if you try to do your own books, just like defending yourself in court.


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## zackman (Jan 11, 2009)

I have my CPA working on this for me also. I have quickbooks and love the program so it is very easy trying to pull up files for him and myself. I just think maybe a tax lawyer is something I should be thinking on doing. Just not sure how much he would cost. Like I said before I'm no where done and I already owe over $ 500.00 to my CPA.. The state wants over $12,000.00 
I think I'm screwed either way!!


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## dfd9 (Aug 18, 2010)

I paid way more than that to my CPA. But as I said, he did everything. It also took 6 months or so because they would request files\info, we would send it to him, the auditor would show up, ask something else, etc. 

It might be worth a call to a lawyer. I'd rather pay $12K to a lawyer and CPA than to the gubmint.


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## zackman (Jan 11, 2009)

Yea same here! They went to his office and he was ale to pull up most of the stuff they wanted because he has my quickbook files. Some of the other stuff like receipts I had to get to him then he sends it to them. I only talked to the lady once. While my CPA has had many calls to her. I sent everything my CPA last night and now he is going to ask for the meeting.. Dam I swear they are trying to kill all the small business owners..


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## alsam116 (Jan 10, 2009)

[Dam I swear they are trying to kill all the small business owners..[/QUOTE]

i think you are right on with your assesment...more rules and regulations so there is not as much growth in our country. that way they control everything. like brian young said somedays its feels easier to close up but then i have to think of allthe freedom of being self employed GOOD LUCK


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## EdNewman (Jan 27, 2004)

How did you make out? I believe in NY you should use a resale cert for the salt purchases and tax the entire sale to the customer. Make sure you send in your payments to the state once you collect the money from the customers.


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## mpgall26 (Aug 19, 2011)

I just started with salt/sand and this is new to me. I was told by my tax accountant to keep the Plowing, sand/salt separate on the invoice and then at the end of the year when I do my taxes as an LLC to incorporate it and then pay what's due for reselling de-ice products. The sand/salt lot just gives me a receipt for the charge period no taxes listed.Bagged product is taxed on the receipt (i think). I am just starting and probably won't make $5000 by 1/1/12 with very little being sand/salt so i wasn't worried about taking a big hit and figured I would see for myself when we sat down at tax time. Am I already screwing myself?? I don't mean to piss off the guys who make real $$ with my relatively insignificant question, but want to start with the right knowledge. Thanks


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## EdNewman (Jan 27, 2004)

Depends. It varies state to state. New York taxes everything.


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## Laszlo Almasi (Feb 11, 2006)

Personally, I have found that going ahead and paying the tax on things I buy is the easiest way to do it in NC. I just pass the tax bill on to the customer. If I have left over product I just chalk up the tax overage I paid as a "benefit" of being self employed. In the end, I know I will never have to worry about a tax audit and can show my receipts where I paid the tax up front. It's simple and less stressful believe me.


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## GL&M (Sep 26, 2005)

I charge tax on everything, collect it and send it in every quarter. I'm probably guilty of paying them too much. Wonder if I'll get a refund?


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## zackman (Jan 11, 2009)

We are still going through this audit but they have ajusted it after I provided a resale Cerft from my subs. (that was a big bill right there) but that is taking care of now. 

We still need to pay the sale tax part but we are still appealing it. 

In my state you have to pay sale tax on all purchases( they say you are consider the consumer of the product). 
We had no idea and even our accountant had no idea that it was suppose to be collected up front
( a matter a fact the state even told us we did not have to pay for it when we bought it) . 

Then you are suppose to not collect tax from the customer on the supplies but ONLY on the mark-up of the product and your labor.. It's impossible for me to bill this way ( and most business) so they know you will tax the whole bill...

So we have collected tax on the whole bill and sent that in for the past 3 years.. Really they were paid already.. From the client" not us" but still paid..

They basically want you to pay it upfront and still collect it from the client so they get it twice. 

Unfortunately this is the way we have to do it.. We now pay tax on all material and we still tax the whole bill.
because there is no way to bill out a bill and show how much sand/salt we used and show tax on mark=up and labor, but not material it would just be to hard to do it.. 

So the state wins and get there money twice!! It sucks but that's life!!

Sorry if this is confusing!!


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## Mike NY (Feb 2, 2009)

Double post.


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## Mike NY (Feb 2, 2009)

IUnfortunately this is the way we have to do it.. We now pay tax on all material and we still tax the whole bill.
because there is no way to bill out a bill and show how much sand/salt we used and show tax on mark=up and labor, but not material it would just be to hard to do it..
In NY it's simple. Just tax everything.
We pay tax on materials when we purchase, customer pays tax on material and labor, then we file for a credit on materials used during that qtr that we already paid the tax on.


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## zackman (Jan 11, 2009)

Mike NY;1349413 said:


> I, then we file for a credit on materials used during that qtr that we already paid the tax on.


 Sorry but what do you mean file a credit?

And your state is right next to mine so they think a like... TAX THE SH*t out of the small business owner..


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## dfd9 (Aug 18, 2010)

zackman;1349360 said:


> We are still going through this audit but they have ajusted it after I provided a resale Cerft from my subs. (that was a big bill right there) but that is taking care of now.
> 
> We still need to pay the sale tax part but we are still appealing it.
> 
> ...


Sounds like an auditor making up the rules as they go along.


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## tuney443 (Jun 25, 2006)

zackman;1349416 said:


> Sorry but what do you mean file a credit?
> 
> And your state is right next to mine so they think a like... TAX THE SH*t out of the small business owner..


What he means is that instead of not paying sales tax for the purchase of materials using a Resale Certificate at the time of purchase,now we have to pay the sales tax up front to our suppliers[sellers],charge sales tax to the customer,and when we file for our period,we show the state on the form the total of sales tax previously paid to those suppliers in the form of a credit.To what you might think,NYS is only allowed to collect the sales tax on materials or service only ONCE.As long as you know and follow the rules,this holds true.You haven't said what state you're in but here's a little blurb from NY that possibly might help you:

''Invalid exemption certificates - Sales transactions which are not supported by valid exemption certificates are deemed to be taxable retail sales. The burden of proof that the tax was not required to be collected is upon the seller.''


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## lilweeds (Aug 3, 2007)

zack what state are you in?


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## zackman (Jan 11, 2009)

lilweeds;1350009 said:


> zack what state are you in?


Connecticut


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## fireside (Mar 1, 2008)

The way it was explained to me was. Pay sale tax on everything you buy. Than you bill for your service or application labor(total cost of salting). The salt sales tax was payed for when you bought it so no sales tax due on materail. The salt was just used in your normal operations at no charge to your client. So i only bill for my labor (application) which is sales taxable. Please keep us informed as to what happens.


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## grandview (Oct 9, 2005)

What happens is, if you buy salt and pay tax on it then bill out the whole thing plus tax ,You then submit the tax money minus what you paid on the salt.


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## fireside (Mar 1, 2008)

grandview;1350126 said:


> What happens is, if you buy salt and pay tax on it then bill out the whole thing plus tax ,You then submit the tax money minus what you paid on the salt.


They want all the tax money some for salt / materials and labor. two diffirent things here. I bill that way for my comm maintance work. The total cost of material is easy to figure out as i know what was used on that job (labor vs materails) My bill will state material than labor sales tax being charged on labor only . How do you know how much salt did you use to come up with a cost? You can only charge sales tax to that client for labor for that job. The truly only way to bill that way is sales tax included. Than you can add all sales minus supplies(tax payed already) than pay tax on labor. I do not wholesale material i use it in my normal operations So i pay tax i quess twice to the state.


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## grandview (Oct 9, 2005)

I like using my resale certs. Then bill the full amount plus tax.


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## CS-LAWNSERVICE (Sep 3, 2011)

Brian Young;1310505 said:


> Well every state if different but in PA you have your tax ID number which in short, says basically we pay tax on things like mowers, rakes etc. but things like grass seed, shrubs, mulch etc. we are tax exempt but we charge the customer tax. In PA there is no tax on snow plowing, however, there is tax on salt. Its really weird, someone has way too much time on their hands. In PA we can not charge tax on mulch installation but the mulch is taxable if done in conjunction with other services such as pruning, mowing and a few other's. Honestly, I charge tax on everything but plowing, if they want to complain they can call a State Representative!!!!!


Here in West Virginia as far as I can tell

We charge tax on items we can touch(salt mulch ect) but not services.


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## zackman (Jan 11, 2009)

I am waiting for the appeal date then I will keep you all up-dated

I was told now after 3 years that you are to pay tax on materials when you buy them. Then when you make out your bill charge sales tax on the mark-up of the materials and your labor but not materials.

We buy our material in bulk ever winter and we do summer work also so we buy that in bulk.

It is hard to break down my billing to show mark-up ( why would I want to show the customer that) and tax on just labor and markup but again not tax the whole bill.
I would be billing all day to do it that way, and the state knows this so they end up getting the tax twice and there happy with that.

Yes I did not pay sale tax on the materials, " now" I do but again they did get there tax. I collected it and summit but they still want me to pay it again ..

This is going on a year of this I just want it to end!!


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## tuney443 (Jun 25, 2006)

grandview;1350180 said:


> I like using my resale certs. Then bill the full amount plus tax.


No can do anymore.I always thought the same.If you look at the note in the resale cert.,it says ''Not to be used by construction contractors.''My accountant gave me a heads up that the tax dep't.will now be cracking down on this.Just to confirm,I just got off the phone with a supervisor at the tax dep't. We are considered contractors,NOT a vendor by sales tax rules.Sucks. This basically explains it towards the bottom with ''if you are a contractor who'':

Repair and maintenance
Installation
Repair and maintenance relates to keeping real property in a condition of fitness, efficiency, readiness and/or safety or to restoring it to such condition.
In the case of a job that constitutes repair or maintenance, if you are a property owner who:
•	purchases materials and supplies only and performs your own labor, you pay tax to the supplier on the materials and supplies.
•	purchases materials and supplies and hires a contractor to perform the labor, you pay tax to the supplier on the materials and supplies and to the contractor for the labor.
•	purchases materials and supplies and labor from a contractor, you pay tax to the contractor on the total charge.
In the case of a job that constitutes repair or maintenance, if you are a contractor who:
•	purchases materials, you pay tax to the supplier, even though you are also required to collect tax from your customer. However, you are entitled to a refund or credit of the tax that you paid on the materials that you transferred to the customer.
•	purchases supplies, you pay tax to the supplier.-9-
Publication 862 (4/01)


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## mpgall26 (Aug 19, 2011)

Tuney, nothing to do with any of this but that Mastadon stuff is wild stuff. Heck of a claim to fame. I can't find my keys.


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## tuney443 (Jun 25, 2006)

mpgall26;1350925 said:


> Tuney, nothing to do with any of this but that Mastadon stuff is wild stuff. Heck of a claim to fame. I can't find my keys.


Thanks--it hasn't gotten me laid yet though and usually it's only the fat grandmotherly types who even know what a mastodon even is.lol


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## EZSWEEP (Nov 18, 2010)

I have a $100,000. Pa sales tax degree ,Why not go after the bums that dont pay. We where told by the state that if we installed mulch it was taxable so we charged sales tax and did not pay sales tax on the mulch we bought. Also farmer that we bought $400,000.00 worth of straw from never charged us sales tax so i didnt know we where supposed to pay a use tax on that.


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## zackman (Jan 11, 2009)

EZSWEEP;1351178 said:


> I have a $100,000. Pa sales tax degree ,Why not go after the bums that dont pay. We where told by the state that if we installed mulch it was taxable so we charged sales tax and did not pay sales tax on the mulch we bought. Also farmer that we bought $400,000.00 worth of straw from never charged us sales tax so i didnt know we where supposed to pay a use tax on that.


Kinda the same problem... You have to fight it... Let me know how you make out


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## MikeRi24 (Dec 21, 2007)

Sales tax is about as confusing as it gets.Especially in NY. I have always just paid tax on everything, and charged tax on everything. Figure you can't go wrong that way because if anything, you're just making the state more money at the end, and how can they complain about that? 

The one thing that hasnt been mentioned yet and I would advise being careful of if this: If you are going to purchase wholesale items for personal use (for example, you're helping landscaping your brothers house for him, and you go buy all the plants and materials from the nursery and put it under your business account to get wholesale pricing), make sure you pay sales tax, and make sure you pay in CASH. If you put it on your charge account, its there and you have to include it with your account payoff, it then gets dragged into your business accounting which can make any kind of audit more difficult. If its paid cash and tax, and it comes up in an audit, you can honestly say "hey I gave my brother permission to use my account to get the discount at the supplier but he paid for it himself and paid appropriate taxes" and they should be ok with that because its just your name on the invoice and it never gets dragged through the business accounting.


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## tjlands (Sep 29, 2005)

EZSWEEP;1351178 said:


> I have a $100,000. Pa sales tax degree ,Why not go after the bums that dont pay. We where told by the state that if we installed mulch it was taxable so we charged sales tax and did not pay sales tax on the mulch we bought. Also farmer that we bought $400,000.00 worth of straw from never charged us sales tax so i didnt know we where supposed to pay a use tax on that.


I have been thru a sales tax audit in NJ. 
Believe me you were supposed to pay tax on that purchase. 
There are very very few exceptions to paying sales tax in nj. (mostly non-profit)
When you file your monthly sales tax return there is a spot for use tax.

I can tell you from experience , that you pay tax on the purchase of mulch, and then you charge customers sales tax to install it or deliver it.
I don't agree but it is the law.
If you dont believe me call the state and ask.


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## jklawn&Plow (Jan 8, 2011)

In New York we pay mulch distibutor sales tax. Mark up or not and charge customer Sales tax. Get refund of the first one when we file quarterly sales tax returns to pay second one.


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## grandview (Oct 9, 2005)

Here you go.

http://poststar.com/news/local/huds...d5-001cc4c03286.html?mode=story#ixzz1eLZgN8Mx


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## tjlands (Sep 29, 2005)

grandview;1355500 said:


> Here you go.
> 
> http://poststar.com/news/local/huds...d5-001cc4c03286.html?mode=story#ixzz1eLZgN8Mx


Thats different than someone that doesn't collect it when they should. He knowingly collected it and kept it.

I know companies that didn't know they were supposed to collect for years, 
until the state contacted them, 
they were forced to payback taxes and huge fines.
Put one very large nursery in Toms River out of business.
Forced them to sell everything. Cost them millions.


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