Are You Checking for Use Tax?

Are You Checking for Use Tax?

Should you trust another company to ensure your sales tax is correct? Sales tax mistakes are really common—more common than people realize.  Walmart, for instance, made mistakes when it came to gun safety devices. Apple made zip code-based mistakes for sales tax. If such large companies can make mistakes like those, isn’t it possible that your suppliers are making mistakes in your sales tax? If you’re not checking your purchases for correct sales tax and paying use tax for those mistakes, you might be putting your business at risk.

Say, for instance, you operate a business that isn’t exempt from sales tax. You have to pay sales tax like anyone else for your business and any sales tax that isn’t collected by the seller you will need to pay in the form of use tax. When you don’t, your business is liable for the use tax and, if audited, would have to pay fines and penalties as well as the use tax due. Whether you’ve been dealing with the same company for a long time or you’ve changed to a new retailer for your company’s purchases, verifying the sales tax is a good plan to keep your business compliant with use tax laws. If you do a lot of purchasing, it can be really time-consuming to verify that every rate is correct, especially if you are affected by exemptions in place for specific items and types of purchases. Not checking can really add up, however.

Say you purchase $10,000 every week of one taxable item that has the incorrect rate—it might even be just a small percentage like 5%. Annually, that adds up to $26,000 that the state is missing. Add in penalties and interest and your business could easily be looking at nearly $50,000 in unpaid use tax. Before you jump to the conclusion that it’s the responsibility of the retailer to charge the correct rate, it’s not quite true.

Retailers can be fined too in this situation but it’s up to your company to pay use tax, just as citizens of states that charge sales tax should remit use tax for non-taxed online purchases. While states might not chase after individuals, they will chase after businesses for use tax. If you’re not checking your purchases and don’t know where to start on the overwhelming path to compliance, sign up for a web demo to find out how we can make a difference in your use tax liabilities.