I thought it would be helpful to start out this year by pointing out some helpful tips for those of you who just can't wait to prepare your fourth quarter and/or December 2011 Sales and Use Tax Reports. (Hint: You might consider keeping these tips handy as you prepare any 2012 reports, as well.)
First, beware of sales tax laws relating to the computation of sales tax when applying customer discounts properly. Also, keep good records of exempt sales. Make sure your records are up to date with a copy of the exempt letter for exempt customers when you get that inevitable sales tax audit. (You do realize that in Nevada, the general rule is not "IF" you will be audited but "WHEN"?)
Second, watch out for whether your accounting or bookkeeping system is recording gross sales as INCLUDING sales tax. A common mistake is to incorrectly think that it includes sales tax, then subtract the sales tax from your gross sales and report the net amount, thus actually ending up under-reporting your gross sales. Of course, another common mistake is that your gross sales actually does include sales tax, and you forget to subtract it before reporting gross sales for sales tax purposes. (Ouch! Overpaid your tax.)
Finally, make sure you reconcile the revenues on the general ledger and your federal income tax return to the revenues reported on your state sales tax return. Many times, inaccurate bookkeeping steps lead to the monthly or quarterly sales tax reports excluding information later recorded in the general ledger. This is one of the first tests a state sales tax auditor does, so you might as well do it and correct any errors that you discover.
The key to staying out of trouble with the sales tax auditors is to have a great bookkeeping system. Ask yourself, "If a sales tax auditor asked to see my books, would they be able to determine the accuracy of my sales tax reports or not?" If the answer is "not," then perhaps one of the bigger issues you need to resolve to help avoid errors in your sales tax reports is to improve your bookkeeping system in 2012. Don't just "mean to get around to it when you have time," but actually make some changes right now before too much time passes and you have accumulated more of a mess to straighten out.
