The United States Supreme Court Justice Benjamin Cardozo once wrote, “…The law, like the traveler, must be ready for the morrow. It must have a principle of growth.”  The law is never stagnant and is constantly changing. This applies to sales taxes or the enforcement techniques that the Tax Authorities use to administer and collect those taxes.

 As the economy goes through its cycles of peaks and recessions, the legislature often responds by changing the sales tax status of goods and services.  It is more important than ever to review your business’s sales tax procedures.  Often, with only a few weeks’ notice, a good or service that was nontaxable will suddenly become taxable under a newly enacted statute.

For example, beginning June 1, 2009 New York sales tax now applies to transportation services provided by limousines and black cars.  Owners and/or operators must register with the Tax Department in order to begin charging and collecting taxes from customers on almost every ride.  Furthermore, beginning November 1, 2009, New York State enacted a 50 cent tax per ride on taxicabs. 

Businesses cannot take for granted that their products and/or services will remain nontaxable.  Failure to collect sales tax does NOT remove the obligation to remit that tax.  Additionally, corporate officers and/or owners can be held personally liable for unpaid sales taxes.  Sales Tax Defense LLC helps our clients and fellow professionals stay up-to-date on the constantly changing tax law and we can advise or assist you on sales tax issues in any state.

We were referred a client who was not charging sales tax on certain taxable services, which they did not know where taxable.  The client was doing some additional governmental registrations and they were concerned that the additional registrations would result in a tax assessment covering 6 years, totaling almost $100,000 of tax, interest, and penalties.  Through the Voluntary Disclosure Program we were able to settle this matter with the state for $30,000 of tax and interest (no penalties.)  Reducing the client’s potential exposure by 70%. 

An earlier periodic review of the client tax positions would have uncovered this error and would have allowed the client to collect (and remit) the tax due, which would have eliminated the entire exposure.