Sales and use taxes are important taxes for Sacramento businesses. Sales taxes are paid when an item is sold, exchanged, or transferred; use taxes are paid when an item is stored, used, or consumed, and it is only paid if the sales tax has not been paid. When a company has liabilities from unpaid taxes that have not yet been recognized by tax authorities, it is known as tax exposure. Resolving this type of issue will require the assistance of an experienced sales and use tax exposure resolution accountant.
If your business is dealing with tax exposure related to its sales and use taxes, get in touch with the Sacramento sales and use tax exposure resolution accountants from Cook CPA Group today. The accountants who work with Cook CPA Group can help your business gain control of all applicable sales and use taxes through efficient and thorough exposure resolution.
Sales and Use Taxes in California
Sales taxes and use taxes are important considerations for any business. Understanding exposure resolution requires an understanding of how these taxes work and the role that they play in the financial lives of business.
Sales taxes are paid on the sales of goods and services; typically, the cost of the tax is added to the sales price and is paid by the consumer who buys the product or service. Sales taxes generally apply to sales that are made between a seller and customer that live in the same state.
Use taxes are paid directly to a governing tax agency when a merchant buys a product to be converted for different use. Use taxes are usually levied when an item or service is used or stored. These taxes are levied on purchases made outside of a taxing jurisdiction but used within that jurisdiction.
There are two varieties of use taxes: vendor/retailer use taxes and consumer use taxes. Vendor/retailer use taxes are levied on sales made by vendors to customers that are located outside of the state where the vendor is based or registered. Consumer use taxes are levied on the person who purchases a product or service. They are self-assessed by the person who makes the purchase if the vendor did not collect a sales or vendor use tax; the tax is then remitted to the taxing jurisdiction.
Understanding the Tax Exposure Resolution Process
Tax exposure occurs when a company’s unpaid tax liabilities are undiscovered by taxing authorities. Exposure can happen with taxes on purchases or sales; it is most likely to happen when a company makes sales in multiple states. Exposure on the sales side will depend on whether the company has established “substantial nexus,” which means that they perform a certain number of business operations within a certain state or jurisdiction.
In some cases of sales tax exposure, participation in a voluntary disclosure agreement may be the best option. If the company in question has not registered to collect taxes in a state where they have nexus, participating in a voluntary disclosure agreement can allow them to receive certain benefits for disclosing their liabilities. It is a binding agreement that can ultimately reduce or waive penalties and provide a certain amount of protection from audits if the taxpaying entity discloses all of their tax information, pays the taxes they owe, and agrees to comply with their state’s sales tax laws in the future.
In Sacramento, businesses can qualify for a voluntary disclosure program if they are located outside of California but engaged in business there, register voluntarily with the California Department of Tax and Fee Administration, have not been contacted by said agency in the past, and have failed to pay their taxes because of a reasonable cause, not negligence.
How an Accountant Can Help with Sales and Use Tax Exposure Resolution
An accountant can assist companies in Sacramento with their sales and use tax resolution by first identifying and quantifying their sales and use tax exposures. When it is time to resolve those exposures, accountants can provide assistance in many ways.
One of the most effective ways of dealing with sales and use tax exposure is to participate in a voluntary agreement, which will allow the company to disclose their tax liabilities and pay their taxes in exchange for benefits. Other ways to deal with tax exposure are to negotiate for interest and abatements or reductions of penalties, or to enter into an offer in compromise.
It’s important for companies in Sacramento to seek the help of an accountant and deal with their sales and use tax exposure as soon as possible. Having sales and use tax exposure during an audit can be catastrophic for companies and put them at risk for significant tax liabilities at a later date.
Resolving sales and use tax exposure in a timely manner can mean shorter prior tax periods and fewer penalties. By resolving your company’s exposure with the help of an accountant, you may even be able to avoid penalties altogether.
Contact a Sacramento Accountant for Sales and Use Tax Exposure Resolution
If your business is facing sales and use tax exposure, use the help of an experienced accountant to resolve it. The accountants that work with Cook CPA Group can help you safeguard the financial stability of your business by resolving your exposure quickly and effectively.