Knowing your numbers is important in every business, especially for hospitality companies, where margins and profits can be complex calculations that require real-time financial data. In the November issue of COMMERCE magazine, Citrin Cooperman SALT partner, Eugene Ruvere, discusses sales tax audits and how hospitality businesses can protect themselves through effective records maintenance.
A sales tax audit can be a difficult experience for any business, but even more so for a hospitality business. As sales taxes are considered to be trust fund taxes paid by the consumer, the state entrusts businesses with collecting and remitting that tax on its behalf. An issue that arises in this context is record maintenance. Auditors compute estimated assessments using sampling methods that don’t capture the full picture of the business’s activities and taxable sales. As you can imagine, hospitality businesses that engage in high volumes of transactions face these issues more than others. If the business does not maintain and/or provide documentation to an auditor in the correct manner and format, it can result in substantial sales tax assessments, as well as penalties and interest. Once an assessment is issued, it’s difficult to fight.
In one such instance, a state revenue department computed an estimated assessment against a restaurant. Citrin Cooperman assisted with reconciling the sales data and accounting for any inconsistencies to alleviate any risk of exposure, saving our client significant money and stress. We also provided advice regarding the types of accounting and point-of-sale systems to incorporate to avoid a similar audit struggle in the future.
Read the article on page 60 of COMMERCE magazine, November 2 issue.