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Use Tax

I work in the finance office at a company who does not pay use tax on any of the purchases from any vendors who do not charge us the sales tax directly. I spoke to the company's accounting firm about the matter and I was advised that "we should be paying it but I am not worried about it because I have saved receipts for some items that we remitted sales tax that were used for research and development" In NYS typically you would file form AU11 and request a refund of sales tax paid on items that were not subject to sales tax. The CPA felt that the tax paid on R&D items would be used a leverage in the event of a sales tax audit. Is the advise given from our CPA good advise?

Answers

Anonymous
(Consulting CFO and Business Operations Advisor) |

IMHO....this seems like really bad advice. Essentially, violate the rules because you think you have an out?
The audit would likely cost more than compliance internally, and could come with penalties *and* refusal to accept those *not-timely-reported* R&D credits.
It could be pragmatic advice...but doesn't sit right with yours truly.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

I agree, and you need to find a new CPA firm as well.

Having gone through a NYS Sales Tax audit (many many years ago) they will go through every piece of paper and will give you the refund and the charge you not only use tax but fines and penalties.

Bob Low
Title: Principal
Company: Perron & Low
(Principal, Perron & Low) |

I agree as well. Filing zero tax could make an audit more likely and more painful. A good faith effort to comply is not only the right thing to do but will limit exposure. The R&D credits might help offset liability on questionable items (i.e. where you have no receipt or the receipt doesn't clearly show whether tax was paid) but are not a reason not to file.

Lyle Newkirk
Title: CFO
Company: Corrigo Incorporated
(CFO, Corrigo Incorporated) |

I am with everyone else on this - it is a really bad idea to not file especially when you know you should do so. Penalties can be huge for noncompliance - assume half the amount due in taxes could be assessed in terms of interest in penalties.
As far as a tax offset, you may be dealing with two different agencies and you may find that you get no relief on your use tax liability.

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