Today's Technology for Tomorrow's Firm.
Issue link: https://cpapracticeadvisor.epubxp.com/i/667870
April 2016 • www.CPAPracticeAdvisor.com 27 A POS is like a modern, comput- erized version of a cash register. It records the items sold, the quantities and the costs of those items. Ten it spits out the total amount that is due – including the sales tax – and any change to be returned to the customer. Clients who don't adhere to state record keeping requirements run the risk of being penalized by auditors. Te exact rules and penalties vary from state to state, but it is defnitely in your clients' best interests to stick to the leter of the law. Generally, a sales tax return must refect total sales; taxable sales; purchases by the business for which no sales tax was paid; credits; sales and use taxes for each locality; and any other taxes due. With that in mind, you should pass along the following basic rec- ommendations to your retail clients. Advise them to keep: Sales records • A journal of non-cash transactions afecting accounts payable; • A journal on cash transactions, including any check transactions; • Sales slips, invoices, receipts, cash register receipts and other comparable documents for original sales; • Memorandum accounts, lists and other documents concerned invento- ries, fxed assets and prepaid items; and • Ledger to which these journals and other records have been posted. Note: If you don't provide a cus- tomer with a writen document, it's critical to keep detailed records of all cash or cash-equivalent transactions in a daybook or journal. Your CPA can provide assistance. Purchase records • Documentation of purchases subject to state and local taxes; • Documentation of purchases for resale, such as inventor y and raw materials; • List of purchases exempt from state and local taxes; • Documents substantiating expenses and cost of goods sold; • Records refecting the business pur - poses of purchases; and • Proof that sales and use taxes have been paid. POS sales and purchase records • Individual items sold or purchased; • Date of sales or purchase; • Sales or purchase prices; • Sales tax due; • Vendor names; • Invoice numbers and amounts; • POS identifcation numbers or pur- chase orders; and • Methods of payment. Electronic records should be able to facilitate direct reconcilia- tion of receipts, invoices and other documents within your books and records, as well as on your returns. If this isn't possible, records may be deemed in adequate and, during an audit, alternative methods (e.g., a sampling) should be investigated. W hat happens if your records aren't up to snuf ? Te risks are severe. Additional ta xes may be assessed in an audit, plus your business is subject to penalties and interest. It's possible that your sales tax Certifcate of Authority could be suspended. In the worst-case scenario, criminal sanctions might even be imposed for failing to main- tain adequate records. How long do you have to keep records? Te usual requirement is three years from the later of the due date of the return or the date the return is actually fled. Records must be made available to state ta x ing authorities upon request. Practical advice: Rely on your CPA to help put your house in order if your business incurs the state's wrath. Sales Tax Record Keeping Requirements for Retailers By Ken Berry, J.D. - CPA Practice Advisor Tax Correspondent S ales tax is a necessary evil in practi- cally every state in the union (all except for Alaska, Delaware, Mon- tana, New Hampshire and Oregon). It is especially problematic for retail clients who are responsible for collecting and remiting these taxes to state taxing authorities. Your clients must keep adequate books and records relating to sales tax, including meeting require- ments for point-of-sale (POS) systems. A Year in the Life of a SALT Accountant is sponsored by Avalara c c o u n t a n t b y A v a l a r a April SALT Checklist Work with your clients to ensure they are utilizing proper internal controls for sales and use taxes. Make sure your clients are keeping proper records relating to their sales and use tax activity. Determine if your clients are complying with reg- istered agent rules in all states where they are li- censed to do business. If not, help get them set up with registered agents. Contact your clients to determine if they are regis- tered to collect and remit sales tax in all the states where they are doing business. Create a checklist to help gather information you need from clients who might need to register to col- lect and remit sales tax in various states. Assist clients with registrations in states where they are making taxable sales. Send a reminder to all clients that they are required to register to do business and have a registered agent in any states in which they are planning on ex- panding their business reach (and remind them that you can help them with this process).