New York Sales Tax Defense Lawyers

Overview of Sales and Use Tax Laws in New York

Sales and use tax laws are very confusing in New York. Failure to comply with sales and tax use rules can lead to tax assessments, interest, and even penalties. Corporate officers and owners can be held liable for the amount due.

Raiser & Kenniff Law Group can help with a wide array of sales and tax law issues. Our goal is to help business owners, accountants, attorneys, etc, understand the sales and use tax laws. We handle sales tax audits, criminal investigations, frozen bank accounts, tax warrants, cases where you haven’t filed a return, and more.

Why Businesses Face Sales Tax Audits

Certain businesses that have lots of cash transactions have a higher chance of sales tax audits and problems. As such, delis, restaurants, bars, autobody shops, have a higher incidence of sales tax audits and sales tax collection problems. All NY businesses that collect, and remit, NY sales tax are at risk.

If your business was notified of a NY Sales Tax Audit, or if you’re being pursued for past due sales tax, there are a number of things you MUST be aware of in order to limit the exposure of your business and personal finances.

Four Common Reasons for Sales Tax Audits

Failure to Report Sales Tax

If you’re making sales which are subject to sales tax, you have to be registered with the Department of Tax to find a certificate of authority. This gives you the right to collect tax on sales. If you have a Certificate of Authority, NYS may review your filings to determine whether sales tax returns are being filed timely. If NYS determines you are failing to report sales tax, an audit can be triggered.

Constantly Filing Late

Two of the most common reasons for a sales tax audit is either because you failed to file sales tax, or constantly file sales tax returns late. If you’re registered for sales tax in NY, then the state requires you file sales and use tax returns quarterly, monthly, or annually, by a required due date. This applies even if your business didn’t make any sales during the period.

If you have a history of failing to file timely sales tax returns, or pay them on schedule, then NYS will audit you to vet the accuracy of your accounting.

History of Past NYS Sales Tax Audits

It’s very common for NY to audit businesses again and again, if the current audit showed your bookkeeping isn’t done properly. Failure to have a point of sale system, or proper bookkeeping shows the auditor there’s a high likelihood of a recurring issue. The chances of another audit increases if the existing audit resulted in your business owing a large assessment.

Industry Classification

Your business can be guilty by association. Certain industries have a higher incidence of noncompliance. Typical targets of NY sales tax audits are restaurants, delis, contractors, and other businesses that have a lot of cash sales.

DEFENSE TEAM SPOTLIGHT

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Legal Scenario: What Would You Do?

Scenario

You own a retail clothing store in Manhattan and just received a notice from the New York State Department of Taxation and Finance claiming you owe $87,000 in unpaid sales tax, plus penalties and interest, for the past three years. The notice states that your exemption certificates for resale transactions were improperly documented and that you failed to collect tax on shipping charges.

Can the state really hold me personally liable for my store's unpaid sales tax, and is there any way to challenge these assessments?

Attorney's Answer

Under New York Tax Law Section 1133(a), any person required to collect sales tax who fails to do so can be held personally responsible for the full amount owed, including corporate officers and LLC members designated as 'responsible persons.' You have the right to request a conciliation conference with the Bureau of Conciliation and Mediation Services or file a formal petition with the Division of Tax Appeals within 90 days of receiving the notice. Regarding the shipping charges, New York does require sales tax on delivery charges when the underlying goods are taxable under Tax Law Section 1105(a), but there may be valid defenses depending on how those charges were structured. An experienced sales tax defense attorney can review your exemption certificates for compliance with Section 1132(c) and potentially negotiate a significant reduction in penalties by demonstrating reasonable cause.

This is general information only. Contact us for advice specific to your situation.

Why NYS Takes Sales Tax Seriously

The NYS Department of Tax and Finance is responsible for collecting and enforcing sales tax. It’s the job of the auditor to decide whether your business has paid the correct amount or not. NYS takes sales tax very seriously, because sales tax is considered trust fund taxes. Your business is collecting this money on behalf of New York State. It’s NYS property, not yours. By routinely auditing small businesses, NYS is ensuring that businesses are complying with sales tax laws. Larger sales tax audits increase NYS revenue due to the large penalties that businesses have to pay if they commit fraud or incorrectly report sales tax.

Duration of NY Sales Tax Audits

The length of time of an audit depends on the complexity of the sales tax, as well as the scope. For example, what period of time of the business is covered, what records are requested, etc. They can take anywhere from 3 months to 12 months. It’s likely you’ll continue to get audited again and again.

Sales Tax Audit Defense Tips