Benefits Of Conducting A Reverse Sales And Use Tax Audit

As companies expand, they become more complex and require more resources to manage.  Due to ever-changing tax codes and regulations, sales and use tax compliance can be particularly challenging, and identifying inaccuracies in this area can be difficult. By conducting a reverse audit, you can potentially spot reporting errors and may even reap some financial rewards if the errors are in your favor.

How Can A Reverse Audit Help You?
1. Identify Prospective Overpayments

A sales and use tax reverse audit is an excellent way to identify overpayments, which can occur due to incorrect classification of goods and services, incorrect tax rates, or failure to take advantage of available exemptions. By conducting a reverse audit, businesses can recover the money they are owed, significantly improving their financial position.

2. Mitigate Risk

Non-compliance with sales and use tax laws can result in significant fines, penalties, and damage to a company’s reputation. A sales and use tax reverse audit can help businesses identify areas of non-compliance and take steps to correct them before they become a problem. By proactively addressing these issues, companies can mitigate risks and protect their reputation.

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Special Report: California Court Of Appeal On Sales And Use Tax On Cell Phone Sales

In a recent court case, the California Court of Appeal for the Third Appellate District ruled that purchasing “discounted” cell phones bundled with wireless services requires paying sales tax based on the cell phone’s full price.

The case in question, Bekkerman-v-CDTFA, was initiated by consumers who purchased discounted cell phones bundled with wireless services yet were charged tax on the full price of the phones. The consumers argued that the discounted price of the phones should have been used to calculate the sales tax owed.

During the hearing, the court specifically analyzed Regulation 1585. The regulation defines a “bundled transaction” as the retail sale of a wireless telecommunication device that contractually requires the retailer’s customer to activate or contract with a wireless telecommunications service for periods greater than one month as a condition of that sale.

Based upon this definition, the court sided with the CDTFA, holding that the phone’s full price should be used when calculating the sales tax owed. The court reasoned that retailers were effectively selling the phones at a discount to induce consumers to purchase wireless service and that the full price of the phones was, therefore, part of the consideration for the purchase of the wireless service.

This ruling was a significant win for the State and has important implications for California retailers. Retailers must be mindful of the taxation requirements of bundled sales, whether involving cell phones or any other type of products and services, and should seek guidance from a tax professional to ensure compliance with state and local tax laws.

Thompson Tax specializes in sales and use tax across many industries. Contact us today for all of your multistate and local sales and use tax needs. We are your Trusted Tax Advisor.

Have a sales and use tax question? Contact Nicole Brown.

California’s New CRV Law And How It Affects The Wine Industry

As many of you may know, California’s beverage recycling program has recently undergone significant changes. The program, which aims to reduce waste and promote recycling, has been expanded to include wine and other alcoholic beverages in addition to traditional recyclables like plastic bottles and aluminum cans.

While the changes are certainly a step in the right direction for the environment, they have also significantly impacted the wine industry in California. Many wineries and vineyards are now required to pay additional fees to help fund the recycling program, and they must also comply with new labeling and reporting requirements.

Aside from the challenge of the new requirement to include a recycling symbol on all wine bottles sold in California, the reporting requirements can be time-consuming and complex, requiring beverage manufacturers to track and report on their sales and recycling efforts.  That is where Thompson Tax can help. We can assist your winery with CRV (California Redemption Value) registration and filing compliance. Reach out to us today for all of your beverage deposit and tax needs, as well as any sales and use tax needs that you may have.  We are only a phone call away!

Have a question? Contact Nicole Brown, Thompson Tax. Call 833.928.9998/

Sales And Use Tax Issues
1. Determine The Correct Sales Tax To Charge

One of the primary taxation issues for direct mailers is determining the correct sales tax to charge. Sales tax laws vary from state to state and even within different areas of the same state, making it difficult to keep track of the applicable tax rates. For example, if you send mail to customers in multiple states, you may need to charge different sales tax rates for each state. Additionally, some products or services may be exempt from sales tax in certain states, further complicating the matter.

2. Identify The Correct Tax Classification

Another issue that direct mailers may face is determining the correct tax classification for their products or services. Depending on the type of product or service offered, it may fall under different tax classifications, each with its own set of regulations. For example, some states may classify advertising services as taxable, while others may consider them exempt.

3. Be Aware of Tax Implications When Using Third-Party Vendors

Direct mailers should also be aware of the tax implications of using third-party vendors. If you use a third-party vendor to provide services such as printing, mailing, or list management, you may be responsible for collecting and remitting sales tax on those services. However, the tax laws surrounding these services can be complex, and it’s important to consult with a tax professional to ensure compliance.

4. Keep Accurate Tax Transactions Records

Direct mailers should keep accurate records of all tax-related transactions. This includes keeping track of sales tax collected and any exemptions or deductions claimed. In the event of an audit, having detailed records can help demonstrate compliance and avoid any penalties.

Thompson Tax Can Help!

Although tax compliance can be a significant challenge for direct mailers, understanding the various taxation issues they may face and taking appropriate measures to ensure compliance, direct mailers can avoid complications and focus on growing their business. It’s always recommended to seek the advice of a tax professional to ensure compliance with all applicable tax laws. Contact Thompson Tax today for all your sales and use tax needs and let us be your Trusted Tax Advisor.

Contact Nicole Brown, CEO Thompson Tax.