Bowling Green Sales Tax Audit Attorney
Making sure you comply with all your federal, state, and local taxes can be difficult but is extremely important for all your assets as well as the overall operation of your Ohio business. While America doesn’t have a federal sales tax, each individual state has implemented their own legislation regarding the sales tax rates in their territories. Recently, sales tax compliance has become a prominent focus for both local and state governments. Because of this, legal practices are beginning to see more and more businesses facing sales tax audits.
While an audit can seem threatening, especially for a business owner, there are ways that you can work through the intimidating process with the proper legal representation. Through risk management, asset assessment, and evidence from your side of the issue, our team can work with you to create a legal strategy to help you through your audit.
Mockensturm, LTD: Bowling Green’s Tax Attorneys
Audits are one of the most daunting situations a person can experience. They often bring about high emotions like anxiety, fear, and worry about the future. Luckily, you don’t have to go through a state or federal tax audit alone. Here at Mockensturm, LTD, our team of expert attorneys and certified public accountants can assist you through even the most stressful of tax situations. For years, we have worked with families, businesses, and individuals struggling with their taxes, and we are dedicated to making the process easier. With our extensive knowledge of the law and the realm of taxes, no other law group can provide you with the high-quality, individualized help that your legal issue requires.
What Is A Sales Tax?
A sales tax is a tax applied to specific goods, services, and properties sold within a state. Because there is no federal sales tax in the U.S., each state is allowed to create their own guidelines surrounding their individual sales tax. 45 states as well as the District of Columbia all have sales tax legislation, including Ohio. Ohio has a state sales tax rate of 5.75%, meaning that it must be applied to all products or services purchased in the state. If a business fails to charge customers the proper sales tax and files their tax return incorrectly, they may be selected for an audit, which can result in serious consequences.
What Is A Sales Tax Audit?
All Bowling Green businesses are required to file a sales tax return in Ohio. A sales tax audit occurs when your state tax agency finds some sort of issue or discrepancy within the return you filed. The most common mistakes that cause sales tax audits in Ohio are often accidents, such as putting a decimal or comma in the wrong place or doing incorrect math in one section of the return. Missing or improperly filled-out sections of your return may also cause the state to audit you. The state tax agency uses the past three years of your business sales and other important data to assess any discrepancies. The state performs these sales tax audits on businesses to verify they are paying the correct amount owed to the government. Otherwise, legal action may be taken until you have paid what is owed.
The Audit Process
The audit process may vary slightly state-by-state. According to the Ohio state government, the sales tax audit process is as follows:
- First Notice Sent Out:
Once the state has determined that your business is going to be audited, they send out two notices to inform you and give you time to prepare. Most likely, you’ll receive a phone call as well as a letter in the mail from your state tax agency. Both notices will sound similar, informing you that your business has been “selected” for a sales tax audit.
- Preliminary Meeting
Once you have been notified that your business is being audited, a state tax agent will schedule a preliminary meeting with you to explain the details of why you’re being audited. The agent will go over your tax return with you, point out the issues and discrepancies they found, and discuss how they will further assess the situation. This meeting will need to occur at your place of business because the agent will most likely need to tour your facility after your discussion. Your auditor may schedule a few more visits in the future if they believe further investigation of your physical facility is required.
- Record Review
After you have met with your state tax agent and discussed the details of your audit, you’ll then begin the process of reviewing your records. This can occur either at your business or at the tax agent’s office, depending on what is more convenient for the different parties involved. From there, you’ll review all records, bills of sale, charts of accounts, and other evidence from your finances over the past three years. If, for some reason, you have not filed a sales tax return in the past few years, your agent may ask for information dating back up to 7 years. The process of reviewing the financial records of your business can take anywhere from a few weeks to months, depending on how accessible your financial information is and how quickly you can organize and submit it.
- Final Review Meeting
Once the record reviewing process is complete, you will then move into the end stages of your audit. You’ll once again meet with your assigned agent to do a final, comprehensive review of all the information that they collected during the audit. During this meeting, your agent will give you a Recommendation of Assessment, which is their recommended method for having you correct your shortcomings and deficiencies. The Recommendation of Assessment may also include potential penalties if you do not follow the decision properly. A final determination will be made by the state tax agency from there. This will inform you of the penalties you received, which range from high-interest payments each month to potential charges of tax fraud.
Taxable Goods And Services In Ohio
Ohio’s sales tax rate sits at 5.75%. This means that all eligible goods and services sold both traditionally and digitally have to comply with this rate. A few of the most common taxable goods and services for businesses in Ohio include:
- Any kind of motor vehicle
- Specific kinds of prepared food products
- Computers, phones, and other technology
- Yard supplies
- Building materials
- Meals at restaurants
- Physical property
- Over-the-counter medications
- Personal property services (installing, inspecting, or repairing specific products, etc.)
- Property maintenance services (landscaping/yardwork, snow plowing, appliance and utility repair, etc.)
- Beauty services (manicures, hair styling, etc.)
- Personal services
- Entertainment (sport events, concerts, etc.)
Sales Tax Exemptions In Ohio
Every state has varying rules on what products and services are exempt from sales tax. As a business owner, it’s your responsibility to be aware of what is exempt from sales tax and what isn’t in your state. Generally speaking, exemptions are based on three broad categories:
- Type of Good, Service, or Property Being Sold
Sales tax in the state of Ohio only applies to certain goods and services, such as the ones listed above. However, there are a multitude of goods and services that are sold by businesses in Bowling Green that are exempt from sales tax, including:
- Prescription drugs
- Machinery and raw materials
- Medical devices
- Medical services
- Custom software
- Use of Good, Service, or Property
The use of the product or service being sold also plays a large part in whether it is eligible for state sales tax. For example, many of the purchases non-profit organizations make are exempt from sales taxes because they are being used for charitable purposes. Other types of sales tax exemptions are allowed when the product benefits a certain industry, such as agriculture, or encourages public activities. Land purchased to create parks by the state government or appliances purchased for a church’s soup kitchen can all be exempt under Ohio state law.
- Identity of Organization
When purchases are made by the local government or non-profit organizations for their specific use, the state of Ohio is not allowed to impose a sales tax on them. Tax-exempt organizations include:
- Public schools and other educational organizations
- Churches and other religious organizations
- Certain scientific organizations
Common Audit Mistakes
If you’re being audited, it’s essential to make sure that you comply with the state government’s guidelines. Otherwise, you may find yourself in even more trouble than you were in the first place. Common audit mistakes you should avoid include:
Not Disclosing All Information
One of the most common mistakes people make when being audited is deciding to limit or not disclose all the information that is requested by the tax agency. Your auditor will only be asking for business records from a certain period, usually the past three years, and will only be concerned with records dealing with business sales conducted in Ohio. By not disclosing all the information asked for, you may ultimately end up making your business look more suspicious, thus making the consequences of your audit more severe if it’s determined you committed tax fraud.
Not Keeping Up With Time Restrictions
All types of audits follow strict time requirements. If your business is slow to find and share information, the audit process may have to be lengthened through the signing of a waiver so the auditor can legally continue. The longer the auditing process lasts, the more information an auditor might need, ultimately making the situation more complex. It’s in your best interest to answer all information requests sent to you by your tax agent in a timely manner so that you can keep the audit process moving. It also doesn’t hurt to stay on your auditor’s good side by doing what they ask of you on time.
Poor Finance Record Keeping
Whether you are being audited or not, keeping organized records of your business’s finances is critical. Whether you just started your business, or you’ve been operating for years, sales reports, payroll stubs, and sales tax information are all important records that you may be asked for at any time. Exemption certificates are also vital information that you should always keep track of, especially in case you are selected for an audit. Your exemption certificates are what prove that you are exempt from paying certain taxes, meaning if the state or your business doesn’t have a proper record of them, the consequences of your audit may be much more severe.
Giving Out Original Documents
In the chaos of a sales tax audit, it can be easy to mix up documents or not realize the importance of certain ones you own. When your auditor requests information and specific documents from your business, make sure that you make copies and do not send in your original documents. Your original documents, unless otherwise stored online, are the only records of your financial sales and other important reports. Though a tax agent is familiar with handling important information, the last thing you want during an audit is the original financial documents you own being lost. It is also more than likely your auditor must keep all the documents you give them for their assessment, so giving original documents to them may mean you will never see them again.
Don’t Give More Information than Needed
Another common mistake taxpayers make when being audited is providing too much information to their assigned tax agent. While complying and providing good quality information is vital to the audit process, sometimes you can provide a little too much. It’s important to do exactly as your auditor asks and only give them the documents they specifically request. Otherwise, you may end up losing important documents that you didn’t need to send in the first place or causing even more potential issues with the extra information.
How Do You Challenge A Sales Tax Audit In Ohio?
Every business is legally allowed to try and appeal the final determination of its sales tax audit. According to the Ohio Department of Taxation, you must abide by these rules:
- When filing for an appeal to your sales tax audit, you must go through the Board of Tax Appeals.
- You have 60 days to send in your request for an appeal after your audit case has reached a final determination.
- You must send in a copy of your final determination along with your notice of appeal to the Board of Tax Appeals and the Tax Commissioner, as well as clearly state why you are appealing the decision that was made. The Board of Tax Appeals allows digital submissions, but you must deliver your documents to the Tax Commissioner in person or through the local mail.
The Advantages Of Hiring An Attorney During An Audit
Being audited is an intimidating and complicated process, especially if you try to go through it alone. By working with a team of experienced attorneys and CPAs, like our team here at Mockensturm, LTD, your audit process can be much less stressful. Some of the advantages of working with an expert sales tax audit attorney include:
Using Their Knowledge of the Law
No one is more familiar with the law than an experienced attorney. When being audited, finding a lawyer specializing in the realm of taxes can change your experience immensely. An attorney can not only guide you through the audit process, but they can use their extensive knowledge of the law to give you legal advice pertaining to your situation. Every audit has unique circumstances, some of which are more complicated than others. By working with a sales tax audit attorney, you can trust that you’ll be able to navigate through the audit process with more ease and less stress.
Protection from Agents
While tax agents are just doing their job, many of them are notorious for being aggressive in their work. This means you may find yourself being consistently contacted or having an agent show up at your business. Though contacting you to collect information is part of the process, if an agent threatens or intimidates you during the audit, they are violating your rights. If this occurs, you should immediately notify your attorney so they can protect you against an inappropriate agent.
Defend and Represent Your Case
Audits commonly occur due to accidental mistakes made by the taxpayer who filed them. Working with a sales tax audit attorney that you can trust can help you better represent your side of the story. The last thing you want is your tax agent thinking that you purposely filled out your tax return incorrectly to avoid paying what you owe in full. A lawyer can assist you in gathering evidence, assessing your mistakes or discrepancies, and working to defend you during your audit. If you receive a notice of a sales tax audit and decide you want to dispute it, having a lawyer on your side to defend you and your business is crucial.
Increase Potential of Less Serious Outcomes
The penalties for audits vary depending on the final review and assessment of the situation but can result in serious consequences for those involved. High-interest rates, back-payments of taxes, and even jail time are all potential penalties of an audit that finds deficiencies in your business’s information. A sales tax audit lawyer can assist you in multiple ways to help you achieve more favorable outcomes. For example, attorneys are extremely experienced in the field of negotiation. This can help you potentially establish installment plans to pay back the money you owe instead of one full payment or sometimes even partially reduce your total balance.
When Should You Hire A Tax Audit Attorney
Being audited can make you feel unsure about a lot of things, one of those being whether you need an attorney to go through the process. If you’re being audited and are experiencing any of the following, working with a state tax audit attorney that you can trust may be in your best interest.
You Want to Appeal an Audit
While appealing your audit decision is a relatively simple process to follow, it can be difficult to organize yourself and your documents, draft your statements and contact the proper facilities on time. A sales tax audit attorney is not only familiar with the different aspects of an audit that you have to go through, but they are also experienced with helping their clients appeal final determinations. They can help you keep track of time and get the proper documentation turned in to where it needs to go. If your notice of appeal is accepted, your attorney can also help with representing you and your business to work towards more favorable outcomes. When it comes to appealing your final determination, consulting a tax attorney can help you immensely.
You Owe the Government Large Sums of Money
Audits are taken extremely seriously by the government. If you received a final determination that states your business owes tens or even hundreds of thousands of dollars, it’s best to seek assistance from an attorney that’s experienced with this area of the law. Because the consequences of audits can be severe, having someone to defend you and assist you through the legal aspects of the process is essential. Otherwise, you may face penalties such as criminal charges and jail time.
You’re Worried About a Poor Final Outcome
If you find that you can’t stop worrying about the potential consequences of your audit result, seeking help from an expert sales tax audit attorney can help relieve some of that anxiety. The potential penalties for an audit are severe, which often sends many people into a spiral when thinking about it. By hiring an attorney, you can receive legal advice throughout the process as they assist you with organizing your financial records. Working with a lawyer can not only give you some peace of mind that your case will be handled properly, but it can also help increase your potential for less severe final determinations through negotiation.
You’d Prefer Someone to Talk to the Taxes Agency on Your Behalf
Tax attorneys are often hired when taxpayers feel uncomfortable talking to state or federal tax agencies. While many clients worry that working with an attorney makes it look like they have something to hide, many people hire a tax audit lawyer simply to assist with the communication aspects of it all and give legal advice. Audits are intimidating, and for many people, having someone to assist them through the process or speak for them can make things much easier.
Sales Tax Audit FAQs
Q: Do I Need a Lawyer for an IRS Audit?
A: If you are facing an audit from the IRS, hiring experienced legal help is the best way that you can deal with the situation at hand. They can assist you with the complicated paperwork and legal communication that will occur, as well as represent you in litigation if needed. An expert tax audit attorney can also offer advice on how to best deal with your unique situation.
Q: What Do Sales Tax Attorneys Do?
A: A taxation lawyer, otherwise known as a tax attorney, plays a variety of roles in assisting individuals with their federal, state, and local taxes. They can help you prepare for the coming year’s taxes, file your current refund, or offer advice and assistance on tax issues.
Q: Do I Need a Tax Lawyer or an Accountant?
A: Accountants can verify the work that an IRS auditor may be doing to ensure everything about the process is correct. With that said, an attorney can do most things an accountant can do while also providing a wide range of legal services as well.
Q: How Much Does an IRS Audit Cost?
A: The overall cost of your audit will depend heavily on what you originally owed to the government as well as what kind of legal help you enlist. A simple, quick audit may only cost a few thousand dollars, while more complex situations can easily be over $10,000.
Q: What Do Sales Tax Auditors Look For?
A: When the Ohio state tax agency selects your business for an audit, its primary goal is to determine whether your company has been properly applying and paying sales tax charges. If you weren’t, your business most likely owes the government money.
Bowling Green Legal Representation For Your Sales Tax Audit
Being audited, especially as a business, is alarming for most. Before you begin to panic, it’s important that you enlist the help of legal representation that you can count on. Here at Mockensturm, LTD, our team has years of experience helping businesses and individuals in Bowling Green through different kinds of audits. Our team of attorneys is passionate and understanding of every business’s unique situation, and they are ready to help build a plan that can help you achieve a favorable outcome. If your business has been selected for an audit in Ohio or you’re looking for high-quality legal representation in Bowling Green, don’t hesitate to reach out to us here at Mockensturm, LTD.