Gross Receipts Reported for Sales Tax Purposes Match Income Tax Return?
A recent notification on Wisconsin's website states, "reconciling differences between the gross receipts reported for franchise/income tax and sales/use tax purposes is one of the most common issues addressed in a field audit."
According to the notification,
"an auditor performs this reconciliation to identify errors that may have been made in reporting sales subject to sales tax, exemptions from sales tax, etc. The gross receipts on the franchise/income tax return should equal total sales on Form ST-12. If they don't match, the auditor is required to reconcile the difference and identify reasons for the differences. Many times, the difference does not impact tax liability. However, if the difference cannot be reconciled satisfactorily, the auditor may presume that taxable sales have been underreported."What Should You Do?
The notification states, and I agree, in order to minimize the time it takes to complete the reconciliation, it's important that sellers report all sales on Form ST-12, line 1, whether taxable or not. Nontaxable and exempt sales will be removed on lines 2 through 5 of Form ST-12. It's also important that the taxpayer inform the auditor of year-end adjusting journal entries affecting gross receipts or total sales.
Taking this step now, can reduce audit assessments and problems later.
Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States. He also writes a weekly column in Tax Analysts State Tax Notes entitled, "The SALT Effect." For more info, visit his website: www.leveragestateandlocaltax.com
You can reach Brian at firstname.lastname@example.org.
Because state and local taxes are deceptively simple and endlessly complicated.