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We got hit with a sales tax audit in NYC here, which apparently is pretty common. Turned into a multi-week process of providing documentation, justifying why s

We got hit with a sales tax audit in NYC here, which apparently is pretty common. Turned into a multi-week process of providing documentation, justifying why some of our deals were non-taxed, justifying some of the work we did, and a little lawyer time. I think in the end we owed ~$3k. What a waste of everyone's time.

cup-of-tea-at-2 12y ago
Semi-related, for anyone in the UK join the Federation of Small Businesses as they can help you out a load with this kind of thing especially with audits. If HMRC tell you you are being audited, just say "thanks very much, my FSB contact will be getting in touch with you" and then let the FSB know. From that point on the FSB handles everything - normally resulting in the audit disappearing as HMRC know they are unlikely to get anything out of you and so would be a waste of tax payers money/time.
wernercd 12y ago
If they say "You owe us 3k", you argue about the 3k. If they say "You owe use 130k", you argue about the 130k and end up ecstatic to pay 3k. Either way, you argue and pay 3k. In option 1, you complain about the 3k. In option 2, you praise the 3k. Just my opinion. Then there is the options that you find fewer loop holes and pay 5k. Or are totally lazy and pay 130k. Or any shade in between. Sounds like a good racket for them.
- vonmoltke 12y ago
  The better racket for them is charging your business just to exist.
  - cmdkeen 12y ago
    In return for providing the legal protections to both enforce contracts and protect your personally from the liability of a failed business. As a small business the value of protection you receive from the state is incalculably larger than the price you pay.
    - vonmoltke 12y ago
      I can get those protections from Texas for free until I exceed $1m in revenues. Not all states charge your business just to exist.
      - _delirium 12y ago
        Texas instead charges your property just for existing (3rd-highest property tax in the nation). Different states choose different revenue mixes; Texas has largely chosen property taxes, sales taxes, and oil/gas severance taxes, plus in recent years the "margin tax" on larger companies.
        Dylan16807 12y ago
        Real property is special. You only truly own it if you're a country. Otherwise you have an encumbered title to the land and taxation is just part of the deal. Movable property taxes, on the other hand, are BS.
        _delirium 12y ago
        Well yes, but I'd argue owning a corporation is pretty similar. The right to organize in a form that lets you incur debts you're shielded from paying back isn't some kind of natural state, but a creation of law in order to encourage certain kinds of commercial activity. Things like corporate taxes are imo a perfect legitimate part of the deal, if a government chooses to impose them. I do think sole proprietorships should not require registration as businesses or payment of a separate tax (besides any personal taxes), though.
        vonmoltke 12y ago
        - Texas doesn't have a state property tax; all property tax revenue goes to local tax authorities. You could argue this is just shifting a burden downstream, but I like that system better than a from-on-high budget distribution. - Property tax applies to all real estate, not just businesses, so I'm not sure what this has to do with business taxes. - We don't have a personal income tax.
- mattzito 12y ago
  Yeah, this is a few years back, but as I recall, they originally claimed we owed ~$20k - and we disputed and negotiated and got supporting evidence, etc. and ended up with 3k. I was more commenting that it seemed like a lot of effort on the part of the city to end up with just $3k.
- martin-adams 12y ago
  >> In option 2, you praise the 3k. And shorten your life by 12 months from the initial shock :)
- Alupis 12y ago
  The high tax liability claims are based off of projected revenue (in a very market-optimistic year) -- not actual revenue. This is why usually the actual tax liability is significantly less.
- anigbrowl 12y ago
  It's only a racket if you assume that nobody cheats on their taxes. If that were the case we'd never need to have audits.

cup-of-tea-at-2 12y ago

Semi-related, for anyone in the UK join the Federation of Small Businesses as they can help you out a load with this kind of thing especially with audits. If HMRC tell you you are being audited, just say "thanks very much, my FSB contact will be getting in touch with you" and then let the FSB know. From that point on the FSB handles everything - normally resulting in the audit disappearing as HMRC know they are unlikely to get anything out of you and so would be a waste of tax payers money/time.

wernercd 12y ago

If they say "You owe us 3k", you argue about the 3k. If they say "You owe use 130k", you argue about the 130k and end up ecstatic to pay 3k. Either way, you argue and pay 3k. In option 1, you complain about the 3k. In option 2, you praise the 3k. Just my opinion. Then there is the options that you find fewer loop holes and pay 5k. Or are totally lazy and pay 130k. Or any shade in between. Sounds like a good racket for them.

vonmoltke 12y ago
The better racket for them is charging your business just to exist.
- cmdkeen 12y ago
  In return for providing the legal protections to both enforce contracts and protect your personally from the liability of a failed business. As a small business the value of protection you receive from the state is incalculably larger than the price you pay.
  - vonmoltke 12y ago
    I can get those protections from Texas for free until I exceed $1m in revenues. Not all states charge your business just to exist.
    - _delirium 12y ago
      Texas instead charges your property just for existing (3rd-highest property tax in the nation). Different states choose different revenue mixes; Texas has largely chosen property taxes, sales taxes, and oil/gas severance taxes, plus in recent years the "margin tax" on larger companies.
      - Dylan16807 12y ago
        Real property is special. You only truly own it if you're a country. Otherwise you have an encumbered title to the land and taxation is just part of the deal. Movable property taxes, on the other hand, are BS.
        _delirium 12y ago
        Well yes, but I'd argue owning a corporation is pretty similar. The right to organize in a form that lets you incur debts you're shielded from paying back isn't some kind of natural state, but a creation of law in order to encourage certain kinds of commercial activity. Things like corporate taxes are imo a perfect legitimate part of the deal, if a government chooses to impose them. I do think sole proprietorships should not require registration as businesses or payment of a separate tax (besides any personal taxes), though.
      - vonmoltke 12y ago
        - Texas doesn't have a state property tax; all property tax revenue goes to local tax authorities. You could argue this is just shifting a burden downstream, but I like that system better than a from-on-high budget distribution. - Property tax applies to all real estate, not just businesses, so I'm not sure what this has to do with business taxes. - We don't have a personal income tax.
mattzito 12y ago
Yeah, this is a few years back, but as I recall, they originally claimed we owed ~$20k - and we disputed and negotiated and got supporting evidence, etc. and ended up with 3k. I was more commenting that it seemed like a lot of effort on the part of the city to end up with just $3k.
martin-adams 12y ago
>> In option 2, you praise the 3k. And shorten your life by 12 months from the initial shock :)
Alupis 12y ago
The high tax liability claims are based off of projected revenue (in a very market-optimistic year) -- not actual revenue. This is why usually the actual tax liability is significantly less.
anigbrowl 12y ago
It's only a racket if you assume that nobody cheats on their taxes. If that were the case we'd never need to have audits.