If a taxpayer’s books and records are inadequate, New York State may apply a reasonable method to determine whether additional taxes are due. Such methods can include analysis of a taxpayer’s credit card receipts, cost of goods sold, etc. Penalties may be imposed for failure to maintain inadequate records.
A taxpayer could be subject to penalties and interest if additional tax is due, be subject to criminal penalties if there was a willful failure to maintain proper records, or have their Certificate of Authority revoked.
New York State imposes a high-interest rate on outstanding sales tax liabilities. As of October 1, 2012, the interest rate is 14.5% if penalties are also owed on the sales tax. The rate is lower if there are no penalties.
As discussed under Responsible Person Assessments, sales tax liabilities may flow through to individuals held responsible for collecting and remitting the tax. A personal liability means the State could pursue the individual’s personal assets to collect on the sales tax liability, including tax, interest, and penalties. Note that there is an exception for qualified LLC members. For more information, see Responsible Person Assessments Against Members of NY LLC for Sales Tax.
We represent taxpayers undergoing New York State sales tax audits. We seek to reach a reasonable resolution with the State as efficiently as possible. Feel free to contact us if you or your business is subject to a New York State sales tax examination.