Sales Tax Mistakes
A local Pittsburgh, Pennsylvania newspaper reporter caught on to something experts in the sales tax industry have known for a long time—businesses make mistakes in sales tax routinely. In the article, the reporter highlighted one story of an online merchant who charged sales tax on a non-taxable item and another story of Kohl’s returning a small amount of money for an incorrect sales tax calculation. The reporter seems surprised, at first, that such mistakes happen (and in Pennsylvania) but then goes on to explain just how complex sales tax laws can be.
What we should note, however, is how the two companies handled their mistakes. When your company makes a mistake in sales tax, your company is supposed to resolve it by either refunding the overage to the customer and requesting a refund from the state where you filed an incorrect remittance or by paying the extra your company missed and leaving the customer out of it for underpayments. Businesses are not allowed to keep overpayments and are responsible for charging the correct rate in every transaction. The truth of sales tax is this is often not the case—businesses make mistakes and sometimes they go unnoticed or are intentionally ignored. If you’re not checking your sales tax after collecting it and before filing, you’re leaving your company open to problems because of overpayments or underpayments.
Double-checking your sales tax doesn’t have to be complex either—with our software, it’s as simple as a click of a button. In this case, Kohl’s did the right thing and returned the tiny overage to the customer, despite the fact that it probably cost them more to do so than the amount refunded. They discovered the error on their own because they verified their information. The other merchant, however, fought with the customer who discovered the mistake—and likely lost all future sales from that person and many others now with their appearance in a local paper. That’s on top of possible penalties from Pennsylvania.
Pennsylvania is cracking down on merchants who aren’t complying fully with sales tax laws, and so are many other states. If you’re doing online business in Pennsylvania and have nexus, you need to ensure that your company is doing all that it can to be as compliant as possible. Pennsylvania’s sales tax officials are taking a closer look at sales tax remittances, especially from companies that weren’t following the rules previously. Not only will double-checking your sales tax ensure you’re compliant with the law, but it will also keep your customers much happier with your service.