How to Survive a Sales and Use Tax Audit for your Campground
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Hi, I’m Donna Bordeaux with CampgroundAccounting.com. Today, I want to talk about sales and use tax. Regarding sales tax: I’ve had several audits for clients on sales tax so I want to explain how you can protect yourself and make sure that you don’t have a big sales tax liability if you are audited.
You will want to know what is taxable on your products and services that you are selling in your state. Every state is different, so you’ll want to make sure you have done your research. You can call your state office and ask them where you can find information online in the Sales and Use Tax guide but never just take the word of somebody on the phone. Always do the research.
Get a physical reference on the information provided. You may request they email you where they found that information on whether something is taxable or not. You’ll always want to have proof of the information you receive and some legal backing in case you’re audited. The person who provided you with information could be gone by the time you’re audited. Verify items that you’re selling at your campground, especially electricity and propane. Those utilities are going to be different state to state.
The second really big hole that I see is use tax. Most people are not familiar with use tax. If you purchase materials to be used at your campground, you can use a resale certificate. Resale means you’re going to buy something and then resell it. If you buy supplies for your store and resell them, you collect sales tax from the end user of those products. Therefore, you do not have to pay sales tax when purchasing those supplies from your vendor.
However, if you’re going to use products to provide services or to provide the sites in your campground, you should be paying sales tax because you were the end user. For example, if you buy lumber from Home Depot or Lowe’s to build new walls around your sites, you’re going to pay sales tax on that product. You are the end user. However, if buy canned drinks to sell at your store, you will not pay sales tax. You will be selling the drinks to the final end user and collect the sales tax at that time.
So that should clear up a little bit about resale. You should not be taking your resale certificate with you to Lowe’s and Home Depot to buy things cheaper. That will just get you in trouble with the sales use tax folks.
Use Tax. I alluded to this before that use tax is sales tax in disguise. Use tax means you bought a product from a vendor and they were not liable to collect sales tax in your state. The supplier didn’t charge you tax. The most common place where this happens is purchasing from an out-of-state vendor. There are a lot of vendors that campground owners use on a routine basis. National vendors such as utility supply, vendors of smores kits and other items. When you buy products that you do not pay sales tax on, but you are the end user, you must voluntarily remit the sales tax to your state. Most people have never done this. This is the biggest point of contention during a sales tax audit that they will nail you for this every time. Another example is when you buy the jumpy pads that you’re going to put in at your campground; that vendor is most likely not in your state. You may pay $4,000, $6,000, or $10,000 for that product, but you haven’t paid any sales tax. You need to mark that so when you file your monthly sales tax, you remit the use tax on that purchase. Just like if you had purchased it in your state and paid sales tax to your vendor. So that is the biggest place where I see problem areas in sales and use tax audits.
Go through and take a look at what you’ve purchased; especially your larger items from some of those bigger campground vendors. If you were on the border of two states, you may have a little more fun to work out details for paying sales and use tax.
If there’s anything that we can do to help you, please let us know.
Donna Bordeaux, CPA with Campground Accounting
What happens when you send two CPAs out into the relaxing outdoors to camp? You get CampgroundAccounting.com. Donna and Chad have over 50 years of combined experience as entrepreneurial CPAs. They’ve owned businesses and helped business owners exceed their wildest dreams. They camp and travel across the country every chance they get, so it’s just a natural fit that they focus their CPA skills on helping campground owners throughout the USA grow their businesses and minimize the impact of taxes. They understand the key performance indicators and specialized issues that face RV park owners every day.