[Me]

I need to file 4th quarter sales taxes but I notice the business collected less in sales taxes from customers based on an old tax rate so when we want to file the return do we adjust/lower the gross sale amount. Please provide any feedback since I need to file it correctly. Thank you

[turo9992000]

This is an interesting question. It makes sense to lower the gross sales amount to back out the sales tax, but I'm not sure that is correct.

How much is the difference?

Hopefully someone is able to provide an answer because I would like to know as well.

[wombataholic]

Disclaimer: I'm not a tax expert.

I think the business will have to eat the difference between what was collected and what should have been collected.

Licensed CPA
Passed each section on the first try with Ninja Notes/MCQ/Audio

[Tim]

I worked in corporate sales tax for a year. Yes, the company needs to pay the difference from its own coffers.

[Me]

Thank you all for your input but I heard from other people that they would back out to calculate the amount of tax based on the correct tax rate and based on the old sale then try to reduce the gross sale even tho the company still going to pay more than they collected. Is this a better way of doing to adjust/ lower the gross sale amount

[Tim]

You understand misrepresenting your sales is fraud, correct? Think of it in terms of income tax. So I made $100k this year and I do my tax return and find out my tax liability is $25k. Oops, I only withheld $20k from my paychecks. Do I then write a check for $5k to the IRS or do I change my income to make it come out right?

[aaronmo]

Are you seriously asking if you should adjust your sales because you screwed up on your collections? Really?

No – you don't fudge the numbers to make them say what you want. You're on the hook for whatever the sales tax rate was at that time; it's part of having a business.

[Me]

Thank you @Tim that's why I asked because I want to file it correctly different people suggested that approach but I think the company needs to pay the difference based on correct tax rate

[Recked]

This thread is very funny to me.
Real world answer, vs the correct and legal answer.

What is the dollar amount difference in sales and in tax?
Under paying sales tax by intentional means is fraud, but in this case you would still be paying in every dollar of sales tax collected.
Selling 100k, collecting 25k, saying you sold 80k and paying in only 20k = fraud.
Selling 100k, collecting 20k, reporting 80k to match the amount collected… illegal yes, but not sure if it would constitute fraud, as you are not keeping the extra money (defrauding the state)

The company should own up to their mistake and eat the difference.
I would not want my name on a sales tax return that understated gross sales or sales tax due.

Also, keep in mind if you understate for a sales tax return, you will also have to understate on the income tax return.
The states compare sales tax returns to income tax returns, and issue audit notices if there are material discrepancies.

I had a similar situation when NYS was bouncing around with their sales tax rates a few years back and I made the client eat the difference.
It was not a very large tax amount. I considered it a stupidity tax for not collecting at the proper rate.

But, how about this one.
Lets say the client collected at 10%, but they should have only collected at 8%.
Do you over report gross sales to match the 10% and thereby not withhold any of the extra sales tax you collected?
Or do you report actual gross sales, pay the correct 8% and the client gets to keep the additional 2%? Thereby keeping funds that belong to the state?
Or… do you report the actual gross, pay in the actual tax collected, and let the client get a sales tax audit (so you get more billable hours…)
So many ethical dilemmas…

[Me]

@reckedracing The difference between tax collected and the tax they should have collected is only $70 since the company started charging the correct tax rate from customer in the middle of the month rather than from the beginning of the month. Therefore I think the company should pay the diffference of $70 in the sales taxes

[Author]

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