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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 13313
Experience:  15years with H & R Block. Divisional leader, Instructor
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I had a sales tax audit on my company. I was never charging

Customer Question

i had a sales tax audit on my company. I was never charging sales tax as i didn't know i had to on a pool service. I owe them $188,000. I have already paid the, 140,000. Can I use this as in an expense since the sales tax was never collected?
Submitted: 6 months ago.
Category: Tax
Customer: replied 6 months ago.
this is in texas by the way.
Customer: replied 6 months ago.
i had to sell off a huge customer base of my company to come up with the money . so now what I'm scared about is all the income i got from that sell. but since i never collected the tax and now have to pay it all to the comptroller, would it be a wash?
Expert:  Robin D. replied 6 months ago.

Hello

The sales tax that you were required to pay was not part of your business income. Any sales tax you pay on a service for your business, or on the purchase or use of property in your business is treated as part of the cost of the service or property. If the service or the cost or use of the property is a deductible business expense, you can deduct the tax as part of that service or cost.

You were paying what the customer should have paid you and then you remit. It is not deductible.

The sale of your customer base is reportable in your business. If you initially purchased the customer list thne you can claim this as a capital asset and use the lower capital gains rates. If you developed the list yourself then you would show this as a sale but ordinary rates apply.

Customer: replied 6 months ago.
What about the penalty and interest from the sales tax audit?
Expert:  Robin D. replied 6 months ago.

The penalty and interest are not deductible as an expense. Fines and penalties a business pays to a government entity for violation of any law are not deductible. That too acts as another penalty and is difficult for a business.

The taxes that fall under the "trust fund" rules for federal or states have stiffer penalties. It is unfortunate that you were not advised about the sales tax situation earlier. I sincerely ***** ***** could give you some good news.

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Expert:  Robin D. replied 6 months ago.

Checking to see if you responded again.

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