I was recently reading an article the other day by Julie Sulc that talked about one particular woman's dilemma concerning use tax. Julie found out about use tax as she was preparing her personal tax return on Turbo Tax. At the end of her return, a question popped up, "Do you owe any use tax?" She recalled a story her friend had once told her about complying with this tax. Her friend had bought a Dell computer online. Dell did not charge sales tax but let the woman know that they would report the sale to her home state. This was enough to scare the woman into complying. To make a long story short, she finally figured out how to submit a use tax return. By the time she submitted the payment, it was after the due date. She was slapped with a notice of interest and penalty due. So much for her having a conscience!
Many people do not realize that they have this obligation, but many states (particularly with huge budget deficits) are going after individuals that are not charged sales tax for purchases made over the internet. However, small and medium size businesses are a target as well and the penalties and interest can be much higher as businesses usually have many more transactions.
If you realize that your business should be submitting use tax for purchases made over the internet or from vendors that did not charge sales tax, just simply beginning to file use tax returns is not the answer. Like the woman in the story above, your business will be hit with penalties and interest. Furthermore, the State can go back as many years as they want to and assess penalties and interest for use tax and other corporate taxes that should have been paid in prior years.
Pennsylvania and many other states offer a Voluntary Disclosure Program for taxpayers who should be filing and remitting use tax to the State but have not in the past. The benefit of this program is that the taxpayer can remain anonymous until approved for the program. Once approved, the taxpayer will only have to file and remit use tax for the three previous years and going forward. For corporate taxes, the lookback period is five years. No penalties for failure to file or failure to pay will be assessed.
To find out more about Pennsylvania and other states' Voluntary Disclosure Programs, contact me.
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