Retail store tax debt: sales tax, payroll and audits

A retailer collects sales tax from customers on taxable sales and files returns on the schedule the state assigns. The tax belongs to the state from the moment it's collected. Using it for inventory or rent is how many store owners end up with a collected-but-not-remitted balance, which states typically treat more harshly than tax that was never collected. Rules and programs vary — see your state sales tax page.

Auditors usually compare what you reported with your point-of-sale data, bank deposits and purchases. Common findings for stores:

• exempt or resale sales without a valid exemption certificate on file,
• register reports that don't match returns,
• store supplies and equipment bought without tax and never reported as use tax,
• markup tests showing sales higher than reported.

Missing records can lead the state to estimate the tax.

Stores with employees withhold income tax and the employee share of Social Security and Medicare and deposit them on the schedule in Publication 15. Unpaid withheld amounts can be assessed personally through the Trust Fund Recovery Penalty.

Payment processors report card and app payments on Form 1099-K. The IRS and some states can compare those totals with the gross receipts you report, so mismatches between 1099-K amounts and returns can prompt questions.

Keep filing every sales tax return, and pay current-period tax first so the balance stops growing. Ask your state about a payment plan, and use the sales tax payment plan calculator to size the payment. The free business tax relief assessment can help rank sales tax against payroll and IRS balances.