Originally Posted by
pendennis
In Michigan, gross sales are those which don't include sales tax (ditto Kentucky and Indiana). Sales tax owed to the state is calculated on that amount. Now, if you get audited, and everyone does eventually, you must show that you collected sales tax on gross sales separately on the receipt (cash register, written, etc.), or you have to remit 6% of the total gross sales. It doesn't make any difference that you may have collected the tax, but if you don't itemize it, you owe on the gross receipts.
Using your example, if the customer pays $1060, and you don't itemize the $60 as sales tax, you'll owe $63.60 to the state when you file your return.
My point is that taxing authorities demand consistency in your accounting procedures and business practices. If you choose to pay on a calculated basis, then you have to do it each and every time, and the tax auditors must know about this in advance. If you get sloppy, and vary on your receipts, you'll get a detailed examination of your books and practices. It doesn't just apply to sales taxes. If you resort to doing a lot of your flying at night, you'll get a flashlight in very tender places.
PS - I've been involved in sales tax audits in two states, and auditors used virtually the same audit programs in each one. As with any accounting procedure, it's about dotting i's and crossing t's. That's why CPA's are worth their fees, and why you should have a tax attorney on speed dial.
PPS - I read the article you referenced. I understand his procedure, but the auditors for Michigan and Kentucky required details and not calculations. My last sales tax audit from Michigan was in 2012. We have a CPA firm which does our books, and I sat in on the audits as a CFO. In New Jersey, your mileage may vary. See my comments above as to consistency of practices.
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