Point at which to stop charging sales tax for customer with new reseller license

[rdklinc]

Hi! I have an ongoing customer who I had been charging sales tax, but who applied for and got a reseller license. He has the same accountant I do, and she told me I could stop charging sales tax as of August, because the customer put in his reseller license application in late July, and that because it was "in progress" it would be valid. When the customer finally got the reseller license, it shows "Issued 9/15". This has me concerned that I may be on the hook for sales taxes from 8/1 - 9/15. My accountant, who is a CPA, still says I shouldn't worry about it because the application was in process during that time, and she seems not at all concerned.

So the question is, am I on the hook for the tax and is my accountant wrong, or is my accountant correct, and is it legit to not pay the sales tax while the application was in progress? I would like to get beyond opinions if possible and figure out what the actual law is, if such info exists. I do not want to put my business at risk, yet at the same time I don't want to throw away money if there is legitimately no need to do so. I am in Cook County Illinois, if that makes a difference.

Thanks!

 

[kirby]

Right off the bat recognize that your cpa has a conflict of interest. That's not a good thing for you as you can tell from your post. Illinois says if you are given a resale certificate it is up to you to call the Illinois tax dept to verify the certificate is valid at the time of purchase. And from what you know, it was not. At a minimum, I would insist that your cpa show you the written law where Illinois says an unissued exemption is ok if pending. If that cannot be proved to you I would bill the customer for the sales tax then I'd absolutely get a new cpa who is on my side, not on someone else's side.

 

[rdklinc]

Thanks for the response. I agree with everything you've stated. I have not managed to find the actual law yet, but I did some digging on revenue.state.illinois.gov, and I found this:

"Failure to present an active registration number or resale number and a certification to
the seller that a sale is for resale creates a presumption that a sale is not for resale.
This presumption may be rebutted by other evidence that all of the seller's sales are
sales for resale, or that a particular sale is a sale for resale (Section 2c of the Act). For
example, other evidence that might be used to document a sale for resale, when a
registration number or resale number and certification to the seller are not provided,
could include an invoice from the purchaser to his customer showing that the item was
actually resold, along with a statement from the purchaser explaining why it had not
obtained a resale number and certifying that the purchase was a purchase for resale in
Illinois."

So I'm taking this as good news -- as far as I can tell, according to this statement on the official Illinois website, if I can get my customer to give me copies of his invoices to his customer in order to prove that the items were re-sold, then that should be good enough to cover me for the questionable period of time? I understand that the authorities could potentially decide to disregard this "evidence" if they wanted to, but by their own description it sounds like it should probably be sufficient. I'm interested to hear your thoughts. Thanks!

 

[kirby]

I think -given what you found there plus the fact that the customer now has a resale certificate so your "audit risk" is low- that you are OK. But your research on this furthers my point - why are you the one who has to worry about and research this when you pay the CPA to do so? Clearly they have lost your trust (and for good reason!). So definitely find another one because "no one can serve two masters".

 

[Samir]

I ran across this issue once in a business I owned. I asked my attorney, accountant, and the state and got three different answers.

Finally, since a tax auditor is the one who makes the call on compliance or non-compliance during an audit. I called up the state and spoke with an auditor. Then to double-check, I called back and spoke with a second one to make sure both had the same opinion. Both the accountant and attorney were wrong--and I paid those idiots for their advice!

I'd limit what information I rely on your CPA for. It's not them that will get in trouble if they're wrong, and you pay for the advice, wrong or right.