NJ State Tax Audits, Refunds & Add'l Issues - Questions & Answers

Question #1

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Question #2
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Why me?  Why was my business selected for audit?

Generally, most State tax authorities, like the NJ Division of Taxation for example, have  developed a rather sophisticated and complex set of audit selection criteria that are used to recommend and select businesses for an audit.  While the exact answer may simply be that it's "your turn", generally, States use hundreds and possibly thousands of algorithms when determining which businesses get selected for audit.  Kindly refer to the first issue of our Newsletter, which is primarily focused on this question.

Having recently decided to do "something" about my NJ Sales and Use Tax compliance concerns, what initial steps should be taken?

Performing a Sales & Use Tax compliance review is an excellent starting point and should  be your first step.  While you may feel reasonally comfortable performing this procedure internally, it's recommended that you engage a professional that is skilled and focused on  NJ S&UT matters.  Please note that while most of New Jersey's Sales and Use Tax Statutes, Regulations, Publications and Policies may seem simple enough and understandable, many are not.  In fact and often times, they are tremendously confusing and complicated.

To illustrate my point, I invite you to review one of the NJ Division of Taxation's numerous publications as highlighted below.  The Division expects that business owners/operators will fully understand and comply with all of the rules as contained in the oublication.  Please click on the link below and let's have some fun.

​Sales of Prepared Food by Food Service Providers.​      ​

Assuming that you read or at least skimmed the above publication, would a reasonable person consider a napkin to be a utensil?  The Division's position is that, in some cases, the sale of an otherwise nontaxable unprepared food, like a dozen donuts or bagels to go, may be subject to sales tax!  Thus, in some cases, a donut or bagel shop proprietor not being aware that a napkin is considered to be a utensil may, upon audit, receive a large sales tax assessment simply for not fully and completely understanding this extremely confusing publication.