Sales Tax Audit for Tire Shops
The most common problem that we see on sales tax audits with tire shop pertain to these issues:
1. Bring your own part (BYOP)
2. Resale certificates
3. Purchases from eBay motors
Bring your own part:
If your customers are bringing in their own parts for you to simply install, then, it must be noted as such on your invoices. If your invoice says to replace the part, then, you will have a problem during the audit because it appears as if you are selling parts in addition to the labor. That will create a taxable event. Break out your invoices by line item!
Resale certificates:
Many tire shops sell tires to other stores. This is common when a shop does not have a specific tire in stock, but they call on their neighbors to get another tire. If you do not have a valid resale certificate from the other tire shop, then, you will either have to charge the tire shop sales tax (which they will assume they do not have to pay) or pay the sales tax after the audit.
Purchases from eBay motors:
This is one of the most damaging issues in an audit. If you are ordering parts from eBay motors and you paid sales tax, you MUST keep the receipt. If you did not pay sales tax, then, you must pay the use tax.
Facing a sales tax audit in Texas? Contact our attorney for a consultation.
