Tuesday, August 12, 2008

Golden Rule - The Invoice is Your Record

Most states require that the user pays use tax. But, the user is off the hook if they can show they've already paid tax to the vendor. And how do they show this? The invoice. In other words, if the seller has put tax on the invoice, then that document is not only the receipt for the payment, but is also the buyer's receipt for having paid the tax.

And if you've gone through an audit, you'll know that sitting in a room, paging through invoices looking to see if taxes were charged, is a significant part of the auditor's routine.

Note, however, that the tax must be billed by the vendor. A scribbled comment on the invoice that you've paid the tax separately probably isn't going to work.

Another thing to keep in mind...and this is more record-keeping. When you do need to make notes for the file that will help during an audit, try to make the notes on the invoice itself. If you make it easy for the auditor to see the explanation, you'll have less questions from that auditor, and will probably keep issues from getting out of hand. And you'll build credibility by having good records.

If you simply staple the paperwork to the rest of the material that's already attached to the invoice, it may get lost. I've worked at some companies where the AP specialists would need to order special, heavy-duty staplers just to keep all of the paperwork in place. And we've all seen those odd pieces of paper sitting in files and wondered, "I wonder what paperwork this goes with?"

If you are going to attach it, attach it well. AND, attach it close to the invoice as opposed to in back, so it will be less likely to detach itself and get lost. AND make a note on the invoice indicating that the paperwork is there.

Sales Tax Guy

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