Question

Kaydee’s Kites sold a big order of kites to a taxable customer, Circus Town. They should have charged sales tax, but did not do so. Circus Town already paid that invoice in full. Which steps should you recommend to charge Circus Town only the sales tax on a follow-up invoice?

Answer 1

THERE ARE TWO ALTERNATIVES TO SOLVE THE ABOVE PROBLEM:-

FIRST ALTERNATIVE:

You have to find out that if the customer have already paid use tax or not.

(USE TAX-It is the same as the resident's local sales tax rates, which includes both states and local sales tax.It is a sales tax on purchases made outside one's residence for taxable items that will be used, stored or consumed in one's state one's state of residence and on which no tax was collected.)

IF YOU FIND THAT CUSTOMER HAVE ALREADY PAID USE TAX

Then provide the state with all the documents, letters, proving that tax was paid.

IF YOU FIND THAT CUSTOMER HAVE NOT PAID USE TAX

Then in most states it is allowed to collect tax now. Just admit your mistake and apologise to the customer and collect the payment.

SECOND ALTERNATIVE:

YOU PAY THE TAX AND CUSTOMER AWARENESS IS IMPORTANT

Explain to the customers that you have mistakenly not billed tax and also there was no tax exemption certificates provided by the customer for their purchases.

And then making customer aware about being audited in certain events and assessed for all these transactions.

Although you're not asking them for these payments as it was your mistake and out of gratitude you let go customer without paying the tax and instead you pay the tax on behalf of customer.

(After realising the mistake, you must begin to charge sales tax now without forgetting about it)