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Comment on taxes / AIN Sale ends today

January 31, 2024
Comment on taxes from article on January 15, 2024
          Thanks for the response to “name withheld” how had a sales tax question on January 15th.  If my long, flowing, explanations to the other questions did anything, it was to point out, that tax issues aren’t that simple. 
          Most accountants have no idea what an alarm company does.  Many, incorrectly, assume that they are subcontractors and treat them that way.  Most states follow a form of what are known as the “Construction Rules” for work that is considered “an improvement to real property.”  The Construction Rules assume that subcontractors are doing simple, piecemeal, work, out of the back of a pickup truck, so states don’t have a lot of confidence that they will charge or pay over tax.  For this, and several other, reasons, they allow subcontractors to pay sales tax on their materials when they purchase them from their suppliers.  Think of a roofing contractor who buys ten pallets of shingles and nails them onto a house.  The state knows that his “invoice” is probably the back of a matchbook, his “pricing” is by the job, and his bookkeeping is a debit card and a checking account. 
          Compare the “subcontractor” above to an alarm company.  Alarm companies may install the system as a part of the initial construction, they may install it afterwards, they may prewire a system, they may trim out another company’s prewire, or they may do an upgrade years after the initial construction.  The system may be a simple burglar alarm or it may be a sophisticated automation, integration, CCTV, or fire system.  Alarm companies many time provide services other than basic monitoring, like interactive, radio, cellular, video monitoring, supervised access, etc… There may be service contracts.  Systems may be leased.  Some companies allow customers to defer some of the installation cost and add it to the monitoring charge.  State taxing authorities are catching onto this and some are even changing their Tax Codes.  We have seen the rate of sales tax audits triple over the past two years.  Many of our new clients come to us because their current accountants don’t know the difference between an alarm panel and a telephone. 
          Sales tax audits can be expensive; Even if you win.  They start with an auditor coming to your business, walking around, and asking for receipts for all of your equipment.  They will then ask for reports of all of your sales and purchases for the last three years, then get ready to explain each invoice to them. When it is all said and done, expect a bill from the State for $20,000 or more, and a bill from your accountants for hours spent learning Sales Tax Code, that they should already know. 
  Mitch Reitman 
817 698 9999 XT 101 
Reitman Consulting Group
Fort Worth, TX
AIN sale ends today
          If you’re an AIN member you have until end of today to get a discount on contracts; a significant discount.  If you’re not an AIN member maybe there’s still time to join and take advantage of this opportunity.
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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301