Every business I’ve ever visited as part of a Arkansas audit seems to stumble and fall as tax auditors review their procurement card (credit card) issues.
Why would a credit card statement become an audit target? Quite simply - records! Where is the receipt showing tax was paid at the time of purchase? Without the receipt to identify the transaction and prove whether tax was properly charged or not, procurement (or credit) card transactions can trigger somewhat of a field day for tax auditors.
Written evidence is the key under tax audits – but it’s important to remember that the burden of proof is on you - the taxpayer. If there is no receipt, and only the credit card statement exists, the tax auditor will list every item on the credit card statement for review. Additionally, if a credit card receipt is available, but the seller did not bother to separately state the tax due on the transaction (and instead simply indicated the “total”) such transactions will also be listed for review.
For this reason, it’s imperative that all personnel assigned a procurement (or credit) card be responsible for collecting and keeping detailed receipts. An easy solution is to list every transaction made during the month on an excel spreadsheet and to then securely attach those receipts to the spreadsheet and credit card statement – and file for future reference. Done!
So, if you are wondering if procurement cards are a good or bad thing in a sales/use tax audit? Well… as long as you have all the receipts, it is good. If you do not have any receipts, unfortunately, it can be very, very bad.
Last tip regarding procurement cards – never ever allow an auditor to project procurement cards as a sample. This issue should be separately assessed as every month is different.
Your questions or comments regarding this (or other Arkansas business tax issues) are invited. See below for contact options.
Other recent “Arkansas (AR)” posts by B.J. Pritchett, CMI:
- Procurement (Credit) Cards in a Tax Audit- Good or Bad?
- Consumer Use Tax vs Direct Pay in Arkansas: Key Differences
- Arkansas Waivers of Statute of Limitations: No, Thank You - Unless…
- Arkansas Local Taxes - Understanding the Local Tax Cap
- Arkansas Statute of Limitations - and How It's Unique