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The Dangers of Combining Sales & Non-Sales Related Deposits

Updated: Nov 6

We discuss intermingling your non-sales related deposits in your business bank account. While there are not rules against combining your business proceeds and nonbusiness related deposits into bank account, it can lead to a huge headache if you are ever subject to a sales and use tax audit.

We discuss the issues that may arise below.

Key Takeaways:

  1. Auditors routinely request bank statements as part of their document request.

  2. If you are commingling personal deposits and business deposits, you must be able to identify and substantiate which deposits are not related to your sales.

  3. Routine non-sales related deposits include capital contributions (i.e., loan money to the business), insurance proceeds, etc.

  4. If you are unable to do substantiate that nature of deposit, the auditor will more than likely treat those deposits as additional taxable sales.

  5. Keep your documents, including check copies and loan agreements. Perform your monthly bank reconciliations. Make sure to maintain your records for the three-to-four-year statute of limitations.

Our mission to provide a resource so business owners, accountants and bookkeepers can understand sales & use tax compliance. We know that sales and use tax laws are not the easiest to understand. Our focus is on empowering you with a framework and general understanding, so you know what questions to ask and where to go to get the information you need to stay on the right side of sales and use tax compliance.

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