New York State Exposed: Audits and businesses

Posted at: 04/07/2014 7:05 AM
Updated at: 04/07/2014 6:33 PM
By: Pat Taney

It's something no taxpayer ever wants to hear. Local businesses are hearing “you're being audited” more often. They say it is a money grab and just another example of how New York is bad for business. Thousands are audited each year, even if they follow the rules.

Business after business told the same thing. They want their stories told, but they’re too scared of being targeted by the state.

When it comes to taxes, there's nothing worse than an audit, even if you're following all the rules and have paid what's due to the state. A lot of local business owners say overly aggressive auditors are becoming a huge problem in New York, but they fear by speaking out, they'll be the next target.

News10NBC talked with a local business owner. He asked that we hide his identity because he fears he’ll be audited again, after what he calls a “horrifying state audit” a few years back. He says it all started when one of his clients was audited by the state. The state says he owed thousands in back sales taxes. He strongly disagreed, but says he felt bullied and unable to afford a pricey defense, so he paid.

Buffalo restaurant owner, Mark Supples, was in the same boat. The state said he owed $1.8 million in back sales tax. Auditors offered a so-called deal. He would only have to pay back $250,000. Supples fought it in court.

Mark Supples said, “I really thought it was time someone had to stand up against these bullies and extortionists and expose them for what they are.”

He won. The case prompted the judge to question the state's method of estimating taxes.

But many business owners say that case, now more than four years old, has done little to promote change. In fact, when it comes to auditing businesses for sales tax, the experts all agree.

Thomas Trumeter, accountant, said, “I believe New York State is one of the top two aggressive states in the country.”

Thomas Trumeter, a Rochester area certified public accountant, says auditors heavily target cash business, especially smaller ones, like restaurants, bars and landscapers.

Trumeter said, “The state knows there's a lot of untapped money out there.”

The state claims it is fighting for you to get it back. A spokesperson says hundreds, if not thousands, of businesses steal from you by collecting sales tax and not paying it back to the state. Their job is critical they say to “level the playing field for customers and businesses that accurately pay their taxes.” But it is their tactics that many question.  

Jim is one of them. He says his audit and cost of doing business here has him considering a big move. 

Tax experts say the moral to this story is to keep near perfect books. Poor record keeping can bury a business and the state is not backing down. While most state jobs are hard to come by, they're readily available at the Department of Taxation and Finance. News10NBC checked and they're aggressively hiring auditors across the state, adding to the hundreds already on board, so experts say “be warned”.