AL – Convenience Store Operator Properly Taxed

ALABAMA: A convenience store operator was assessed properly under the Alabama sales and use tax law on its retail sales. The taxpayer failed to maintain adequate books and records and didn’t correctly report its sales. The taxpayer did not provide thorough information about its purchases, and, as a result, the Alabama Department of Revenue  determined the tax liability using the purchase markup method.                                                                                                                                                                                                                                                                                                                                                                                                                      Markups are the ratio of gross profit to the sales price. For instance, if you have an item that costs $4 and you sell it for $8, your gross profit is $4, which is the markup. The markup percentage equals the gross profit divided by the sales price or 4 divided by 8, which is .5, or 50 percent. The taxpayer argued that the percentage markup was skewed because the auditor did not consider various factors, including that the store did not sell beer and that it lost money on its hot food bar, nor was the population of the town considered. However, the taxpayer provided no records to support these contentions. The Department of Revenue found that using a 35-percent markup was reasonable and, thus, the assessed sales tax was affirmed.
Finally, the taxpayer was liable for a fraud penalty. The Department of Revenue determined that because of the greater than 50-percent underreporting, consistent underreporting, failure to keep adequate records, and failure to disclose a second bank account supported the finding that the department correctly applied the fraud penalty.


About Davis Davis & Harmon LLC – Sales Tax Experts: Headquartered in Dallas, Texas, Davis Davis & Harmon LLC – Sales Tax Experts specializes in sales/use tax refund recovery and audit defense. Our team of consultants is comprised of former Big 4 sales tax consultants and state sales tax auditors. Each of our consultants has 15 to 20 years of experience, providing our clients with access to a highly specialized team of sales/use tax professionals. At Davis Davis & Harmon, LLC, we are committed to maintaining the highest standards in our talent pool. We work hard to meet our clients’ needs by ensuring that you view our firm as an extension of your company and a member of your team.

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