Sales and Use Tax ‘Gotchas’: A Taxpayer’s Guide to Navigating

I. Introduction
According to Merriam-Webster.com, a “Gotcha” is an unexpected problem or usually unpleasant surprise and fully defined as an unexpected usually disconcerting challenge, revelation or catch. 1 A “Gotcha” is also a colloquial expression meaning ‘I’ve got you.’ In sales tax circles, a “Gotcha” is an unexpected outcome usually from an audit that seems illogical and counterintuitive. And when compared to the typical treatment of similar transactions by other states or, to a lesser extent, other tax types, is something you don’t see coming.

1 http://www.merriam-webster.com/dictionary/gotcha.

Gotchas are exceptions to the general rule. They result from activities with a high probability of error caused by the many variables that must be considered to comply with the law. Gotchas are difficult to automate and difficult to incorporate into everyday compliance activities. They touch all areas of the organization from how companies sell to how companies pay sales and use tax and everything in between.

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