"Every seller, retailer and person storing, using or otherwise consuming in this state tangible personal property purchased from a retailer, and every lessor and lessee of tangible personal property for use in this state, shall keep adequate and complete records showing:

• Gross receipts from sales or rental payments from leases of tangible personal property (including services that are part of the sale or lease) made within California irrespective of whether the seller or lessor regards the receipts as taxable or nontaxable.
• All deductions allowed by law and claimed in filing returns.
• Total purchase price of all taxable personal property purchased for sale or consumption or lease in California."

Obviously, this is a tall order for any veterinarian. Fortunately, there is a so-called "loophole" that permits the veterinary practice to keep only those records that are "ordinarily maintained ... by the average prudent businessman."

This frequently results because the "gross receipts" figure demanded by California and many other states means the total of all monies coming into the practice, including sales tax collections. Obviously, careful recordkeeping is needed in order to "blackout" the sales tax from the veterinary practice's gross sales.

The bad debt write - off Although it is relatively easy to recognize when a sale has occurred, it requires good bookkeeping or tracking to note the point of time when a sale is actually written-off as not collectable. Bad debts can be a simple failure of someone to pay a bill, a check with insufficient funds or a rejected credit card transaction.

Bad debt can usually be excluded from gross receipts with a reduction in the period that it is actually written-off. Naturally, if that bad debt is eventually recovered or collected, the amount must be re-included in gross receipts at that time.

Obviously, bad debts are a federal tax write-off. They should not, however, be ignored for sales tax purposes. The importance of writing-off bad debts for sales tax purposes against the sales tax liability results in a return of 100 percent of the originally reported tax. Sales taxes written-off against federal income tax liability only results in the savings of the income tax on the sales tax.

In the beginning Before any practice or business opens its doors, registration with the sales tax authorities should be undertaken for each place of business. A license or permit is important because in some states it is a criminal offense to undertake sales without one. Any veterinarian who fails to collect sales tax may, of course, be held liable for the uncollected amount.

And don't forget that all-important resale certificate. Without it, a practice may be paying sales tax on supplies, goods and products that are resold to customers. The government may not care that two sales taxes are being paid on the same item. It is the sale to the ultimate consumer of goods, products or services that is taxed. All intermediate sales are usually exempt from sales tax payments if the buyer has a resale tax license that will allow it to collect sales taxes, both the amount unpaid when purchased and on the amount added before sale to the ultimate consumer.

When it comes to "discounts," it is all in the timing. That so-called "prompt payment" discount offered by so many practices is considered taken after the sale act in many states and is often included in gross receipts. In other words, the seller reports the gross receipts without reflecting the amount the customer may deduct due to a prompt payment. In a number of other states, the seller can adjust the gross receipts after the fact reflecting the discounted amount of the computation received on a prompt payment discounted sale.

In many states the reduction in selling price resulting from a trade or quantity discounts shown on the face of the invoice reduces the taxable gross receipts as well.