The HST (Harmonized Sales Tax) Bill has now been presented to Parliament in Ontario. This is going to be a 13% tax (5% GST and 8% PST combined) levied on pretty much everything in our lives. Apparently Dalton McGinty and his Gang seem to think this is going to help reduce corporate taxes and paperwork and create half a million jobs.

Now anyone can correct me if I’m wrong, but from what I understand and have read it goes something like this:

Manufacturers are charged all kinds of taxes throughout the manufacturing and delivery process – known as “Embedded Costs”. These costs are presently being charged at the rate of 7% each and apparently can add up before the actual product gets to the retailers and consumers. The HST will eliminate these 7% charges along the way, bringing that rate down to 0%, and then only charge a full 13% to the end user. I believe that is why this 13% rate will apply to practically everything except food and certain other exempted items.

The British Columbia government actually has a pretty good web site explaining all of this – but then again, it has to – it’s got a fight on its hands too, with British Columbians.

Now, in theory, this sounds pretty good and fair. The manufacturers should be able to maintain their “actual” manufacturing costs and when that product reaches the retailers you would think that the product would be around the same price as it is now, or perhaps in some cases a little cheaper. With the manufacturers not having to pay that 7% tax at their end, and not having to remit tax form after tax form to the government, their costs should be cheaper and the consumer should benefit to a certain degree.

“In theory” are the operative words here!!! We all know any savings these corporations get will probably NOT be passed on to the consumers and will probably increase certain corporate wages and bonuses. Don’t get me wrong, I’m all for creating new jobs, but why are WE paying to do that?? I thought the whole idea of the “trickle down theory” was to create wealth at the top and have it trickle down to the little guys!! This seems to me to be the “trickle UP theory“, only it’s via new taxes on the little guy. Oh, I suppose you could say we’re creating wealth by cutting corporate taxes, but again, that’s being done BY US. Why can’t the Ontario Liberals just cut their corporate tax rates? I really wish someone in charge or an economics professor could explain this one to me!!!

I’m not too sure how foreign imports will be affected by these taxes, and I’m sure those foreign countries must have to pay some sort of import taxes – but are they going to be reduced or eliminated too, or will they get rebates? Will these foreign countries pass this savings along to us? I’m especially thinking of the United States. I’m not too sure how much of actual manufactured American goods reach Canadian shores, but these past few years have shown that the U.S. is harbouring a few greedy CEOs, corporate executives and investment bankers that think being greedy is a good thing. Yes, I’ll even admit to Canada harbouring a few of these guys, but so far the Canadian Government has failed to flush them out!

With bad economic times looming around us, the Ontario Government also seems to think this is a good time to introduce the HST. What!!!!!!!! I thought we were trying to ’stimulate’ the economy, not rob it by going through the back door. Again, will someone explain this to me!!

The HST is going to be seen on your utility bills, hair cuts, new real estate purchases, and a whole slew of other little items, including funerals. Yes, I said Funerals – you’re going to have to pay a tax before you leave this world!!!! So Dalton gets his final last laugh!!!!

It’s been nice that the food lobby/industry has been able to stop the Liberals from putting the HST on any food item under $4.00 – so at least now you can get that cup of coffee and possibly a muffin HST free!! How nice for them!!!  We’ll all be able to drive down the road to get a cup of coffee (of which I hate) but we’ll struggle to pay to heat our homes, light our rooms, get hair cuts or even pay for the gas to put in the car to drive us down the road to get that cup of coffee!!!

So if Dalton gets his way we’ll all be doing laundry 3:00 o’clock in the morning (because of those Smart Meters), line the pockets of corporations, give a sizeable payment to Government coffers before we die and hope like hell a job is created somewhere for someone who will then get a job so they can pay their fair share of the HST and the whole vicious cycle starts over again.

Now in order to ease this extra burden, dear Dalton has decided to give everyone some sort of rebate. Naturally the higher income earners ($160,000.00) will get 3 payments of $1,000.00, the middle income earners will get 3 payments of $300.00 each and the lower earners will get an even lesser payment. Does he really think this is going to help? Does he really believe that these payments are going to be there next year in all of our bank accounts to help pay that utility bill that’s going to be increased by 8%? Plus what happens the year after, and the year after that when wages, salaries and other manufacturing costs start to increase again once the economic recovery is fully over with??

I truly wish Dalton McGinty and the Ontario Liberals would come to grips with reality. Clean up the EHealth mess and the Ontario Lottery Corporation guffaws and maybe then they could recoup a whole whack of money by greedy executives, stop the flow of cold hard cash from going to some off-shore tax haven and leave us poor schmucks alone. GM is about to reduce my husband’s pension in January because of their short-comings (literally and physically!!!) and now we’re going to be burdened with more taxes by the Ontario Government. Where and when is this all going to end. We can only take so much!!

I say we all stop going for hair cuts, turn down the heat, turn off the lights, stay at home bundled under a mound of blankets, and hibernate for the winter. Maybe this will turn out to be a really bad nightmare. Oh, I forgot, this HST thing is going to take effect in June, so that kills the hibernation theory. Oh well, maybe we can all get together, take whatever money we’ve got left in our bank accounts along with Dalton’s first installment of that $1,000.00 gift (joke, joke), hire a whack of tour buses (getting a huge group discount) and head down south. The U.S. economy is still flailing, the CDN dollar is pretty good right now, and I hear the California economy needs a huge economic boost!!!! How could we loose??? OH, we could also head out to Alberta – the last bastion of a relatively tax-free zone!!!

Sin duda, quien lo tenga todo en webmail no se ha de preocupar, pero la gente ( como yo ) que utilizamos un gestor de correo, para almacenar todas nuestras cuentas de correo, contactos, calendarios y RSS, si se nos estropea o tenemos algún problema, lo pasaremos mal.

Outlook trae una herramienta para la reparación de archivos.pst.

La herramienta se llama SCANPST.EXE y la podemos encontrar aquí:

C:\Archivos de programa\Microsoft Office\Office12

La ejecutamos

Ahora elegimos el archivo PST.

Ahora le damos a Iniciar para hacer la comprobación de errores.

Después de pasar las 8 fases nos mostrará los errores.

Hacemos la copia de seguridad y le damos a reparar.

Este mensaje ya nos dice que el archivo de  Outlook está reparado.

This post concerns the use of zappers in restaurant operations.  It is not a “how to” guide in their “proper” use, nor is it, in any way, an endorsement of their use.  In fact, if you are even thinking of employing a zapper to fill your pockets with cash stop and read this post.  It is not worth the risk.  You will get caught, eventually, and here’s why.

Use a Local POS Vendor

If you purchase your software and zapper from a local vendor, distributor, developer or consultant, you will get caught.  If you use a zapper, you will need some technical support to ensure that your computer system does not keep any stray bits of zapped data on the hard drive.  As a result, you are locked-in with your consultant or other advisor.  There will come a day when that person will be caught assisting another taxpayer in the use of a zapper.  One way or another, the tax authorities will gain access to the consultant’s customer list, and you will become the latest target for an aggressive tax audit.

The Ministry of Revenu Quebec has used this method of identifying restaurant tax evaders quite successfully.  They have also worked with the Canada Revenue Agency to execute search warrants in other provinces.  The next step (much harder) is to collaborate with tax authorities in other countries, such as the U.S. 

Zappers Aren’t Perfect

Even though zappers can delete or modify specific transactions and make it appear as though they were never there, many POS systems have frequent backup sub-systems to prevent the loss of data in the event of an unexpected shut down or power loss.  These backup versions of files may remain on the computer disk and may contain remnants of the original “zapped” transactions.  Where the use of a zapper is suspected, a tax auditor may call in a computer audit specialist to obtain the evidence of zapper usage.  Using a zapper consultant to help cleanse your computer system means you have an accomplice (see first point).

Comparative Analyses

Auditors of all types (not just tax auditors) use analysis to help determine whether financial figures “make sense”.  In a typical business, we compare key metrics with those of similar businesses.  Where there are significant differences that have no reasonable explanation, we suspect errors or omissions in the accounting system.

Typical metrics might include the percentage of cash sales and whether this has changed significantly over the course of the audit period.  An obvious one is the margin percentage for major product groups (wine, beer, liquor, food).  Another might be the cost per ounce of alcohol for a variety of categories.

While most restaurants and bars do not have ready access to key metrics for similar establishments, rough guidelines are available from restaurant associations and other restaurateurs.  Care should be taken to making sure you compare metrics from similar establishments.  Metrics for a sports bar will be very different from those of a fine dining restaurant.  Where proper comparatives are not available, you need to make sure that your margins (and other metrics) are reasonable, by comparing your actual metrics with what you should have expected given your prices, costs and other known information.

Vertical Analyses

Auditors also look at the relationship between various financial figures, as a test of their reasonableness.  Many financial figures are related to sales volume or dollars.  To some extent, labour costs, supplies,  and a variety of other expenses vary with the volume of business.  An auditor will analyse these relationships over time to determine whether there may have been unreported sales.  Few restaurateurs would be capable of the meticulous recordkeeping and adjustments that would be required to make sure these analyses stayed consistent at all times.

Accounting for Cash

Most businesses generate some cash sales.  There is nothing wrong with this.  Once the cash has been received, it becomes an asset of the business.  Well run businesses ensure that all receipts (including cash) are promptly deposited, intact, into the bank accounts.  Many small (and some large) businesses do not follow this sound practice.  Where such funds are not deposited into the bank, it is imperative that the owner meticulously account for all cash received with proper cash disbursement records and receipts (invoices).

Some restaurateurs are known to pay some of their staff in cash, without going through the regular payroll system.  This is done to try to keep the labour costs in line with the reported sales (after zapping or skimming).  Another practice is to purchase some supplies or inventory with cash, perhaps using separate cash accounts with existing vendors.  In each case, the restaurateur has brought in accomplices to the fraud, increasing the chance of being caught.

Owners Living Above Their Means

While typically not used in restaurant audits, it is possible to examine the owner’s lifestyle to determine whether it makes sense, given the level of income reported from the business.  If the owner’s lifestyle cannot be supported by the income from the business and other legitimate sources of funds, this becomes evidence that funds have been fraudulently removed from the business.  Note that this method of assessing taxes is much more prevalent in the U.S.  It is also used in Canada, and elsewhere, where it is difficult or impossible to verify income by any other means.

Changes in Cash Receipts

When a zapper is first used, or a skimming operation is commenced, there will be a decrease in cash receipts reported by the restaurant.  This may provide evidence that a tax fraud has taken place and prompt the auditor to examine the books and records more closely.

That said, not all sudden decreases in cash receipts are fraudulent.  A significant change in the restaurant operation may be completely legitimate and reasonable, depending on the circumstances.  At the end of a patio season, cash sales may drop off considerably as fewer customers pay with cash in an indoor dining room.  Similarly, if business at a bar drops off relative to its dining room volume, there will likely be a significant drop in cash receipts.

Paper Guest Checks

Most guests are provided with guest checks during their visit, regardless as to whether they pay by credit card or by cash.  When a customer takes the paper guest check, it is an external piece of evidence of the transactions incurred at the restaurant.  If a tax auditor were to obtain copies of cash-paid guest checks for a restaurant or bar (perhaps during another audit), these could be used to match up with guest checks reported by the restaurant during a future audit. 

If the auditor is unable to exactly match the paper receipt with an identical guest check in the restaurant’s POS system on that date, this will be strong evidence indicating the use of a zapper.  In fact, this is exactly how a Revenu Quebec auditor stumbled upon a major tax evasion case involving the use of zappers.  The auditor visited a restaurant that had been selected for an audit and paid for the meal with cash.  During the audit, it was determined that the original guest check had been altered, by removing an item (the original food modifier was not zapped).  Note that the guest check number must be identical too.  Note also, it only takes one discrepancy to provide strong proof.

Original POS Reports

Every day a restaurant operates, a variety of POS reports may be generated.  As a minimum, each server will have a shift report showing the start and end times, total sales, by category, taxes collected, receipts by type, and balance owing to (from) the house.  In most cases, this is a printed report provided to the manager or owner for review.  Often the server retains a copy to keep track of tips owed.  In order to keep track of the server’s performance and to help identify theft, these reports must include all sales.  That is, they are pre-zapped reports.

The manager or owner also prints a day end report showing the aggregate totals for all servers for the day.  Other reports may include taxes collected, sales by item, inventory usage, etc…  Some reports may be provided to the chef for ordering purposes or inventory management, others may be provided to the manager.  Again, all of these reports are pre-zapped summaries of transactions during the day.  Effectively, all of these reports are a hardcopy “snapshot” of the POS transactions actually processed by the restaurant.  Even though they may be subsequently changed by a zapper, they are a permanent record that may be made available to an auditor.

Unless all of these reports are destroyed after a zapping operation, there will be a paper copy available to indicate the use of a zapper in the operation.  All that is required is a simple comparison of the original report with the current, zapped report. 

All it takes is one disgruntled employee who suspects the use of a zapper (or other means of skimming) to provide original POS reports to a tax authority.

Quebec Approach

Quebec has decided to take a different approach to combatting the use of zappers and other forms of technologically-assisted tax evasion.  They have started a pilot project involving the use of a Sales Registration Module (SRM), which will create a permanent record of each establishment’s transactions and guest checks.  The SRM will produce reports for preparing QST returns.  It will allow tax auditors to easily determine whether a specific guest check has been recorded or whether it has been tampered with by any means.  Every patron must be presented with a guest check, or the establishment will face substantial fines.

The full rollout of the SRM system is expected in 2011.  All but very small restaurants are expected to use the new SRM, which will be provide free of charge by Revenu Quebec.

 Conclusion

While you may get away with the use of a zapper for a while, there are too many ways you could be tripped up.  When it does happen, the penalties will be severe.  It is not worth taking the risk.

Recently, we’ve begun to hear a lot more about tax evasion in the restaurant industry.  More specifically, we’re talking about technologically-assisted tax fraud, using zappers or phantom-ware.  It made the news, again this past week, when it was disclosed that the Canada Revenue Agency had found more than $40M of unreported tax in the restaurant industry attributed to the use of zappers.  Today’s post looks at the issue of tax fraud in the restaurant industry and tries to determine how “rampant” it might be. 

While tax fraud can occur in many different ways, when we talk about the restaurant industry, it usually takes the form of cash sales “skimmed” off and not reported for tax purposes.

The Pre-zapper Era

Before the mid-1990s when zappers became available, restaurants, bars and other businesses with significant cash sales used other means to skim a portion of cash sales and under-report their sales and sales tax liabilities.  Manually prepared invoices or guest checks could be destroyed if the customer settled the bill with cash.  We don’t see too many places that still use manual guest checks, but there are a few. 

A restaurant with stronger internal controls would have kept all checks and monitored the sequence of guest check numbers, to ensure that all invoices were recorded.  This is why the tax auditors ask for all guest checks issued during the audit period.  When they are not kept, it helps the auditor conclude that the restaurant’s internal controls are inadequate for ensuring the accuracy and completeness of the sales and sales tax records.

Another method was to have phantom cash registers.  Typically, an establishment would maintain an extra cash register (or two) at a bar where the majority of the sales were likely to be paid in cash.  The sales rung into the phantom cash register would never be recorded in the accounting system.  The owner of the bar would need to keep track of any significant underreporting of sales, so that alcohol inventory could be repurchased off licence.  This would have been required, to make sure that the margins, based on licensee purchases, would appear to be reasonable.  More sophisticated frauds involved separate accounts with food suppliers, where a portion of the purchases were made in cash, to make the food margins appear reasonable, where a portion of food sales were not reported.  Finally, some of the servers/bartenders would have to be paid in cash, so that the labour costs would appear reasonable. 

As computerized POS systems became more affordable, their use in restaurants of all sizes exploded.  This gave rise to a couple of new, technologically-assisted methods for skimming.  The first was phantom-ware, which was built into the original POS software and could be programmed or activated to remove specific types of sales transactions.  While there was a legitimate use of such software (the ability to reset data in the system for a new user), in reality, it was quite rarely used.  Where phantom-ware was identified and used to commit a tax fraud, the tax authorities were able to convict the software developers as co-conspirators in the crime.  Consequently, their use is quite rare.  Instead, zappers were developed and their use appears to be on the increase around the world.

What does a Zapper do?

A zapper is a standalone software application that is attached to the POS system from time to time.  It is usually contained on a CD or a memory stick.  It is removable and only resides on the computer (or network) while it is doing its “work”.  Consequently, its use may be shielded from other employees (or even owners) of the restaurant or bar.  It can be extremely difficult to detect, though not impossible.

When a zapper is activated on a POS system, it allows the user to access the POS transactions database and make changes to the entries.  Zappers are designed to search for cash sales, because these have no independent audit trail outside of the POS system.  Whole guest checks can be deleted, items can be removed from the check, or the amounts can be modified.  The zapper keeps track of the amount of items “zapped” from the system.  Once the desired amount of sales has been achieved, the zapper renumbers the guest checks in the POS system and prepares adjusted reports for the day. 

Sophisticated zappers may also adjust inventory usage figures and employee time records to conform with the adjusted sales figures. 

How Prevalent is Zapper Use?

There is very little hard evidence of zapper use anywhere in the world, though some European countries believe that zappers are being used in cash-based industries and are taking steps to curb their use.  In particular, Greece, Germany, Italy, and the Netherlands. 

A limited study of tax evasion in the restaurant industry in Germany revealed significant underreporting of cash sales.  Closer to home, in Quebec, two studies were undertaken.  In the first, 41 zappers were found in 70 systems tested.  At first blush, this is a startling finding.  However, the sample was taken from the customer list obtained from a zapper distributor in the province!  Given the sample, it becomes startling that only 41 of the 70 systems were using the zapper!  In the second study, based on a random sample, the Ministry of Revenu Quebec found 16% of all sales were unreported.  They concluded that “tax evasion is rampant” in the Quebec restaurant industry.

Revenu Quebec has only released a summary of their findings, so it is difficult to comment.  For example, we don’t know how they determined that 16% of all sales were not reported.  We don’t know whether this underreporting of sales relates solely to the use of zappers or to the use of other means.  We don’t know the number of establishments using zappers or the percentage of establishments with zappers in use. 

Other countries, like Japan (no cases) and the U.S. (2 cases) have not seen the same level of usage, or their tax authorities have been unable to detect their usage.  In Canada, we have seen about 275 cases in Quebec, many of which were found on distributor client lists, but only 11 across the rest of the provinces.  The latest sweep by the CRA has identified a few more, but at this point we don’t know how many or where they are located.  Given that there are thousands of restaurants across Canada, even the number of zapper cases identified in Quebec does not justify calling their use “prevalent” in the restaurant industry.

You can not lump the entire restaurant industry together and say that zapper use is “prevalent” or tax evasion is “rampant”.  The industry is too diverse.

Tax evasion, with or without zappers, requires that a significant portion of the fraudulent restaurant’s receipts be in the form of cash.  Credit cards (including debit cards) create their own independent audit trail, making it nearly impossible to skim these receipts without being caught.  Some restaurant and bar operations tend to take in more cash from sales than others.  Nightclubs, bars, sports bars, pubs and fast food franchises tend to have significant cash sales.  Higher end, fine dining restaurants tend to have very few cash receipts, as few people carry around large amounts of cash and corporate entertaining is almost always supported with a credit card receipt.

Fast food operations, despite taking in large amounts of cash, are less likely to skim significant amounts of cash, because they are accountable, not only to the tax authorities, but also to the franchisor.  Franchisors have several methods of identifying unreported sales, because their franchise fee is usually dependent on gross sales of the franchisee.  For example, a franchisor could monitor the franchisee’s sales in relation to the volume of pizza boxes (or other packaging) consumed. 

While there are documented cases of fraudulent use of zappers, their use in Canada is no where near as prevalent as the tax authorities would have us believe.  Furthermore, as society moves toward less use of cash in commercial transactions, the potential for tax evasion using zappers decreases.

1. Start > Run > type ‘regedit’
2. Locate the following path in your ‘Registry Editor’
3. HKEY_CURRENT_USER\Software\Microsoft\Windows NT\CurrentVersion\Windows Messaging Subsystem\Profiles\Outlook
4. Export and save .reg files to your desired location.

You can run the same file while restoring your outlook. This will restore your old outlook profile with all your email accounts settings and rules. You will need to enter your password because is not stored into .reg file.

I don’t want to scare you, but I feel it is my duty as a fellow restaurateur and as an accountant.  After reading this headline, many of you will think this blog entry is going to be about the economy and how it will affect your restaurant business.  As for the economy, I think the worst is behind us, but there is another threat to your business that is going to be a lot worse in the next few years.  Let me explain…

Most economists seem to think that the recession has bottomed out and we are now on the road to recovery.  To be sure, the recession was sudden and quite severe.  The recovery is unlikely to anything but a long, gradual improvement in business conditions.  This is not good news to the many small businesses, including vulnerable restaurants, with their razor thin margins.   We could all use a quick return to buoyant growth! 

Governments at all levels need this too.  The sudden, deep recession put a serious dent in government tax revenues.  Also, they had to increase their spending to avoid an even worse fate.  The federal and provincial governments are under intense pressure to limit their deficits, maintain key social programs and not raise taxes.  A quick return to growth would do wonders for the government coffers, but it isn’t likely to happen.  This leaves tax authorities with few options.  They can find new taxpayers and they can make sure that “tax cheats” pay their taxes.  Unfortunately, to the tax authorities, the terms “restaurateur” and ”bar owner” are synonymous with “tax cheat”!

I am mainly concerned with Canadian taxes imposed on restaurants and bars, but it is usually a good idea to look at what is happening in the US, to understand what is likely to happen up here.  A look at various state tax authorities reveals an ominous trend towards increased audit activity directed at licenced restaurants and bars.  Few taxpayers will object to their government taking measures to ensure that all taxpayers comply with the tax laws.  By increasing audit efforts, tax revenue can be increased without the negative political connotations of an increase in taxes.  It is very easy to justify hiring more auditors to avoid increasing taxes!  And this is what we see happening south of the border.  You should expect to see the exact same trend in Canada.

But why target restaurants and bars?  There are a number of reasons.  All restaurants are required to charge sales taxes on their gross revenues.  In Ontario, the rates are 8% on food sales, 10% on alcoholic beverages, and 5% GST on all sales.  Generally, there are no deductions against these taxes.  If a tax auditor can show that the restaurant failed to report sales, an assessment can be issued calculated at the appropriate rates, combined with penalties and interest.   Tax authorities suspect 50% or more of all restaurants and bars are “cheating” on their taxes owing.  It is easy for the auditor to accurately verify the alcohol purchased.  There is a theoretical (or standard) cost for every drink sold.  With a few simplifying assumptions, the auditor is able to estimate the sales that should have been generated by the restaurant during the audit period. 

So, for a relatively small amount of work, the auditor is able to estimate the likely “true” sales of the business.  Then, it is up to the taxpayer to rebut the presumption that the restaurant has failed to report all sales.  In order to do so, the restaurant must document the reasons that costs deviated from the standards.  This can be exceptionally difficult to do, after the fact.   Few restaurants and bars have the time to document all of the factors that affect their margins.  It can be done, but there can be a significant cost.  Ideally, such information should be independently developed.  While it can be costly to stay on top of your margins, it is still far cheaper than letting the tax auditors have their way with you, and an ongoing analysis of your margins will help you manage your restaurant more effectively.

If I have scared you into action, I’ve done my job.  Continue reading this blog site for a comprehensive list of procedures to help protect your business.

Today’s Toronto Star ran an article about restaurants hiding cash income.  You can find it here:  Restaurant probe finds $40M in ‘phantom’ sales.

Until recently, most detective work surrounding the use of zappers had been focused in Quebec.  Now, we find out that the CRA has been involved in a two year, national probe of the restaurant industry.  So far, they’ve found about $40 million of unreported income, though they expect to find much more by next March when the study is completed.  Of course, such unreported income must be in cash, as there is a separate audit trail for all credit card receipts.  It appears that this CRA probe concerns the use of zappers by restaurants.  Previously, I wrote about zappers, here.

I find it interesting that the CRA has only found about $40M of unreported sales, whereas Revenu Quebec estimated $417M of unreported taxes in a two year period.  It may be that CRA is considering only unreported sales using zappers, whereas Revenu Quebec is estimating tax losses by any means.  The scary thing is that someone, presumably at CRA, named Caitlin Workman is quoted as saying, “preliminary work indicates that (practice) is prevalent across Canada.”  So, the CRA thinks that the use of zappers in the restaurant industry is prevalent!

Prior to undertaking this probe of the restaurant industry, the CRA had identified only 11 cases of using a zapper, and zappers have been around since the mid-1990s.  Does this sound “prevalent” to you?  I’m willing to bet that Revenu Quebec, alone, identified more than 11 uses of zappers in the past.  In fact, they have prosecuted about 275 cases of restaurants using zappers during the last 10 years.  While other researchers have given their opinions that the use of zappers is likely to increase in the future, there does not appear to be a consistent level of usage across all jurisdictions.  In fact, several local factors lead many of us to believe that Quebec restaurants are much more likely to use zappers than restaurants in other parts of Canada.  I’ll be examining this opinion in more detail in a future post.

Both the federal and provincial tax authorities know that the restaurant industry is an easy target for assessing taxes on “unreported sales”.  Studies like this one that find any evidence of unreported sales give them the justification to step up their enforcement efforts.  The CRA and all of the provincial tax authorities use indirect audit methods to determine unreported sales, they do not wait to find the existence of a zapper.  All restaurant owners (even completely honest ones) need to be even more careful in the next few years.

VG melder at PST planlegger tettere samarbeid med FBI.

Amerikanerne har allerede vist seg å være på et veldig feil spor etter 9/11, og Jaques Chirac hadde nok veldig rett når han konstaterte at “krigen mot terror” sin fremste effekt var å skape tusenvis av nye terrorister. At Norge nå ønsker tettere samarbeide med et land som har vist seg å opptre med så liten visdom og så umodent er ikke noen god ide. I USA har en rekke uskyldige blitt ofre for idiotisk og udemokratisk politikk som er en konsekvens av Patriot Act. Det sier seg selv at en liste over terrormistenkte som omfatter hele fire hundre tusen personer er helt virkningsløs og veldig ødeleggende for demokratiet.

PST har allerede vist at de lar seg inspirere av disse simple amerikanerne med sin tåpelige ressurssbruk i Bhatti-saken og mot somaliske miljøer i Oslo. De har også opptredt meget ufint og uprofesjonellt i media i forkant av valgkampen med en klam oppfordring til angiveri som ikke virker å være basert på en god virkelighetsanalyse i tillegg til en veldig ufin mobbekampanje mot Arne Treholt. Jeg mistenker at PST ikke er spesielt profesjonellt drevet siden slike barnslige autoritære maktdemonstrasjons-krefter har fått slippe til: en etterretningsorganisasjon burde holde seg i bakgrunnen og opptre dannet og i tråd med demokratiske retningslinjer. Etter min mening er dette feil retning for Norge nå, og Stortinget bør sette PST på plass både i sin ufine offentlige opptreden og passe på at et evt. samarbeide med amerikanerne ikke innebærer overgivelse av informasjon om norske borgere.

So far, I’ve discussed the POS system and how to maintain it for accurate reporting, how to document your sales mix for all audit periods, and the importance of maintaining an accurate history of your menu prices.  Taken together, these bookkeeping tasks are crucial in helping the restaurateur determine, and properly support, accurate weighted average prices.  This is a crucial component of the mark-up calculation performed during a typical audit.

Now we’ll take a look at the actual cost of the alcoholic beverages purchased for sale.

Gross Quantities & Costs

In Ontario, licensed establishments are required to purchase all alcoholic beverages from licensed agencies, the LCBO or Brewer’s Retail.  Each vendor keeps track of licencee purchases with the use of licence numbers.  This allows auditors to obtain a listing of every bottle of alcohol purchased by a licencee for any period of time.  Details include the bottle size, quantity purchased, description, invoice cost and date of purchase.  In Ontario, the details include the price net of GST, the licencee discount, and the gallonage tax.  These figures allow the auditor to calculate a net cost for each bottle of alcohol purchased (wine, liquor, beer).

All of this information is provided to the auditor in electronic form.  Typically, the auditor imports the data into an Excel spreadsheet, where it can be sorted to match the sales categories and sub-categories.  From there, the auditor will summarize the total ounces and cost of alcohol purchased in each category.

Allowances

Depending on the type of restaurant operation, the auditor will make one or more allowances to consider the effects of spoiled (tainted), spilled and over-poured alcohol.  Usually, this allowance is expected to cover staff theft as well.  Additional consideration may be given to alcohol used in cooking and customer comps.  The amount of the allowance (usually expressed as a percentage) is based on the restaurateur’s responses to questions during the initial interview, the nature of the restaurant’s operations, and the auditor’s judgement (based on “similar” operations) as to the percentage that might be considered “reasonable”. 

Depending on the type of alcohol and the peculiarities of the operation, allowances can be as low as 1% and up to about 50%.  In many cases, the allowance is about 10% for all possible reasons (spilled, spoiled, over-poured and stolen).  Any allowance greater than this will need to be properly supported.

All other adjustments will need to be properly supported with logs or ledgers detailing the reasons adjustments are required for alcohol used in cooking, customer comps and other reasons.  This will be a topic of a subsequent post, but for now, you should know that logs will be required to support any other adjustments to costs.

Proper Matching

It is extremely important to make sure that the auditor is properly matching the correct alcohol with the drinks sold in each category.  It is equally important for the auditor to exclude beverages that are not actually sold to customers.  For example, several liqueurs may be used solely for flavouring martinis or cocktails.  Similarly, Vermouth is rarely, if ever, sold on its own.  These are commonly regarded as mixes.  Some restaurants consider port wine sales in the same category as after-dinner drinks, brandies and cognacs.  Most likely, these will be reported as liquor sales rather than wine sales.  Care should be taken to making sure that the auditor is aware of the restaurant’s categorization of menu items.

Cost Per Serving

During the initial interview, the auditor will ask questions of the restaurateur in order to pin down the serving sizes for all drinks sold.    The auditor will also examine menus to help determine the serving size for all alcoholic drinks.  The auditor will also be asking questions to gain an understanding of the potential over-pouring of each category of drink (wines, draft beer, liquor).   It is extremely important to have expert advice prior to providing this information to the auditor during the initial interview.  If inaccurate or vague information is given, it will be very difficult to get the auditor to change his or her assumptions later on.

Taking all of these factors into consideration, the auditor will develop an average cost per serving for each category of alcohol sold by the restaurant.  This figure incorporates the allowances described above.  The average cost per serving for a category is matched with its corresponding average category selling price to determine the average category mark-up percentage. 

Putting It All Together

Finally, the auditor takes the total cost of alcohol purchased for each category and multiplies this by the applicable mark-up percentage, to provide an audit estimate of the sales that “should have been” generated from the purchased alcohol.  This is done for all liquor categories.  These total projected sales, calculated by the auditor, are compared with the total alcohol sales reported by the restaurant, for each category.  If the reported sales were lower, the difference is considered unreported sales.  The restaurant will be assessed for the sales taxes on the unreported sales, and will likely be assessed income taxes on the difference, as well.

Auditproofing

Now that we know how the auditor performs the sales projection, we need to perform a similar analysis before the auditor arrives at your door.  Regarding average costs, you should be prepared to invest the time to keep track of the quantity and cost of every bottle of alcohol purchased by the restaurant.  Unfortunately, you will have to manually maintain this list.  I suggest an Excel spreadsheet.  Every item should be listed along with all of the details noted above (date, quantity, bottle size, etc…). 

Once this and the other procedures (average selling prices, sales mix) have been performed, we can prepare analyses similar to those that the auditor will carry out during an audit.  Then, when the audit takes place, you will know the assumptions necessary to support the tax returns that were filed.  These proactive analyses will also be used to document and explain variances from the standard mark-ups on an ongoing basis.  These explanations will be very useful in supporting the reasonableness of the various assumptions made during the audit.

As a restaurateur, you probably have a general idea how your menus and prices have changed over the last few years.  Unfortunately, only having a “general idea” can land you in a big pot of trouble when your restaurant is audited.  This post reviews a few of the methods of documenting key changes to your menu and prices.  When the time comes, you will have accurate, credible information to support your actual margins and document the reasons for variances from the expected margins. 

Please note that we only need to track alcoholic drink menu items (wine, liquor & beer).  Auditors focus, almost exclusively, on alcohol sales, because they are able to verify alcohol purchases much more accurately than they can for food purchases.  Of course, you can track all other menu items, if you need this information for managing your restaurant (as opposed to auditproofing your restaurant). 

Most restaurants have a POS system that maintains a list of menu items.  Reports can be prepared from time to time showing all menu items and their related prices.  However, they don’t usually maintain a history of menu prices, which you will need when you are audited.  I recommend that you maintain an Excel spreadsheet of menu items and prices at various times during the year.  At this point, I would suggest a monthly tracking of prices, however, in a future post, I will recommend that this be done every four weeks, rather than monthly.

Thankfully, most alcoholic drink menus stay the same from one period to the next.  Most POS systems allow you to export your menu (with prices) to a file that can be opened in an Excel spreadsheet.  Once you have done this, we want to track all subsequent price changes and the effective dates for each menu item.  Typically, price changes will be implemented for an entire category of menu items about once a year.  For these items, it is important to document the exact date of the change.  When the auditor performs a mark-up analysis, average prices will be used.  If the exact date of the change in prices is known, along with the actual sales mix, you will be able to support an accurate weighted average price to be used by the auditor, instead of a rough average price.  The difference can be significant.

While most alcoholic drinks stay the same, wine lists usually change much more frequently.  In many higher end restaurants, wine represents a majority of all alcoholic drink sales.  Accordingly, more care and attention should be paid to maintaining an accurate weighted average selling price for this sales category.

For higher end wines, when the vintage (year) sells out, the wine will be removed from the list or a new vintage of the same wine will be added, usually with a new price and a new cost.  Some wines will not be replaced after they sell out, for a variety of reasons.  The point, here, is that a typical wine list can (and will) change drastically during any year.  Unfortunately, when the auditor tries to calculate an average wine price, there is almost no possible way that it will reflect the actual weighted average wine price experienced by the restaurant during the year.  When the auditor’s average price is higher than your actual weighted average price, there will be a finding of unreported sales of wine, which will result in a reassessment for unreported sales tax and income tax on the unreported sales.

This is one of the main reasons that we find drastically different unreported sales from one year to the next during a typical audit.  The actual sales mix of wines does change, but the auditor’s method of determining an average price of a “typical” wine does not reflect the sales mix accurately.  Instead, the auditor uses the restaurant’s menus to calculate an average price of “wine” during the year. 

As we all know, higher priced wines usually have lower markup percentages.  When the auditor calculates an average price, every wine used in the auditor’s sample is given equal weight.  This will tend to inflate the average wine price, because higher priced wines do not sell as frequently as the lower priced ones do.  However, higher priced wines sell less frequently than lower priced wines.  This is reflected in the actual purchases of wines.  As a result, the cost used in the auditor’s calculation will approximate the average cost of a bottle of wine purchased during the audit period, but the price of a “typical” bottle of wine will be inflated.  This will cause the auditor’s calculation to show unreported wine sales, even when there were none.  Consequently, it is crucially important to maintain an ongoing analysis of the sales mix and price changes for all wine sales.

One final note of caution.  If you wish to defeat the auditor’s use of rough average prices in the mark-up calculations, you will have to continuously and meticulously keep track of all sales by item and all price changes.  Infrequent or inaccurate analyses of sales and prices will not help you.  Unless you are able to demonstrate that your figures are more accurate than the auditor’s “average” figures, the auditor will rely on his or her own figures as being at least as good as yours, and you will run the risk of an inaccurate projection of sales by the auditor.

This is the second post in the series on auditproofing your restaurant from an unfair audit.  Most restaurants and bars with weak internal controls (almost all independent establishments), will be audited by the Canada Revenue Agency (CRA) or a provincial tax authority using an indirect audit approach.  In most cases, this approach will be the mark-up method, which seeks to project the sales level that was likely to have been generated based on the amount of alcoholic beverages purchased by the establishment.  As we have seen in other posts, this audit method involves making a number of assumptions about the operation.  Determining what these assumptions should be, can be quite complicated. 

Instead of spending the time to develop accurate assumptions for each establishment (which would be the fair method of auditing), the auditor relies on rules of thumb.  Basically, these are averages of metrics observed at similar establishments or annual averages based upon the restaurateur’s answers to questions during the initial interview. 

Let’s look at one of the key assumptions auditors make. 

The Sales Mix

Each restaurant will have its own sales mix, which is simply the percentage of each category of menu items, such as liquor, wine, beer and food.  The sales mix may be relatively consistent from one year to the next, or there could be significant changes, if there has been a strategic change in the business operations (new patio, new bar, renovation, new chef, new menu, etc…)  Where there have been significant changes to the restaurant, it is important to ensure that the auditor takes these into account when determining the average sales mix for each year.

Not only will there be a sales mix of major categories of menu items, there will be a sales mix of sub-categories within the major categories (martinis, 1 oz shots, 1.5 oz shots, etc…)  These sales mixes can also change from year to year. 

So, we want to know how the auditor determines the sales mix for each year of the audit.  Typically, the auditor will work backwards to determine the estimated sales mix, based upon the actual purchases of alcohol in each category and certain assumptions regarding the mix of sales in sub-categories.  Armed with estimated average sales prices and average portion costs, the auditor is able to calculate average markups for each category (and sub-category), for each year.  Care must be taken to properly allocate the change in inventory each year, for each category of alcohol. 

Why is this important?  The determination of the sales mix can have a significant impact on the projected sales, because the margins in the various categories and sub-categories can be quite different and each category of inventory has its own “theft profile“.

In my first post on auditproofing, I briefly discussed checking the accuracy of each menu item’s categorization.  While we could re-sort all of the menu items into appropriate categories, using a program like Excel, this would be time-consuming, subject to error, and require additional audit work to determine that the re-sorted report is accurate.  Auditors don’t like Excel reports, because it is difficult to determine whether they have been manipulated.  Consequently, we want the POS system to provide accurate sales and inventory usage figures, directly, without any re-categorizing.  This will also save a lot of time preparing analyses during the year.

We will be preparing several POS reports on an ongoing basis.  It is important that they be consistent from one period to the next, because we are going to summarize them for each year that is to be audited.  We will be analysing the sales mix for all categories and for key sub-categories within each period and for the entire year.  Before the auditor conducts the initial interview, you will know all of the sales mixes that are relevant to your restaurant for the entire audit period.  Not only that, you will know them to a very high degree of accuracy. 

In a future post, we will be looking at gross margins and how we document the variance between the expected margin and the actual margin.  We will be looking at all categories and major sub-categories, and we will be looking at changes over time.  This is another reason why we need the categorization of menu items to be consistent throughout the audit period.

To put this post’s topic in perspective, the sales mix among the categories (and within major categories) is a key component of the mark-up method, used by auditors to project sales for a restaurant.  If we know the actual sales mix figures and they can be supported, before the auditor arrives, the auditor will be compelled to adopt these assumptions in the audit analyses.  It is one less assumption that might lead to an error in the auditor’s analyses.

Today’s posting is the first in a series of articles about “auditproofing” your restaurant.  By this, I mean taking proactive steps to help ensure that your restaurant or bar is not unfairly reassessed for sales and income taxes when it is audited by the CRA or provincial tax ministry.  Please check back regularly for other methods of auditproofing your business.  If you have any questions, please post comments to the articles, and I will do my best to respond.  If you prefer, you can email your questions to me.

Most restaurants have a computerized point of sale (POS) system to keep track of items ordered by each guest, send orders to the kitchen or bar, and process guest check settlements.  Most systems can keep track of many other important transactions, such as discounts given (by type and employee), voids (with reasons, by type and employee), ingredient usage, and many others.  From a tax perspective, the POS system keeps track of every item ordered and calculates the appropriate sales tax.  Just like your car, the POS needs to be maintained properly. 

One of the first audit steps a tax auditor performs is to reconcile the POS sales and tax figures with the accounting records and with the actual sales tax returns that were filed.  The auditor will also check to ensure that the correct sales taxes were charged on each item sold.  Any discrepancies will cast doubt on the reliability of the procedures to accurately calculate and remit taxes and ensures that the auditor will be justified in using an indirect audit method to reassess sales (and income taxes) for the restaurant. 

Here are a few steps that you should perform before your restaurant is audited.

Recalculate Taxes on Sales

It would be incredibly time-consuming to check every transaction that the restaurant processes.  Luckily, we don’t have to check every one.  We can check them in bulk for a period of time.  If the figures are correct for the entire period, they are likely to be correct for every transaction processed during that period. 

Consequently, for each period, review the POS report that shows sales and taxes collected.  In Ontario, the report should show non-alcoholic sales (food and beverages), and alcoholic beverage sales, together with the total GST, PST (food at 8%) and PST (alcohol at 10%).  I suggest that this report be run monthly, but you could do it daily or weekly, too.  Once you have the report, multiply the total sales for each category (alcohol & non-alcohol) by the applicable PST rate, and compare this figure with the sales tax collected as shown on the report.  Total sales (both types) multiplied by the 5% GST rate should be compared with the total GST collected that is shown on the report. 

Explain Differences

Any differences between the calculated tax and the tax shown on the report should be investigated.  One reason for there being a difference is that some of the sales transactions were exempt from one or more taxes.  Examples include purchases by Status Indians and Foreign Diplomats and food sales less than $4.00 in Ontario. 

The more likely reason you will find a difference between the calculated tax and the actual tax collected is that the POS system contains errors in the tax setup for one or more menu items.  When this happens, the auditor will conclude that the POS system and the internal controls over sales are not effective to ensure the accuracy and completeness of the sales and sales tax figures.  Consequently, you want to ensure that all discrepancies are identified quickly and appropriate corrective action taken.

If you find discrepancies, you will have to check the tax codes for every menu item in the POS.  All food and non-alcoholic beverage menu items should be coded to charge 8% PST and 5% GST.  All alcoholic beverages should be coded to charge 10% PST (Ontario) and 5% GST.  This can be a time-consuming task, but if done properly, you should not have to do this again.

A POS Key for Every Item

You should ensure that every item sold has its own key in the POS system.  Ensure that a new POS key is set up prior to adding any new wine to the menu.  Do not let staff try to convince you that they “need” an Open Liquor key.  They don’t, unless you fail to set up keys for all menu items.  They may try to argue that they don’t have time to find the right key when they’re busy, etc…  If this is a problem, ensure that they are properly trained on the POS system and consider reorganizing menu items on the POS to make it easier to find items quickly.  Why is this so important?  Once you have an Open Liquor key, it will be used for a wide variety of customer purchases.  Wine, beer, alcohol and even food will be processed under this key.  This will distort the reporting of sales by category (and taxes collectible) and it will make it impossible for you to accurately track usage of ingredients based on actual sales.  As we will see in future posts, this will be an extremely important control when we need to rebut the auditor’s assumptions.

POS Menu Security

Once you have completed this task, I recommend that you change the security authorizations in the POS system to restrict all staff, except yourself or a trusted manager, from making changes to or adding menu items.  With this control in place, you will only have to check future changes and new menu items for accuracy.  Subsequent monthly reconciliations should reveal no unexplained discrepancies.

Other Housecleaning Tasks

While not the topic of today’s post, when you are checking each menu item, you can perform other useful steps that we will be using in future auditproofing tasks.  In particular, while checking the tax codes, you should also ensure that each menu item (focus on alcoholic beverages only) is summarized in the appropriate sub-category.  Here are a few typical sub-categories:  Domestic bottled beer, Imported bottled beer, martinis, shots, cocktails, Wines by-the-glass, Wines by the bottle, etc…  Accurate categorization of all menu items will make it easier to analyse sales data in the future.

Another step is to create recipes for menu items.  Usually, when we think of recipes, we might think of a cooking recipe for a dish.  While this can be programmed into most POS systems, this can be an extremely time-consuming exercise.  Most auditors are far more concerned about alcoholic drink sales.  Consequently, you should consider creating recipes for all alcoholic beverages.  Having a recipe for each menu item will allow you to prepare POS reports of ingredient usage, based on the actual items ordered for any period of time.  Depending on the level of sophistication required, these usage reports can also be used to identify inventory shortages and assist in placing orders to replenish stock. 

Recipes can be as simple as having an “ingredient” of one bottle of Heineken for a bottle of Heineken (menu item).  A glass of wine could have 6 ounces of Catena Malbec, or it could be described as 25% of a bottle of Catena Malbec.  Cocktails could have several alcoholic ingredients. 

Recipes can have a standard spillage factor built in or not.  If you do incorporate a spillage factor, it should be a fairly accurate estimate of the true spillage amount.  Note that this percentage will vary among the various liquor categories.  If the spillage factor is included in the recipe, it is one less factor that needs to be explained in future variance analyses.

This post has been concerned with the menu items in a POS system.  I have not discussed other issues such as discounts, voids, spoiled stock, and customer comps.  These will be discussed in future posts.

Hey Pandas!

I saw Sheriff,Henry and two other moderators during the party! The party started at 12:00 AM PST. We partied for nearly half-an-hour! I updated the Moderator Tracker as soon as I saw one! Hope it was useful! Also  Pandanda is one year old!

These are the pandas who won the raffle contest:

Lolita163

Pakoleon

Panda753951

Here are a few pictures:

And this is Moderator Skippers’ pet’s name:

There’s gonna be another contest!

(Thanks to Penguitt for the picture)

Did you come to the party? Did you like it? Please comment!

~Rory

Knowledge Base Article: 17190-20-108

Symptoms:

While adding a Microsoft Outlook PST file to the list in SysTools PST Merge, an error comes

“The added PST file corrupt and hence cannot be added to the list”

Cause:

The following can be causes

1. The PST file can be corrupt.
2. Microsoft Outlook is not configured with POP3 profile.
3. Microsoft Outlook is configured with Exchange Profile.

Solutions:

To verify whether the file is corrupt or not, open the Microsoft Outlook PST file in Outlook by following the below steps

1. 1. Open Microsoft Outlook.
2. 2. Traverse File | Open | Outlook Data File

If no error comes then the file is not corrupt. But if it fails to open then use the ScanPST utility provided by Microsoft or any 3^rd party product to recover the PST file.

SysTools PST Merge requires Microsoft Outlook to be configured with a default POP3 account profile. To configure POP3 account read more.

SysTools PST Merge may have issue if Exchange profile is set as default. To overcome this it is recommended to remove the exchange profile and configure the POP3 profile while the merge process is in progress.

Applies To:

• SysTools Split PST
• SysTools Compress PST

Next summer (2010), the Ontario Government is set to put into force its new harmonized GST/PST sales tax which will apply a 13% sales tax to everything we purchase.

Things That Were Not Subject To The Current 8% PST Will Be Now Taxed –  As a result, things that were not previously taxed under the current Ontario Provincial Sales Tax (PST) will be taxed at 8%.

The new 13% tax will therefore apply to things like your electric bill, your gas bill, your water bill, condominium fees, insurance premiums, and every other good and service you purchase. There are almost no exemptions.

The current Ontario PST tax does not apply to services, nor does it apply to  the purchase of certain goods. The new 13% tax will therefore extend the old 8% PST tax rate to the purchase of all goods and all services.

The New 13% Tax Will Apply To The Puchase of All New Homes – The new harmonized GST/PST will also apply to all purchases of all new homes.  If a person were to purchase a new $1 million dollar home in Toronto, they would have to pay roughly $200,000 in taxes as a result of the Ontario land transfer tax, the new City of Toronto land transfer tax, and the new harmonized 13% GST/PST.

Think about that and what that would do to real estate values in Toronto. It will cause property values to fall and kill the new home construction industry and the jobs it creates.

And it won’t be long before you’ll hear our elected representatives telling us that, because of the harm that has been inflicted to the new home construction industry by the new 13% tax, it would be “fair” to extend the new 13% tax to sales of existing homes.

The New 13% Tax Is An Assault On Your Primary Residence Canadians have had two things that they have always been able to count on as being tax free – things that they could use to save money and accumulate wealth. They are your: (a) primary home; and (b) RRSP. That’s it.

The extension of the new 13% GST/PST to homes is simply a tax assault by the government on your primary home. They want to tax your primary home and you will suffer because of it.

Why? Because if a purchaser has to pay almost $200,000 in taxes to buy your  $1 million dollar home, the purchaser is going to pay less to you for your home. The purchaser will reduce the amount he or she is willing to pay to you in order to pay all the taxes.

The New 13% Tax Will Effectively Raise Your Income Taxes – Currently, the combined Federal/Ontario income tax rates are roughly 25% on the first $20,000 of taxable income, 42% on the next $40,000 of taxable income, and 46.5% on each dollar of taxable income over $60,000. On top of that, you have to add the “Fair Share Health Tax” of up to $1,000 each of us has to pay.

If the Ontario Government gets away with implementing their new harmonized GST/PST sales tax of 13%, the top effective income tax rates in Ontario will  be as follows (since you can’t spend any of your tax paid dollars without paying the new harmonized 13% GST/PST tax):

38% on the first $20,000
53% on the next $40,000
59.5% on every dollar over $60,000

On top of that, you have to pay your Ontario Fair Share Health Tax, your city realty taxes, your city garbage fees, your city water fees, your city street  parking permit fees, your annual Ontario and new City of Toronto vehicle license plate fees, your Ontario land transfer tax, your new City of Toronto land transfer tax, your gasoline taxes, your liquor taxes, your air departure taxes, your entertainment taxes, and so on.

OF ALL THE MONEY YOU WORKED HARD TO EARN, WHAT PERCENTAGE ARE YOU REALLY  KEEPING FOR YOUR OWN USE? 25%? 20%? 10%?

ENOUGH IS ENOUGH – FIGHT BACK- THIS HAS GOT TO STOP HERE OR WE WILL ALL SOON BE WORKING FULL TIME FOR THE  VARIOUS LEVELS OF GOVERNMENT IN ONTARIO .

AS A RESULT, I URGE YOU TO TAKE THIS ISSUE SERIOUSLY AND TO SIGN  THE PETITION AT http://www.unfairtaxgrab.com

I WOULD ALSO ASK YOU TO SEND THIS E-MAIL ON TO OTHERS THAT YOU KNOW AND ASK THEM TO DO THE SAME.

IF WE DON’T WORK TOGETHER ON THIS ISSUE THE NEW HARMONIZED 13% SALES TAX WILL BECOME A REALITY NEXT SUMMER.

THANK YOU.

So now the folks at the interoperability labs at Microsoft want to open up the Outlook PST format so that other people can interoperate with it.

Hmmm, forgive me, but that sounds a bit too much like Harrison Bergeron. Equality for all doesn’t mean the experience sucks any less.

The PST format (and the more recent updates for Outlook/Entourage) have been the bane of the average system or backup administrators’ existence for way, way too long.

Oh I recognise the arguments in opening it up: it will allow developers to come up with custom access programs/software, and that may include utilities to allow easier block level backup of local PST files. (See here.)

You know what I think it’s more likely to do though? Encourage more people to use a format that shouldn’t have been created in the first place, to hold data that shouldn’t be there, and thus create more backup and storage problems.

If the Microsoft interoperability labs were serious about interoperability, they’d have published a timeline on moving either towards a more open mail format (not by creating published data structures, but by using honest to goodness simple formats plain text, attachments, etc.), or at least, if nothing else, a stripped down SQL database and provide a local utility/API that can be used to access in plain relational database format. They do, after all, design their own SQL database server, and they provide ODBC client access at the OS level (something I’m constantly reminded of by Excel users!) What’s more, Apple managed to integrate this style of system into their OS, so it can hardly be said that it’s not possible.

Knowledge Base Article: 17190-2-107

 Symptoms:

 While migrating the Lotus Notes mailbox using SysTools Export Notes some folders hierarchy may not migrated properly to Microsoft Outlook.

 Cause:

 Lotus Notes NSF file may be corrupted for the particular folder hierarchy.    

 Workaround:

 Follow the below steps

1.  Open the NSF file in Lotus Notes Client.
2. Rename the folder which is not getting migrated.
3. Close the NSF file.
4. Close the Lotus Notes Client.
5. Launch SysTools Export Notes and perform the conversion.

Applies To:

•  SysTools Notes Address Book Converter
• SysTools Lotus Notes To Outlook Express

Knowledge Base Article: 17190-2-105

Symptoms:

After installing the Full version of SysTools Export Notes, when a user load a Lotus Notes user      mailbox NSF file perform Start Scan, it throws error

“Lotus Notes Not Installed/Configured Properly”

Cause:

The following are the reasons for the error

1. Lotus Notes not installed.
2. Lotus Notes Client is connected to Domino Server.
3. NSF File is copied from another machine.
4. Lotus Notes Client have been upgraded from previous version.

Solutions:

SysTools Export Notes required Lotus Notes client to be installed on the workstation where the migration/conversion is carried out. Lotus Notes Client 5.0/6.0/6.5/7.0/8.0/8.5 versions are supported.

It requires the Lotus Notes client to be working in an Island Mode i.e. not connected to Domino Server at the time of conversion.

If the NSF file have been copied from another machine then follow the below steps

1.  
   1. Copy the .ID file associated with the NSF file on the workstation where migration/conversion is done.
   2. Open Lotus Notes Client.
   3. Traverse File | Security  | Switch ID.
   4. Provide the path of .ID file and the password.
   5. Launch the SysTools Export Notes and perform migration.

If the workstation on which migration is carried out have been upgraded with multiple versions of Lotus Notes Client then follow the below steps

1.  
   1. Search  for the nlsxbe.dll.
   2. Open the Run window and type the following command

         regsvr32 <Path of the NLSXBE.DLL

Confirmation for successful registration will come.

Applies To:

• SysTools Notes Address Book Converter
• SysTools Lotus Notes to Gmail Contacts
• SysTools Outlook To Notes
• SysTools Notes To Excel
• SysTools Lotus Notes To Outlook Express
• SysTools Securase
• SysTools Lotus Notes Contacts to Outlook Express

When the auditor arrives to audit your bar or restaurant, he or she will review your internal controls to ensure the accuracy and completeness of your recorded sales and the taxes thereon.  If the documentation is not available to determine that appropriate controls were effective throughout the audit period, the auditor will conclude that the controls were lacking and that the books and records may not be relied upon to support the sales taxes collected by the restaurant.  Most independent restaurants will fall into this category.  As a result, the auditor will proceed to apply an indirect audit approach to estimating the amount of sales that were likely to have been generated, based on your purchases of alcoholic beverages.  Several key assumptions are used in this method, which I will describe in the remainder of this post. 

Keep in mind that the auditor is attempting to estimate your “true” sales based on certain facts, such as the amount and volume of alcohol purchased, and a variety of average assumptions, such as portion sizes, drink prices, sales mix, spoilage, theft, personal use, complimentary drinks, etc…  Every time one of these average assumptions differs from your restaurant’s actual situation, there is a potential for the auditor finding “unreported sales”.  Consequently, it is extremely important that the auditor’s assumption conform as closely as possible to the true state of affairs that took place during the period under audit.  Please note that I will examine these assumptions in much greater detail in future posts.

Sales Mix

During the initial interview, the auditor will ask you for a breakdown of your alcoholic beverage sales by category.  Typical categories might be:  bar shots, cocktails, martinis, draft beer, domestic bottled beer, imported beer, domestic wine and imported wine.  Few restaurateurs are able to provide detailed, accurate breakdowns of sales by category over a four year period.  Furthermore, the sales mix will likely have changed over the course of the audit period.

Most POS systems will provide reports to show the sales mix for a particular period of time, but the report will only be accurate if each menu item is set up properly in the appropriate category.  The restaurateur should review all POS menu items (and any new ones) to ensure that they are summarized in the proper category.  Detailed sales mix reports should be prepared for every fiscal year of the restaurant’s operation.  Without this information, the auditor may be forced to conclude that the sales mix matches the volume of alcohol purchased for each category.  This may lead to an inaccurate sales mix determination.

Average Sales Prices

In order to calculate an average sales markup for each category, the auditor must have an average sales price for the category for each year.  If the restaurateur is able to provide very accurate average prices for each category, the auditor will be forced to use these figures.  Otherwise, the auditor will attempt to estimate the average price, based on menus that were in effect during the year.  In the absence of more detailed, supportable, information from the restaurateur, the auditor may have to take an average of menu prices during the year.  Depending on when price changes came into effect, the average prices may not be accurate, leading to a distortion in the average markups that will be used by the auditor.

As a result, each restaurant and bar should maintain a detailed record of every price change for all alcoholic beverages, including the price change dates.  Combined with the sales mix information, this price data can be used to calculate a weighted average category price for each category, which will be substantially more accurate than the auditor’s simple average. 

Portion Size

The auditor will ask you for the portion size of all alcoholic beverages and this information will be matched to drink sizes noted on menus.  The auditor will also enquire as to the existence of any alcohol dispensing systems that may have been used to help ensure proper control over the standard drink size.  The agreed upon portion size will be used to determine the cost of a serving for an average drink in each category.  Most categories will have a large number of drinks sold during a typical year.  Consequently, a small change in the average portion size will have a large impact on the total estimated sales for that category. 

Each category of drink has a variety of factors that affect the portion size.  Draft beer with too little head will result in a substantial over-pour.  Multiplied by a large number of draft orders, it will appear to the auditor that there is a substantial amount of unreported sales of draft beer, when this happens.  Similarly, free-pouring of alcohol for shots and martinis can result in substantial overpouring of liquor.  Keep in mind that a 1/2 ounce overpour on a 1 oz drink represents a 50% overpour.  On a 1-1/2 ounce shot, the overpour is 33%.  Most auditors will attempt to use a much smaller overpouring percentage, often as low as 10%.  This will result in the finding of a significant amount of unreported sales of liquor.  Portion sizes for bottles of wine are obvious, but serious overpouring of wines sold by-the-glass can occur.  Average portion sizes must be determined and monitored by the restaurateur on an ongoing basis.  Documentation of this monitoring can be provided to the auditor, if necessary, to document known portion control issues.

Shrinkage

All auditors know that restaurants and bars experience some theft of their inventory, especially alcohol.  Where restaurateurs and the auditors differ, however, is in the amount of theft.  The auditor will attempt to provide a minimum allowance for theft, “based on average theft levels for similar establishments”.  Any attempt by the restaurateur to increase this  allowance will be challenged.  You will be asked for police reports to show that you reported the theft to the police.  In my experience, unless an employee was caught “red handed” in the act of stealing (and even rarely then), the police are never called in.  Most restaurants don’t want the negative image of a police cruiser in front of their establishment, so they will not report the theft.  The auditor, however, takes this to mean that it didn’t happen in the first place.  Most restaurants simply experience a loss of inventory without actually finding the thief. 

As a result, it is extremely important that the restaurant document it’s findings of theft, based on regular inventory counts and POS usage reports.  Most POS systems allow you to create recipes for menu items, which will provide usage reports of all ingredients.  While this can be a significant amount of work setting it up, it will allow you to determine the loss of stock over a period of time.  In the case of wines sold by the bottle, you will be able to get a better estimate of the actual theft losses than by any other means.

Shrinkage also includes spoiled product.  For example, beer in the draft lines that is discarded rather than sold.  Wine bottles that are opened to be sold by-the-glass will become tainted, if it isn’t sold in a reasonable time.  Some wines are corked or otherwise tainted by the time they are opened.  Some wine sites on the internet provide documentation that as many as 1 in every 18 bottles of wine are tainted and unsuitable for sale.  This, alone, represents almost 6% spoilage, if the tainted bottles are not returned to the suppliers for credit.  Ideally, you need to have a process in place to document and prove the amount of tainted wine your establishment incurs.

Cooking Use

Some establishments use a considerable amount of alcohol in their food menu recipes.  Unless the auditor deducts the alcohol used in cooking from the purchased alcohol, projected sales will be substantially inflated, based on the markup method.  Therefore, it is important to document the amount and type of all alcohol (wine, liquor and beer) that is used in preparing and flavouring sauces that accompany food plates.

In particular, a proper demi glace, used as a base for many sauces uses a substantial amount of wine in making the sauce.  In my restaurant the demi glace was reduced at least four times from the original ingredients.  The auditor had an extremely hard time understanding this and kept picturing a main course swimming in wine, based on the wine used in cooking divided by the meals served.  Eventually, we were able to prove the amount of wine used, by documenting the number of batches of demi glace prepared during the year.  It was a lot of work to document after the fact.  After that, we documented all recipes that used wine and the batches prepared in a log.  This will provide strong evidence to support the amount of alcohol used in cooking recipes.  Ideally, the manager and the chef should initial each transfer of alcohol to the kitchen.

Customer Comps

In the absence of documented proof of complimentary drinks provided to customers, the auditor will consider this part of the shrinkage allowance.  Consequently, it is important to maintain details of all complimentary drinks.  Most POS systems will allow you to do this, most often by voiding the amount for the complimentary item.  While this may be accepted by the auditor, more credible evidence can be obtained by maintaining an ongoing ledger of all customer comps, supported by sales chits describing the reason for the comp, customer name, description of comped item and amount.  When documented on a daily basis, this isn’t too much trouble.  If you had to go back over four years to try and document your customer comps, it would be a monumental task.  Therefore, try to keep track of complimentary drinks every day.  As a minimum, make sure that all drinks are rung in and comped on the POS system.

Similarly, when drink orders are made but the customer sends them back (wrong order, changed mind, etc…), we usually void the order on the POS.  Care should be taken to distinguish between voids that were made (representing a loss) and those that were not made (keying mistake that was caught).  Alcoholic beverage voids that were made but not served should be documented to prove the amount to the auditor.

Summary

In this post, I have tried to describe the key assumptions that are made by sales (and income) tax auditors when auditing restaurants and bars.  Each establishment has its own unique aspects, which may involve other assumptions in addition to those detailed above.  It is important to understand the assumptions that are made and the documentary evidence that may be used to ensure more accurate, truthful assumptions are used by the auditor.  Not only will this save you a considerable amount of money, it may save your business.

NRK Dagsrevyen forteller tirsdag 27. oktober at en Narvikstudent har mistet oppholdstillatelsen, og dermed utvist fra Norge. Politiets Sikkerhetstjeneste (PST) begrunner hjemsendingen med at utdanningen kan misbrukes i Iran.

Utdanningsvalg grunn for utvisning
Studenten kommer fra Iran, og har studert Norsk og samfunnskunnskap for utenlandske studenter i Narvik og hadde i høst planer om å starte på masterstudiet Satellitteknologi. Utdanningsvalget er altså årsaken til utvisningsvedtaket. Iran har i de siste år intensivert sin satsing på forskning innen atomkraft og -våpen. Dette satt i sammenheng med at studiet Satellitteknologi innebærer en del raketteknologi samt styringssystemer for raketter førte til at studenten ikke fikk fortsatt opphold i Norge.

Åpne studier
Alle studiene i Narvik er åpne studier i den forstand at pensumlister og emnebeskrivelser er tilgjenglig på nettet. PST viser slett forståelse for utdanningssystemet i Norge, så vel som i resten av verden når de nå sender en student hjem fordi de tror han kan misbruke sin kompetanse fra sine studier her i Norge.
En liten faktasjekk viser at veldig mange universiteter har all nødvendig informasjon angående sine studier på sine nettsider. Om noen fra “feil” land ønsker å utnytte dette for å studere emner som kan utnyttes til eksempelvis krigføring, er det ingenting som hindrer de i dette, verken ved Høgskolen i Narvik eller ved de fleste universitet ellers i verden.

Dårlig tidspunkt
Høgskolen i Narvik (HiN) har i de siste månedene gjort flere tiltak som vil gjøre det lettere for utenlandske studenter å studere i Narvik. 5 av de 6 masterlinjene innen teknologi lyses ut på engelsk til neste studieår, og det er gjort avtaler med flere universitet, blant annet Philadelphia University i Jordan. Spesielt avtalen med dette jordanske universitetet kan være i fare på grunn av denne utvisningen av en av HiNs utenlandske studenter. Philadelphia University tar inn studenter fra hele Midt-Østen, deribalnt fra Iran. Flesteparten av studentene på dette universitetet er faktisk utenlandske.

Hvilket signal sender Norges myndigheter ut?
I år er det ca 19.000 nordmenn som studerer i utlandet. Hvordan kan vi forvente at våre studenter blir behandlet når ikke vi tar vare på de studentene som kommer til Norge for å ta sin høyere utdanning.

Les mer om saken her:
Konkret sak ved Høgskolen i Narvik bidrar til nasjonal debatt! - Høgskolen i Narvik sine nettsider
Lik rett til utdanning? – Origo (Studentavisa i Narvik)
Iransk Satellittstudent kastet ut – NRK
Frykter iransk student skulle skaffe rakettinfo i Norge – Dagbladet
PST kastet iraner ut fra høgskolen – Avisa Nordland
PST kastet iraner ut fra romfartsstudier – Aftenposten
PST kastet iraner ut fra romfartsstudier – Stavanger Aftenblad
Kastet iraner ut fra romfartsstudier – Finnmark Dagblad
Justisdepartementet instruerte UDI om å nekte iraner oppholdstillatelse – Document.no
PST aksjonerte mot HiN-student – Fremover
Reagerer skarpt på at iransk student kastes ut – NITO
Iraner drømte om å bli romforsker – NRK
Stemplet som bombeforskere og kjeppjaget til Iran – Dagbladet

If you have been following the posts on this site (and several others on the internet), you know that your restaurant or bar business faces a serious risk when it is audited by CRA or the provincial auditors.  In most cases, your licenced business will be audited, it is just a matter of when.

As a restaurateur that will be subject to an audit, you have a number of choices concerning how you will respond:

1. Wait until the audit is complete and file an objection (appeal)
2. Attempt to refute the auditor’s assumptions during the audit, in hopes of minimizing or eliminating the additional taxes
3. Provide credible, accurate information at the beginning of the audit that will “force” the auditor to develop assumptions that will support the sales previously reported

The first two options will have varying degrees of success, depending on the accuracy, consistency and credibility of the information you are able to obtain to support your filing position.  These will also be the most expensive options – by far.  In the first case, once the audit is complete, the onus of proof is on you to prove that the auditor has used factually incorrect assumptions and/or has erred in the approach used to determine that there were additional taxes owing.  It is not enough to show that different assumptions would lead to a finding of no unreported sales.  The reasons why the “true” assumptions are more appropriate must be supported with factual evidence.  When you are trying to obtain this type of evidence, in many cases years after the fact, it may be impossible to disprove the auditor’s assumptions.  Even where you are able to obtain this evidence, it will be a very costly venture.

In the second option, you have an opportunity during the audit to change the auditor’s assumptions, before the findings are finalized.  In this case, you will be trying to refute the assumptions that the auditor made based on your comments during the initial interview and the documents you provided to the auditor at the beginning of the audit.  This information and the assumptions made by the auditor become the “facts” that will determine whether there were any unreported sales.  You have a much better chance of refuting the auditor’s assumptions during the audit than you have once the audit is finalized.  However, you must still provide evidence why the auditor’s assumptions are incorrect for your particular restaurant or bar.  If necessary, you may ask for a review by the auditor’s supervisor.  In order for this approach to be successful, you will undoubtedly require a consultant that is experienced in these types of audits.  This can be a very expensive option, too, because all of the information gathering and analyses that would be required to appeal an unfair assessment will have to be done prior to the end of the audit.  This will give you about 30 days to perform all of this work, which may not be long enough to do it properly.

The Best Option

It should be clear by now that the only way to effectively protect your business from an unfair reassessment of sales and income taxes is to be proactive.  Ideally, you want to be prepared for the day the auditor walks into your restaurant.  You need to know exactly which assumptions the auditor will be making and the numerical values that will properly support the sales figures that were previously reported.  You will need to know the reasons why your actual margins differed from the theoretical margins, for the entire audit period (usually four years).  Effectively, you need to audit your own business before the auditor arrives.  Ideally, you should be doing this continuously.

You can do most of this preparation yourself.  You may wish to retain an accountant or consultant to help set up internal controls over inventories, purchases, sales and receipts.  Ongoing monitoring and analysis of the controls can usually be performed by the restaurateur, at little or no cost other than your time.  It may be advisable to have the restaurant’s independent accountant monitor the controls and help document the margin variances on a quarterly basis.  The results of this work will provide the restaurateur with the answers to the questions that the auditor will ask at the initial interview.  Most importantly, the restaurateur will be able to support these statements with evidence in the form of analyses done prior to the audit taking place.  To the extent that an external consultant or accountant is involved in the analyses, the information should be considered more credible than uncorroborated internal reports.  The onus will be placed on the auditor to find evidence that your statements are untrue, in order to make an audit finding of unreported sales.

While there is a cost of implementing these internal controls, in almost every case, there should be significant savings that far outweigh the costs.  The ongoing savings will be through a reduction of staff theft and improved margins.  There will be a major bonus when the business is audited and there is a finding of no unreported sales.

Your business will be audited in the future.  While you do have options, in terms of favourable outcomes, you really don’t.  You must be proactive to protect your restaurant or bar from an unfair (and very expensive) audit.  The relatively low cost of controlling your costs and monitoring margin variances will be more than offset by an increase in profitability and a substantially reduced risk of an adverse audit finding.

Al parecer Microsoft está moviendose hacia la corriente y empieza a ver con otros ojos todo lo referente al Software Libre.

En este caso, segun un post publicado en el blog de Interoperability de Microsoft, planean publicar documentación y liberar el formato .pst que maneja el cliente de correo Microsoft Outlook.

Microsoft apunta a la liberación del formato del archivo .pst para que cualquiera pueda implementar el formato en cualquier aplicación o herramienta sin el impedimento de patentes o el permiso de Microsoft para su uso e implementación.

En un parafo del post comentan:

“A la hora de facilitar la interoperabilidad y habilitar a clientes y desarrolladores al acceso de los datos en un archivo .pst en una variedad de plataformas, estaremos liberando documentacion del formato .pst. Esto permitirá a los desarrolladores ver, crear y operar con los datos dentro de un archivo .pst en servidores o clientes de correo utilizando el lenguaje de programación y la plataforma de su preferencia. La documentación técnica detallará como los datos son guardados, ademas de guias para el acceso a esos datos desde otras aplicaciones. Además se mostrará la estructura del archivo .pst, dando detalles de como navegar entre las carpetas y exlpicar como acceder a datos individuales de los objetos y sus propiedades.”

No se porque recuerdo la frase “No me hice rico firmando cheques…..” del capítulo de los Simpsons en el cual aparece Bill Gates tratando de comprar la reciente empresa de Homero….

I had such great fun today in the office, oh how I danced and flitted about from file to file.

My co-worker, who is responsible for cash applications, cleared about parts of Accounts Receivable this past Friday. Unfortunately, she cleared out the wrong items. My Accounts Receivable is in a huge mess, for reporting purposes, and who has to answer for this at monthend to the Director of Finance, the CFO and Regional Headquarters? Me. Now I have to fix another’s mistake, which takes me away from my own work.

Received a note from a vendor that they are suspending our account until we pay up for invoices outstanding for more than 180days. We have invoices outstanding for close to a year, sitting on some Account Manager’s desk – their excuse being that t hey are far too busy to process the invoices. We hold to the opinion that if you are the one placing the order, you should be the one making sure the vendor gets compensated. Now we  have other vendors refusing to do business with us, cos it heard it on the grapevine that we take 3 months or longer to pay invoices. My suggest to the Production Accounting Manager is that either we escalate the issue to Senior Management (as this affects the ability of our company to function) or to make it more personal and direct – lock out the individuals responsible for this fiasco from their email accounts.

Have to self-assess PST going back to September 2005. I am doing it for all 7 units. My co-workers are refusing to do their own self-assessments, preferring that I do it. I’d rather not, but it has to be done so that we don’t suffer at the next PST audit.

Microsoft have announced that they are opening up the technology behind their .PST files- the files that hold all the email, calendar and contact info that Outlook archives. While many people aren’t fans of .PST files (products such as Symantec’s Enterprise Vault have whole modules aimed at eradicating them), they are still prevalent and so anything that makes interacting with easier has got to be good

While developers have been able to work with .PST files in the past through MAPI and the Outlook Object Model, it required that Outlook was installed on the machine. However once this new documentation is released it will:

“will allow developers to read, create, and interoperate with the data in .pst files in server and client scenarios using the programming language and platform of their choice. The technical documentation will detail how the data is stored, along with guidance for accessing that data from other software applications. It also will highlight the structure of the .pst file, provide details like how to navigate the folder hierarchy, and explain how to access the individual data objects and properties.”

This is another move by Microsoft to increase interoperability between their products and those of other manufacturers, and is to be applauded I think. Some say this might lead to more people moving away from Exchange but I doubt that anyone was sticking with Microsoft’s email platform simply because of .PST’s

The full post can be found here.