Note 10 – Sales and Use Tax

The Texas Comptroller conducted a sales and use tax audit of our operations in Texas with respect to the period December 1, 2009 through June 30, 2013 and subsequently sent us a preliminary assessment in September 2015 asserting that we owe $220,007 plus penalties and interest of $66,645 for a total payment due of $286,652. On February 21, 2017, a Compromise and Settlement Agreement was reached between DGSE and the Comptroller’s Office to pay a lump sum payment of $261,490 on or before March 23, 2017. Payment was made in full on March 2, 2017.

The Texas Comptroller is currently conducting another sales and use tax audit of our Texas operations with respect to the period July 1, 2013 through December 31, 2016. The audit is in the final stages and we feel a resolution is forthcoming soon. It has been determined, after consulting with our sales tax consultant who has been handling the audit, that a reserve of $70,000 should cover any assessment, penalty and interest which is included in accrued expenses in the accompanying consolidated balance sheet as of December 31, 2017.