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Exploring what's new, relevant and upcoming in the ever-changing world of sales tax.

Don’t be Fooled by Calculated Error

 Jun 06, 2016 Sales Tax DataLINK

“Free” automated sales-tax calculators seem like a time-saving miracle. No commitment. No wasted time. No cost.

But to the trained eye, these elaborate facades do the opposite.

Let’s break down the sales tax calculation process.

There are three questions necessary to answer for accurate sales tax calculation:

  • 1.Is this sale taxable?
  • 2.Where does the sale take place?
  • 3.What is the rate of taxation for this jurisdiction?

Current free automated sales tax calculators only address two of the three by ignoring the first question entirely. “Is this sale taxable?” is a question so vital to accurate calculation that it must precede the other two. You might not even need to collect tax at all.

Taxability is determined by three things:

  • Statutes/Laws:

- Each state defines which products and services are ‘taxable’ differently, and these laws are often changed or updated. Current free automated sales tax calculators not only lack the complexity to assess what you are selling, but also ignore checking this information with the appropriate laws.

  • How the product is used:

-The laws mentioned above usually come with a whole list of exceptions to the rule. What is the use of the purchased good or service as well as where it is being used can be the deciding factors in taxability. For example, NY manufacturers are exempt from paying sales tax on replacement parts and affiliated parts even if the same item used under a different context is taxable. (For more on this see: http://www.salestaxdatalink.com/blog/iowa-bill-decreasing-sales-tax-for-manufacturers-to-be-changed)

  • Who your company is:

-Government organizations are commonly exempted entities. However, enterprise zones also predict whether or not a business is exempt. (For more on this see: http://www.salestaxdatalink.com/blog/enterprise-zone-financing-and-sales-tax)

Without knowing the taxability of the sale, you will almost always miscalculate your return.

Free automated calculators will ask for just an address/zip code and will calculate based on the general tax rate.

This spurs its own complications. You often lack the specificity that jurisdiction description requires and have no idea if your rate is even accurate.

You have no access to the breakdown of your calculation either. Say you are to pay a calculated $8.00 in sales tax. You don’t know what percentage of that $8.00 applies to special jurisdictions common in places like Texas and Missouri. This lack of information can keep you in the dark about rate changes, while also allowing the calculator room for error.

But it’s still free, right?

Sorry, also no.

Automated calculators usually come with usage limiters that prevent continual use, so you can use it for more than a few of calculations per month. They also require your contact information to activate your free subscription, and your “free” subscription effectively acts as a marketing tool for the company. Companies will incessantly contact you in-person or fill your inbox with advertisements for their software. Now you are in their marketing vortex.

Think of an automated calculator like a trailer for a movie. They’ll show you just enough explosions to make you want to watch the movie, but you get none of the plot or character development or emotion. You get an unfinished product.

Don’t get played by the current free automated sales tax calculators; get clear, accurate, and complete information with Sales Tax DataLINK. Let us impress you. We have a better option than “Free”.

Visit us at http://www.salestaxdatalink.com/ to get more information or even a free demo of our software!

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Sales Tax Baker's Dozen

 Jun 01, 2016 Sales Tax DataLINK

A baker's dozen is thirteen, not twelve. The term harks back to the days when a baker could be fined for giving short weight. Since it's tough tomake sure that every pastry weighs an equal amount, bakers would throw in an extra to make sure their dozen rolls or cakes or doughnuts would measure out to the full required weight.  Read More

The Most Common Sales Tax Errors

 Jul 28, 2015 Sales Tax DataLINK

To err is human, and that fact is never so apparent as when dealing with taxes. Recently, several states have publicized the most common sales tax management errors experienced by their residents in an effort to help business owners comply with complicated sales tax laws. Read More

Late Invoices/ Underpaying Sales Tax

 Jun 10, 2015 Sales Tax DataLINK

What do you do if order invoices come in after you have already filed sales tax? Correcting tax errors can be stressful, but it is necessary in order to keep your company from suffering penalties or fines. If you discover you have insufficiently paid sales tax the best course of action is to self-report the mistake. In many cases, if the business comes forward with the mistake, a request for a waiver of penalties due to reasonable cause can be made.
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Sales Tax Software Mistakes that can Cost You Big

 Jun 05, 2015 Sales Tax DataLINK

Relying on technology for sales tax is a smart move when it comes to accurate compliance. What controllers are not told, more often than not, is that most sales tax software lack the ability to accurately identify filing errors prior to remitting a return. Most sales tax filing software lacks the safeguards needed for improved and comprehensive filing. Instead, the accountants are stuck with software that is a sales tax form generator; it just puts numbers in the boxes. As a result, businesses pay more in the long run because they are not aware of the errors floating in their ERPs that pop up on paper returns.
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