A Letter on Sales Tax from the AAA-CPA

A letter sent to Congress by the American Association of Attorney Certified Public Accountants firmly states that sellers will expend more money complying with an internet sales tax as part of the Marketplace Fairness Act than states will receive through the effort, negating the growth that the internet creates for businesses, both e-commerce and brick-and-mortar businesses. Sellers like Jane Erickson are increasingly worried about the impact the MFA might have on online businesses. In the letter, the AAA-CPA states that the hardest part of sales tax is the knowledge required about sales tax to determine sales tax information, like taxability, responsible parties, exemptions and other difficult to master concepts.

They say any “monkey” can push a button to calculate sales tax by zip code and while we agree with most of the statements made in the letter, this is where our opinions diverge. As we’ve said before, using zip codes to calculate sales tax is not reliable since they have nothing to do with sales tax jurisdictions and only have to do with postal deliveries. Using zip codes to calculate your sales tax rate will immediately create problems with compliance that will send you into trouble with a sales tax jurisdiction. Instead, using the exact location to determine where the address falls into sales tax jurisdictions is the only way, either by address information or by geo-location.

While sales tax software is easy to use, Jane Erickson brings up some relevant points in her letter about her concerns as a merchant: how can software calculate these thousands of jurisdictions out reliably and can she really count on it? Knowing that the team behind your sales tax software knows the inner workings of our sales tax jurisdictions will give you some confidence that your software is reliable. When you’re shopping around for sales tax software, be sure to ask how often it’s updated and how quickly changes are implemented for rates if that’s a concern. If reliability is more your concern, ask questions about support and what happens should something go wrong—after all, you don’t want a monkey running your software behind the scenes.

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