Is 100% Sales Tax Compliance Possible?

One of the biggest topics of discussion and goals for sales tax software is 100% compliance with sales tax laws. But if you’re a huge company that has millions of transactions every filing period, is that ever actually possible? Theoretically, you will be tax compliant if you use the right software, verify and comply with sales tax collection and rates and always stay up to date on the latest laws and changes. But actually doing that takes a lot of time and money and might not be worthwhile. The difference between 99% compliant and 100% may be a million dollar task. We’re certainly not advocating failing to collect and file sales tax properly — not by any means.

That’s something every business that is required to do should do, and “Should You Collect Sales Tax When it is Not Required?” even if you’re not required to, you might choose to do so. The penalties for skipping it can put your business under when you get caught if you’re intentionally not complying with the law. On the other hand, doing your due diligence and working in good faith towards compliance probably won’t get you to 100% compliance. It’s all about doing what you’re supposed to do to the best of your ability. If you look at “Are You Making a “Good Faith” Effort?” Target’s misstep when they changed the sales tax rate before it was time, it’s clear that even the biggest companies make mistakes.

In fact, 100% compliance can be harder for a big company than for a smaller one. 100% compliance takes a lot of time and money if you’re dealing with a lot of transactions. It’s a goal to strive for, but like all attempts at perfection, it may not be realistic. We like to talk about $10,000 solutions to a $200 problem here at Sales Tax DataLINK — if you have a $200 problem every filing cycle, it’s a good idea to try to balance it out and file correctly. After all, over time that $200 in penalties and interest can add up. But spending $10,000 in time and tools to fix a $200 problem may not be worth it. Should you expect to get 100% compliance with sales tax software? Yes. All software, including ours, is built for 100% compliance. But deciding what to do when you don’t get it depends a lot on the scale on which you operate and the risk you’re willing to take as a business. It’s all about scale.

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