Sales Tax Compliance Management Tips
Sales tax compliance is complicated and includes many factors. As a manager or business owner, you are the first line of defense your business has against possible sales tax errors. That means you need to be informed, organized, and prepared to educate your staff on your company’s sales tax solution methods that keep the doors open and the auditors out. The following tips focus on three categories that proactive managers know to keep an eye on; registration, collection, and reporting. Registration: Making sure that you have successfully registered in the states where you do business, collecting the correct sales tax rates where you should be collecting, and knowing where and when to remit sales tax go along with this step. Managers looking to affirm that their practices are correct can perform the following tasks.
Double Check Which States You Are Registered In:
If those states do not match up with where you are doing business or if states are missing, it is time to find out why.
Check Your Software:
Technology is a great tool if it is working. However, some automated systems have to be checked to make sure that tax collection is enabled.
Sales tax professionals will preach nexus until you are tired of hearing about it, but we assure you that state laws concerning what constitutes as business presence are always changing. Additional activities that your business could be doing may require further tax registration and change your reporting obligations.
Monitor Market Changes:
Changes in the market, products, or geography can result in additional tax responsibilities.
This step is where the majority of compliance mistakes occur. Problems ranging from damaged customer relations due to inaccurate pricing to angry auditors highlight the importance of collecting the correct amount of sales tax. Look over your current collection process with the following criteria in mind to ensure your business is on track.
Review Existing Approaches:
Better you find errors than an auditor. If your methods are working keep going, but if you are finding mistake after mistake it is time to rethink your system.
Identify How You Are Being Taxed:
How, where, and when are your products or services being taxed? Is it in every state where you do business or are you largely exempt Make sure that the answers to those questions correspond to your practices and are easily viewed in your reports.
Keep detailed records of who is exempt and who has obtained resale certificates. In the event of an audit, you will be responsible for providing this documentation, not your customers.
Clearly document the flow of tax charged from transaction to tax form. Reporting What good is an accurate, well-documented report if it is filed late? Late forms result in penalties, fines, and put you at a higher risk of an audit. That is what remitting sales tax on time and to the correct jurisdiction is so important.
Here are a few reporting recommendations:
Document The Current Tax Calendar: Know the key filing requirements (filing frequency, prepayment requirement, return type, etc) in the states where your business is registered. Identify Supplemental Reporting Requirements: Such as consumer’s use tax reporting, the nature of the data sources used, and the existence of processes to validate vendor charged tax in the purchasing process. For help with compliance Sales Tax DataLink offers both a free evaluation using our software and your data to identify possible problem areas and an outsourcing service to handle all your heavy lifting.
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