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 lacks 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.
There are more advanced sales tax filing solutions available but keep in mind that not all technology is created equal.
Pitfalls Avoided By Validation Sales Tax Software
If you’re looking to save your company money on sales tax management while getting a higher level of sales tax compliance, here’s what to watch out for in conventional sales tax filing software.
- Applying Incorrect Taxability Rules: Different products are taxed differently and your ERP product ledger needs to be in sync. Your
sales tax software should take into account the rules your company determined for taxability and follow them in every instance. Mapping candy made with flour to confection can result in a 4% tax error. - Deciding Who Is Exempt From Sales Tax And Who Isn’t: Dealing with customers who claim to be exempt from sales tax can become a headache. It’s not unusual to receive exemption certificates 60 days after invoicing—and this can create serious filing problems and signal red flags to authorities. Most sales tax software doesn’t support exemption certificates because they don’t track sales from invoice all the way to the right return. The right sales tax software makes it easy to organize, manage, and connect all your sales tax paperwork together.
- Missing a Filing Deadline: Sales tax returns must be filed promptly, on time, and on the schedule required for your company. Did you
know that many Tax authorities are starting to publish filing notices online and aren’t sending paper notices anymore? Making a claim that I did not receive notification will not work. Weekends and holidays can also move up deadlines, making it even more complex to manage. Sales tax software should help you stay on schedule easily with built-in schedule monitoring and reminders. - Incomplete Sales Tax Returns: Your company needs to reconcile your sales tax return with your accounts—and that doesn’t happen
with sales tax software in most cases. Instead, the software simply fills in the information and moves on, blind to any errors. Mistakes can and will happen if you do not reconcile prior to filing. If you are not reconciling with every return, your odds of being audited increase. - Inaccurate Sales Tax Rates: Sales tax rates must be updated timely. It shouldn’t be up to you to make sure it’s done—but rather
your software. If you forget to update rates or your IT team falls behind, tax calculation errors will happen. Without verification that rates were correct, you’ll have no way of knowing a mistake slipped through.
We know how overwhelming sales tax rules and systems can be, especially if you have no idea where to begin. Sales Tax DataLink offers free evaluations to help consumers make the best choice for their businesses.
