Using Sales Tax Liability Data In Business Decisions
Sales tax risk management in business can help you better make decisions on how to move forward with your business. Sales tax liability data regularly impacts how businesses conduct themselves on a day to day basis–or at least it should. Taking into account how changing jurisdiction rates, product classifications or even how aggressive a state is when it comes to taxability rules can affect how wise a business move is. These aspects influence your business due to the pressure sales tax compliance puts on a company’s resources; and on a broader scale the costs, commitments, and risks of becoming a retailer in different states should be reviewed. Sales Tax Liabilities to Consider When Changing Your Business Business actions and sales tax liability are directly proportional. That is to say, a business with more activity will most likely have greater sales tax liabilities. This is why it is important to examine how your sales tax liability will be affected by certain actions and if your business is prepared to handle the results.
In truth, many activities can affect a business’s sales tax liability. Doing your research and understanding the sales tax laws for your area is your sales tax jurisdictions. That being said, here are four common aspects of sales tax data you should consider before making a business decision. Sales Tax Nexus Expected business activities such as physical storefronts, employees, order processing, or storage can establish
nexus. However, there is an expansive list of other activities, such as independent agents or deliveries, businesses perform that can establish unexpected nexus. Nexus will dramatically affect how and where the business must collect sales tax. This is why it is important to examine how individual states treat nexus and if your business’s desired actions can result in unwanted sales tax liability.
Once established, nexus is permanent, so make sure your expansion strategy includes a sales tax solution to handle new sales tax collection and filing burdens. Sales Tax Rate Changes Keeping up with the always changing sales tax rates requires on-going effort for any business. Even businesses that rarely conduct business outside of their established nexus can experience sales tax rate changes within those locations. Before making a sale, even in a place where you think you know the rates, double check to ensure compliance. Failing to maintain current data regarding sales tax rates can result in heavily error books that will not pass an audit, if one were to occur, and calling a client to collect more sales tax does not help customer relationships. Technology can help immensely in this respect, a good sales tax software system can automatically determine jurisdiction rates as well as identify possible errors in minutes that would take a skilled accountant days. Aggressive Taxability Rules The definition of taxable goods and services is always expanding to include more and more products.
Many business make easy taxability mistakes because of changes in taxability. Incorrect understanding of the rules pertinent to your business can leave you with little protection in the event of an audit. States routinely change taxability rules, but they also amend their existing rules by issuing restrictive or otherwise aggressive rulings, opinion letters, bulletins and other informational publications. These announcements need to be filed and kept up with so you know your business is collecting the correct sales tax. Sales Tax on New Products For growing businesses, new products or services present new challenges as existing sales tax procedures and solutions must be modified to meet the needs of the new product or service line. Before deciding to offer a new service of product it is a good idea to research how it will be taxed in the areas where your business has nexus and how that information will affect your current sales tax solutions and liabilities. Sales Tax DataLink understands how difficult compliance can be at times so we offer a free evaluation to our readers, letting you see how the software works with your own data. We also offer outsourcing options that save you time and money by letting us do all the work.
National Sales Tax The idea of a national sales tax has once again been introduced as a bill in Congress. The Fair Tax Act of 2023 is currently being considered in the House. This bill would, if passed, abolish the Internal Revenue Service, repeal...
Sin tax A sin tax is a type of sales tax intended to discourage people from buying a particular item. An extra tax on the purchase of cigarettes, soda, or alcohol may be intended to keep consumers from buying as much if these sinful items -- oral least...
The GAO speaks up on remote seller sales taxes The Government Accountability Office is responsible for providing important facts to Congress so they can make the best legislative decisions. They have just released a report on the question of sales tax...