Guest post by Darcy Boerio, Channel Development Manager, Avalara
Contrary to popular belief, sales and use tax compliance is not just a concern for traditional resellers. As cash strapped states look for new opportunities to collect sales tax, more and more products, industries, and services are finding themselves in the crosshairs of auditors.
All types of organizations need to be aware of the ways in which they are impacted by sales and use tax and the challenges that come with calculating, collecting, and remitting sales tax and documenting tax-exempt sales.
Here are five ways sales tax affects your business.
1. Shifting rates & boundaries. In some places, sales and use tax rates can change on a monthly basis. Combine that with illogical boundaries that are often the results of gerrymandering and can change at any time based on a political whim, and your company’s otherwise sound management and compliance efforts can be materially inaccurate.
2. Aggressive taxability rules. Keeping up with the ever changing definitions of taxable items and services – and interpretations of those definitions – can be a full time job. And you still might not get it right.
3. Regular, timely compliance obligations. Not only does it take time to prepare and file returns, keeping up with the right forms and filing frequencies is challenging. And even the slightest mistake can lead to months of corrective actions to resolve.
4. Non-taxable transactions. It is the seller’s responsibility to maintain proof of exemption in cases of exempt sales. Collecting and managing certificates takes time and can even hold up sales. But lack of proper documentation of tax-exempt sales can be costly in an audit.
5. Nexus. Many activities beyond a local physical presence can obligate you to collect and remit sales tax in a given jurisdiction. And every state defines nexus differently.
Through our partnership with our sales tax experts at Avalara, Nexxtep can help you identify key areas of risk and put a system in place to save you time and protect you from costly audits.