How to eat an elephant

 

 

 

 

 

Sometimes the best way to resolve sales tax risk is one small bite at a time.

I'm often brought in to help identify sales tax risk areas for a business and recommend the appropriate steps to minimize that risk.  For a myriad of reasons - misdiagnoses of sales tax nexus or not realizing a product/service is taxable - a business will often realize they should have been collecting sales tax in a jurisdiction for a period of time but have not.  Regardless the reason, the risk assessment comes back with a multitude of states where thousands of dollars are owed in each state.  The magnitude of the issue can be overwhelming and paralyze the business owner.

The approach I've counseled my clients with is a smallest to largest approach.  Start with the state with the least exposure, get current and start filing there.  Then tackle the next state and so on.  In some situations, it may even make sense to proactively register in the states with the largest exposure, start filing prospectively in an effort to keep the exposure from growing, and then later participate in a voluntary disclosure or amnesty program available to current tax payers.

In addition to whittling away at your exposure, you can demonstrate a proactive approach to resolving the issue when or if another state approaches you.

For specific strategies and advice for managing your sales tax risk, please contact me or one of my partners at TaxConnex.

Brian Greer

Written by Brian Greer