Once you’ve determined your requirement to collect and remit sales tax, you’ve set-up a process to charge sales tax, and you have registered with each required state, you need to consider how you will manage the return filing process.
Many automated solutions claim they manage this process for you, but when reading through these important aspects, you may realize you’re the one left still managing the heavy lifting and each one is very important to ensure accurate and on-time filings.
Keep reading for 5 pieces of your sales tax process that we think are crucial to maintaining compliance.
- Tax Data Reports - In a perfect world, all of your sales tax calculations will be managed in one system, and you will be able to produce a single report each month that provides details with all of your sales and use tax liabilities. However, the reality is that businesses grow, they acquire other businesses, they change accounting systems, they launch new e-commerce platforms - all resulting in different sales tax processes. Be sure you have a process to gather the applicable data each month and reconcile this data to your general ledger before you start the filing process.
- Tax Calendar - It’s critical to maintain an accurate tax calendar that reflects where your business is registered for sales tax purposes, the filing frequency of each return, the e-file login credentials, and other state-specific information. This tax calendar is not a static item, it will need to be maintained and updated over time as your filing frequencies may change or you may register in additional state or local jurisdictions.
When using an automated solution, you are the one responsible with updating the software to follow any frequency updates. It is important to ensure you have someone available to monitor for notices and changes so that the system can be updated.
- Online vs. Paper Returns – You should have a process to prepare and file both online returns and paper returns. Most every state will be an online filing with an electronic payment. Local jurisdictions often require paper returns with a check. Be sure to understand any IT restrictions that may prevent you from accessing the states’ website and also recognize your internal deadlines to process checks.
- Notice Management – Jurisdictions enjoy sending you mail. Some of this mail may be informational but still critical. For example, you may receive a notice of a change in filing frequency from quarterly to monthly. If you miss this change, and skip two monthly returns, you will be penalized. Additionally, you may receive a deficiency notice that requires you to correct an issue. These deficiency notices generally have very tight time frames by which you must respond – 5 days, 10 days, etc. Most software companies don’t manage this process for you directly – you are the point of contact for notices and you are the one responsible for contacting support to rectify an issue or updating the system to reflect a change.
- Controls - If you are a public company or have various financial covenants, you will have to thoroughly document your process including the various controls in place that ensure the process is executed effectively each month. These controls will also have to be reviewed periodically and tested to ensure proper operation.
Even when working with a provider such as an automated software that claims to manage it all, many of these things still fall to an internal team member. Ensure when choosing your provider you pick what works best for your business. Do you have someone who can still spend a good part of their time managing filings and sales tax systems? If not – a more service focused business may be a better solution.
TaxConnex aligns each of their clients with a dedicated practitioner who manages the sales tax compliance process so the client doesn’t have to worry. Once the data and money has been received by TaxConnex – the rest is on us to ensure sales tax obligations are managed. Contact us to learn more about how we can take sales tax completely off your plate.