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. Some key areas to consider are the following:
- 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 additioal state or local jurisdictions.
- 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.
- 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.
This can be a lot to manage, especially if your full job isn’t tax compliance, or economic nexus has brought on new headaches for your business to manage. Instead of over-burdening staff, or hiring new team members to manage the process, many are looking for outsourced resources. If you’re looking for a way to get sales tax compliance off your back, talk to us! With TaxConnex, it’s all on us. Contact us to learn more.
Looking for more information like this? Check out our eBook, The Guide to Getting Sales Tax Right, for further data on the ins and outs of filing and remitting sales tax, or understanding where you have nexus and when your products are taxable. Click here to download the guide.