October 15th ended the last major income tax due dates in 2023.

Most CPAs use the fourth quarter of the year for audit and tax planning for clients, strategic planning for the firm and of course, CPE. (Look out for our December webinar for an additional CPE credit!)

 As you are contemplating your clients’ needs and identifying tax planning for them, don’t forget about sales tax planning as well. Most likely, your clients’ businesses are changing and growing with new markets and new products/services. Both of these changes can directly impact your clients’ sales tax responsibilities.

Here are some potential planning projects that can really add value for your clients so they can head into 2024 with a stronger foundation of where they are with sales tax:

  • Nexus review: Determine if the new markets are creating sales tax nexus in new states. Don’t forget that factors that create sales tax nexus are different from the factors that create income tax nexus. It is much easier to establish sales tax nexus, so make sure your client is planning for its growth with a nexus study. Also consider the fact that employees can cause an impact on physical nexus. As more businesses hire remote employees, they may be creating a larger nexus footprint.

You can monitor economic nexus thresholds with our state map Click here  

  • Taxability review:   Determine if the new products and services are subject to sales or excise tax in any of the states where there is nexus. Pay particular attention to how the products and services are described in marketing material and on invoices to customers. Sometimes the product or service may not seem substantively taxable, but the form in which it is described paints a different picture. Sometimes a client with sales tax nexus and taxable sales may need to enter into a voluntary disclosure agreement to help mitigate the prior period sales tax risk.

Taxability reviews can be especially important if they have grown into new states that may tax their products/service differently or if they’ve acquired a new business or product that may have different taxability than their normal line of business.

  • Exemption certificate inventory: Review your clients’ exempt customer lists and ensure they have adequate exemption certificate documentation. Too many taxpayers incur unnecessary sales tax expense because they don’t have the proper paperwork to show a customer that the transaction is not taxable.

When you are talking to your clients about areas of risk and exposure, don’t forget to consider sales tax.  If you’re looking for more questions to guide your sales tax discussion for end of year planning, check out our new infographic!

If significant risk or sales tax growth is found during these reviews and it is more than you want to manage on your own, look to TaxConnex as a non-competitive partner to alleviate the burden of sales tax compliance for your clients. Click to learn more! 

Robert Dumas

Written by Robert Dumas

Accountant, consultant and entrepreneur, Robert Dumas began his public accounting career on the tax staff at Arthur Young & Co., followed by a brief stint at Grant Thornton. In 1998, Robert founded Tax Partners, which became the largest sales tax compliance service bureau in the country, and later sold it to Thomson Corporation. Robert founded TaxConnex in 2006 on the principle that the sales tax industry needed more than automation to truly help clients, thus building within TaxConnex a proprietary platform and network of sales tax experts to truly take sales tax off client’s plates.