Looking back on last week, I talked with several companies that were overwhelmed with how to address their sales tax compliance obligations. In each situation, the company was out of compliance in multiple states. The myriad of nexus issues, taxability issues, customer exemptions, registration requirements, how to get tax on their invoices, etc. had brought them to a spot where they knew they needed to do something … but they didn’t know where to begin.
In these situations, if you’re dealing with a single legal entity, then a holistic approach can be effective. If your business consists of multiple entities or divisions then it may be best to look at a specific portion of the overall business or even specific states where your risk is greatest. Regardless, taking the first step (or the first bite) is necessary.
I often simplify where to begin by providing a framework for how to proceed:
- Review your sales tax nexus footprint
- Determine the taxability of your products/services and potentially the taxability of your customer base
- Identify any prior period sales tax exposure
- Determine a remediation strategy to resolve prior sales tax exposure
- Implement your plan and get started
We’ve developed some great guides and videos that walk through each of the steps above.
The essential piece to note is that by taking no action your sales tax risk will continue to mount. Taking the first bite and chipping away at the exposure means that you are reducing your risk every day. You may not get there all at once, but getting started is key.
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