As businesses adjust to the “new norm” of working remotely and managing cash more closely than ever, several states are postponing deadlines for filing and paying sales and use taxes, often waiving penalties and interest. In just a few examples, many states are offering 30-day extensions to file and pay, California is offering extensions of up to three months, and Maryland and Massachusetts have pushed their sales and use tax deadlines to June. (see other tax updates here.) 

You’ve determined nexus to exist for your business and understand that your products or services are taxable, but you’ve yet to comply to sales & use tax rules. What’s next?

Sales and use taxes collected on behalf of the government are considered government funds upon collection. Failure to remit taxes collected to the appropriate jurisdiction is considered a criminal offense – the parties thereto connected (including corporate officers) or contributing to the offense could face fines in excess of 50% of the tax amount…and prison.

It happened.  You received a sales tax audit notice from a jurisdiction.  What do you do?

Drop shipments are more prevalent in today’s marketplace than most realize –many purchases made online today are commonly drop-shipped to consumers, transactions that typically involve multiple states and parties. Navigating the application of sales and use taxes and related exemptions in a drop shipment scenario is tricky for both the retailer and the drop-shipper. 

Technology companies frequently engage in sales tax nexus creating activities without realizing it.  Many different activities can create “nexus”, the link that establishes the need for a seller to adhere to the jurisdiction’s sales tax rules.  And with the introduction of economic nexus in 2018, it has become even more confusing.

I’m often situations where people will ask me to explain what I do.  Once I get the initial “tax” word out of my mouth, and explain that my busy season isn’t coming up…it’s every month, I’ll get some random questions related to state sales tax – who creates it, when is the next sales tax holiday, how did it start, and have I heard of NOMAD?

The need for quality sales tax compliance support continues to grow – especially in the small to mid-market business segment.  This is due to a combination of factors including:

The Nebraska sales and use tax is imposed on taxable retail sale of tangible personal property and certain services.  The state sales and use tax rate is 5.5%.  Local jurisdictions are authorized to impose a sales or use tax on the same base as the state – local rates average 1.4%.

I had a sales call this week with a very experienced CFO for a group of start-up technology companies.   Over the course of the last couple of years, this CFO became aware of sales tax responsibilities for some of his companies and had begun building processes to identify prior period exposure and to manage the prospective sales tax compliance process. 

With all the talk about simplifying Arizona (or not simplifying as it seems from a return preparer perspective), Tennessee has slipped in a totally new e-File system that has gone live and boasts the ability to file sales and use tax, privilege tax, tobacco tax, liquor-by-the-drink tax, and television & telecommunications sales tax online.

A colleague of mine and I were recently discussing that there are some common sales tax questions we receive just about every day.  We’ve outlined some of them below:

Generally, the state of Montana does not impose sales and use tax on purchases of tangible personal property. 

However, effective 2003 Montana legislated a transaction tax on lodging/accommodations, vehicle rentals and telecommunications services.

The Missouri sales and use tax is imposed on taxable retail sales of tangible personal property and certain services.  The statewide general tax rate is 4.225%. 

Cities and counties are authorized to impose sales and use taxes for various purposes. These local sales and use taxes are generally imposed in the same manner, on the same subject, and collected in the same way as the state sales and use tax. 

However, in many jurisdictions, the local use tax rate is less than the local sales tax rate.  This is unusual in the world of sales and use tax – in almost all states and local jurisdictions throughout the country, the sales tax rate is the same as the use tax rate.  The average local sales and use tax rate in Missouri is 3.66%. 

RISE UP ATLANTA FANS – Super-Bowl Sunday is just three short days away!  While I’ve been studying up on Matt Ryan, Julio Jones, and the rest of the Falcons team, I’ve also been planning my Super-Bowl Sunday Snacks and I love some chips, salsa, and home-made guacamole.

I heard a story about Chick-Fil-A on the radio this weekend that has reminded me about the importance of service.

My apologies in advance to Chick-Fil-A and the characters in the story to the extent I get the details wrong, but I believe I am getting the moral of the story right.  Here we go…at a strategy meeting of Chick-Fil-A executives, they were discussing the need for faster growth to fend off another competitor that seemed to be growing faster at the time.  After listening intently to the discussion, Truett Cathy – the much revered and respected founder of Chick-Fil-A – stopped the conversation and stated that he did not want to hear anything else about fast growth.  He wanted to discuss how Chick-Fil-A could get better.  He said if Chick-Fil-A gets better, the market will demand they get bigger.  Based on the results, I think Truett Cathy has proven he was right!

As the founder and leader of TaxConnex, I am always trying to push for faster growth.  I measure part of our success on year over year revenue growth because businesses with fast growing revenue are deemed more valuable and exciting. 

There is definitely truth in this, but fast growth does not mean the business is getting better at what they do. 

We see this in the sales tax compliance industry, which is dominated by fast growing technology companies.  These businesses have created and built software applications using the latest technologies – e.g., “the cloud” – and developed a very appealing message of push button simplicity.  There are definitely aspects of sales tax compliance that demand and require the latest and greatest software technologies, but there is a significant aspect of sales tax compliance that also requires good old fashion service.  

It is critically important for businesses in sales tax compliance to strive to get better whether we provide technology or service.

TaxConnex is a premier service provider that uses proprietary and licensed software solutions to manage the financial risk of all or part of a business’s sales tax compliance responsibilities.  I am reminded by Chick-Fil-A that my goal for fast growth will only be achieved if we constantly get better at what we do.