3 min read

5 Steps to Put Your Business on the Right Track to Maintain Sales Tax Compliance

By TaxConnex on Thu, Sep 24, 2020 @ 11:00 AM

It has been two years since the US Supreme Court passed the Wayfair decision which paved the way for states to enact economic nexus rules. At this point, the majority of finance professionals understand the need to maintain sales & use tax compliance. Most businesses have some type of process in place although it may not be comprehensive enough. What do you do when you discover you are out of compliance in some states? Or you acquire a business that has done very little to manage sales and use tax compliance?

In this blog, we’ll outline 5 steps that will put you on the right track to have your business prepped to maintain compliance.

1. Complete a Nexus Review

Nexus is determined by a physical presence OR economic presence within a state or jurisdiction. Nexus can be an evolving issue for many businesses. As your team and business grows, you could also be expanding your nexus footprint. Having a complete nexus review to understand your current footprint is key to starting the process towards compliance. You must also understand that this is not a one-time project. It is important to monitor nexus thresholds throughout the year to be sure you have not triggered nexus in new states.

2. Understand your exposure

Sales tax is meant to be a pass-through tax and thus one that should have minimal impact on a company’s bottom line. But, if you fail to collect and remit the applicable sales tax, under audit a jurisdiction will assess the tax due + a penalty + interest. This then becomes a bottom line hit to your business unless you can recoup from your customers.

If your business has previously established nexus and has not been collecting sales tax, you must determine your prior period exposure. The analysis of prior period exposure should encompass all periods where the company had nexus and taxable sales but wasn’t in compliance. For many states there is a 7-year look back period that needs to be addressed.

To gain an estimate of your liability/risk, you can use our free calculator tool, but to get the most accurate answer it is best to talk to a sales tax expert.

3. Understand if a VDA is right for your business.

A Voluntary Disclosure Agreement (VDA) is a legal means for taxpayers to self-report back taxes owed for income, sales, property, and other tax types. In exchange for voluntarily reporting the tax due, states generally grant a waiver of penalty and a limited look-back period (generally three to four years). VDAs can be effective tools to mitigate prior period sales tax exposure, but aren’t necessarily the best option for everyone.

Do your research and determine if a VDA is the best option before moving forward with the next step.

4. Register with a state to begin collecting and remitting sales tax.

Before you start collecting and remitting sales tax you need to register with the applicable jurisdictions. Through this registration process, the jurisdiction grants a license to collect the sales tax on their behalf. Registering to collect and remit sales tax generally requires submitting basic business contact information (though this can vary state to state) including a list of corporate officers, their social security numbers, and phone numbers.

5. Set up your process to collect, file and remit sales & use tax in your registered states.

This last step is really made up of several other steps. Maintaining a sales tax compliance process isn’t a one and done project. Whether you manage the process in-house, work with a technology vendor or outsource completely, there are many decisions and pieces to the process that need to be understood.

How will you calculate sales tax? Who will manage monitoring your nexus footprint? Who will maintain your tax calendar and monitor mail for notices? Talking to a CPA or working with an outsourced sales tax compliance provider can alleviate the burden considerably when managing this on-going process.

Keep reading more about how to setup and maintain your sales & use tax compliance in our eBook – Sales Tax Compliance: Your Need-to-Know Guide.

If you’re looking for some help along the way, contact TaxConnex We have a team of experts to help you navigate the many pitfalls of sales tax compliance.

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Topics: sales tax nexus sales tax compliance
8 min read

6 (Not So) Simple Steps to Sales Tax Compliance

By TaxConnex on Tue, Sep 15, 2020 @ 11:00 AM

Sales tax is complicated. Many sales tax companies will tell you it’s simple with their solution, but when you take a look at all that goes in to compliance – you will understand that no technology can fully automate or manage sales tax without a good bit of project management from your side 

Topics: sales tax compliance sales tax
3 min read

COVID Surcharges and Sales Tax

By TaxConnex on Thu, Sep 10, 2020 @ 11:00 AM

Lost sales, expenses for cleaning, more time and money for employee protection and training are just some of the reasons for businesses to claim they now have to charge extra to pay for responding to the pandemic (aka, “COVID surcharges”). In many places and for many industries these charges have become commonplace.

Topics: sales tax compliance sales tax
7 min read

Address the Mess: Looking into the Complexities of Sales Tax

By TaxConnex on Thu, Aug 27, 2020 @ 11:00 AM

When it comes to sales tax, most businesses fit into one of three categories:

Topics: sales tax compliance sales tax
3 min read

2020 Sales Tax Updates

By TaxConnex on Tue, Aug 25, 2020 @ 11:00 AM

It’s been quite the year as many businesses and lives have been put on hold. But one thing that hasn’t stopped is the need to collect and remit sales tax. Even in the midst of a pandemic, sales tax updates have continued to happen. In this blog, we will take a look at some of the major sales tax developments that have happened so far in 2020.

Topics: sales tax compliance sales tax
3 min read

Taking a Look at the Exemption Certificate

By TaxConnex on Thu, Aug 20, 2020 @ 11:00 AM

A key document of sales & use tax is the exemption certificate.

Topics: sales tax compliance sales tax
3 min read

The ABCs of Sales Tax

By TaxConnex on Tue, Aug 18, 2020 @ 11:00 AM

Sales tax nexus is the basis for all your sales tax decisions. Without nexus, you have no further obligation to a state. If you do have sales tax nexus, then you need to dig a bit deeper and understand if your products and/or services are taxable. If they are, and you have nexus within a state that charges sales tax, in most instances you should register and start collecting sales tax. Simple right? Not so much.

Topics: sales tax compliance sales tax
1 min read

6 Easy Steps to Switching Your Sales Tax Compliance Provider

By TaxConnex on Thu, Aug 06, 2020 @ 11:00 AM

Is your outsourced sales tax compliance vendor making your life easier? It's a simple question, and if your answer is anything but yes, it may be time for a change. Sales tax compliance comes with a lot of complexity and liability. You shouldn’t be paying someone to do it for you but still managing the brunt of the headaches.

Topics: sales tax compliance sales tax
16 min read

The Top 5 Misconceptions of Sales Tax Nexus

By TaxConnex on Thu, Jul 30, 2020 @ 11:00 AM

The complexity of sales tax has grown immensely in the last two years with the introduction of economic nexus due to the South Dakota vs Wayfair case You would think after two years things would have gotten easier, but that’s not really the case. Because of this, many businesses still have misconceptions about how Wayfair might affect them  not to mention cost them money and headaches. 

Topics: sales tax compliance sales tax
10 min read

Sales Tax M&A: Mitigation Options

By TaxConnex on Tue, Jul 28, 2020 @ 11:00 AM

Due to the pandemic, many businesses are in a precarious position relative to long-term survival. Some companies who previously were doing well are now in a situation in which a merger or acquisition could be their only way to survive.  No matter your situation, understanding how sales tax obligations could hinder your sale is important for any business involved or thinking about merging or being acquired

Topics: sales tax compliance sales tax
2 min read

Sales Tax Calculation Software - Do You Really Need It?

By TaxConnex on Thu, Jul 23, 2020 @ 11:00 AM

You’ve determined you have nexus and your products and/or services are taxable. Now how do you implement and actually charge sales tax? There are several ways to calculate and charge sales tax but many people lean towards letting a software handle it for them, but is this really the best solution for everyone?

Topics: sales tax compliance sales tax calculation
4 min read

How the Sales Tax Picture is Changing During the Pandemic - and Beyond

By Robert Dumas on Tue, Jul 21, 2020 @ 11:00 AM

This article was written for the Atlanta Business Chronicle Leadership Trust. To see the original post, click here

The coronavirus has upended just about every aspect of life and business. We are all adjusting to a new way to work, live, shop and more, and it is hard for us to imagine when life will go back to normal, or how many of these changes will stay with us into the future.

Tax collection is one of the many things that has changed a lot recently, starting with postponements to file and pay income taxes at the federal level and in most states.

For sales and use taxes, some states implemented various forms of relief. This included extensions to file returns, tax payment deferral, and waivers of penalties and interest in some situations. But now that most of these extensions and waivers have expired, what does this mean for your business? 

Time not on your side?

For many, the delays came as a relief, but if you didn't pay your sales and use taxes because of an extension, it's possible you set yourself up for trouble down the road. When you collect sales tax from a customer, you become a fiduciary of the state. So, while deferring sales tax payment might mean you had more funds available to run your business, keep in mind that the money collected is now due. 

State slowdowns

It is, of course, hard to predict how the current crisis will impact other aspects of sales tax compliance, such as state tax administration. Assuming some portion of a government’s employees are working from home, their response rates and ability to conduct business as usual will be impacted, resulting in delays in certain areas. Audit programs around the country have slowed or even been suspended.

The outbreak has perhaps created opportunities to work with states and gain a little leeway. If a state has you under audit, for instance, it may be willing to waive interest or penalties. States also might be willing to work with sellers of goods essential in the outbreak, such as protective medical gear, food or cleaning supplies.

Generally, sales and use tax collections mirror the general economy. I expect that collections will likely decline in the short term (perhaps over the next six months or so) and then return to pre-COVID levels in the long term. 

What changes can we expect to see?

Studies indicate that once buyers are comfortable with the online shopping experience, they’re more likely to continue shopping online. (We tend to see this after holiday shopping seasons.) Our current crisis is forcing a lot of people who historically haven’t purchased online to switch to online shopping. Expect many of these people to continue purchasing online.

After the pandemic, I believe we’re likely to have a bigger audience of consumers who will be purchasing goods and services online in a number of tax jurisdictions.

What can be done to streamline the tax collection burden on online businesses in this environment? This has been the question since the 1992 Quill decision. Later, we started to see efforts related to the Streamlined Sales Tax Project (SSTP), which has been implemented with varying success in roughly half the states.

There may be no way to simplify sales tax collection enough unless the states uniformly raise the economic nexus threshold to where the businesses affected innately have the financial wherewithal to adhere to the sales tax rules.

Online retailers and businesses should work with their local lawmakers to voice concern regarding the burden placed on small businesses, both now and in the future.

As the sales tax collection landscape shifts, there comes a significant increase in states requiring remote sellers to collect and remit sales tax based on economic nexus. That means companies may hit economic nexus thresholds in different states, bringing about new regulations and deadlines. It’s another thing for company leaders to track in these already difficult times.

At TaxConnex, our goal is to take sales tax off your plate. Now it is even more important to have a resource to help you understand your sales tax obligations. We aim to help not only our clients through this time, but you as well, even if it is only to serve as a resource to stay up to date with all the changes. Contact us to learn more about how TaxConnex can remove the burden of sales tax from your business.

Topics: sales tax compliance sales tax filing
3 min read

Top Marketplace Facilitator Questions Answered

By TaxConnex on Thu, Jul 16, 2020 @ 11:00 AM

We talk a lot about nexus and compliance processes in our content, but what about marketplace facilitators? It’s often a topic we stay away from - due to the fact that the majority of small businesses that utilize marketplace facilitators won’t need our help, but there are situations in which you still may need a sales tax professional to assist with your sales tax compliance process. In this blog we answer your top questions:

Topics: sales tax nexus sales tax compliance
3 min read

Reminder: Deferred Deadlines Looming for Sales Tax Filing

By TaxConnex on Tue, Jul 14, 2020 @ 11:00 AM

Weeks ago, state tax authorities lent a hand to companies ravaged by the pandemic and postponed sales-tax filing and payment deadlines. But that extra time is about to run out.

Topics: sales tax compliance sales tax news sales tax filing
6 min read

Get Ready for Audits as States Keep Losing Sales Tax Revenue

By Robert Dumas on Thu, Jun 25, 2020 @ 11:00 AM

This article was written with contributions by Clark Calhoun of Alston & Bird. 

Topics: sales tax compliance sales tax audits
11 min read

You Can't Solve Sales Tax Problems with Technology Only

By TaxConnex on Tue, Jun 23, 2020 @ 11:00 AM

Since the Wayfair decision two years ago (the 2 year anniversary was just this past weekend)sales tax compliance has become a major priority for many businesses. These businesses all have varying levels of knowledge on the sales tax rules and regulations, but they all have one thing in common: they want a solution to the problem, and they want it to be simple.   

Topics: sales tax compliance sales tax calculation sales tax filing