I like it because it fits a compulsion I have to clean up messes and make things fit into their proper boxes. Nationwide sales tax laws provide unlimited opportunities for businesses to mess up, so it makes sense I would enjoy it so much.
In November my blog gave you many tips to get ready for the new year. Now the new year is here and changes are in effect. Are you ready?
ERP and sales tax automation firms are quick to point out their “push button” ease of use. They sell the easy button solution and many taxpayers are happy to buy it. Until they realize it’s not so easy.
We’ve lost clients in the past – not related to our service at all – but based on the belief that they can fully automate the sales tax process with the push of a button. Sometimes these decisions get made a level or two above the people that are left filing the sales tax returns and managing through the exceptions. We’ve had some of these same clients come back to us after they realize that sales tax compliance is rarely compatible with a “push button” system.
When we say this, we are referring to the fact that sales tax cannot be fully automated due to the abundance of “gray” areas that require real-time decision making by a human. This sets TaxConnex apart from other technology-centric sales tax compliance vendors.
Most of my 20 plus year career in sales tax compliance and consulting has been serving Fortune 500 companies and telecommunications service providers. Virtually all the Fortune 500 companies had a tax department and one or more sales tax professionals on staff and was fully informed and aware of their sales tax responsibilities and liability risks. Additionally, the telecommunications companies without a tax staff were always aware of sales tax as a part of their invoicing process. I never had to educate these clients about their sales tax responsibilities.
It’s hard to believe that Thanksgiving is next week, Christmas is in a month and then there’s the new year. Are you prepared for this holiday season? Have you thought about how you’re going to manage sales tax compliance in these shortened months?
When I first started in public accounting in 1985, there were two computers in the entire office. I worked for one of the Big 8 at the time, so this wasn’t because the firm was behind the times. This was the extent of computer technology in most accounting firms in 1985.
Back in June I posted “Most Costly Sales and Use Tax Compliance Errors.” In this blog, I described one of the errors was not filing and paying electronically.
If you’ve been following the EYE ON series, Connecticut is the first state (in alphabetical order) that has state level sales and use taxes only. The general sales and use tax rate is 6.35%. While sales tax compliance is fairly straightforward in Connecticut, there are a few exceptions.
For many businesses, when it comes to sales tax compliance, they must deal with data that is sourced from multiple systems. Businesses often have e-commerce sites and legacy invoicing systems that are configured differently. Any type of acquisition may introduce additional systems – all with different methods of tracking sales tax. The differing systems can result in data that is inconsistent in format and content.
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.
As part of an overall sales tax compliance process, effective data management along with a current tax calendar are two of the more critical aspects. What exactly is data management? As I define it here, it should be a written plan that includes the following components:
Whether you are managing a sales and use tax department, have landed on sales tax outsourcing as a strategy or you are a lone soldier and sales tax is just one of the many jobs you do, it is very important to have an up to date tax calendar.
I frequently engage with businesses to help them establish a sales tax compliance process. Setting up a sales tax compliance process includes multiple steps - identifying sales tax nexus, determining how to calculate sales tax for inclusion on invoices, managing exemptions certificates, preparing and filing returns, etc. I occasionally see businesses fall into the trap that all of the various sales tax compliance functions can be automated with technology. I believe technology has a role in the process and is necessary, but is inadequate in addressing many of the sales tax decisions that companies are required to make each day.
Why would states go through all the trouble of enacting economic nexus to grow their tax coffers...
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