With thousands of rate, rule, and boundary changes every year and an epic legal debate over e-commerce taxation, sales tax has never been more complicated. Unfortunately, this trend will only continue to get worse, as cash-strapped states rely heavily on sales tax audits as a way to make up for their revenue shortfalls.
While the outlook can be daunting, Avalara (makers of Sage 100 ERP Sales Tax) has compiled a list of 12 things that every business should know when it comes to sales tax compliance. Here’s a peek at a few of the top tips.
- Determine If You’ve Created Nexus
Have you sent an agent or sales representative to a new state? Began delivering and installing product in a new state? Did you hire new employees that work from a remote location? Answering yes to any of these questions might mean that you’ve created nexus, and may be liable for sales tax in that state.
- Understand Taxability of New Products
Offering a new product? It’s important to identify the unique taxability laws in each jurisdiction where you have nexus and plan to sell your new product. Moving into a new state? Product taxability laws are not consistent across state lines—what may be taxable in one state, may be exempt in another.
- Verify Jurisdictions Based on Exact Location, Not Zip Code
One critical component of determining the correct sales tax rate is ensuring you know where you have liability to collect sales tax. ZIP codes are a web of streets and postal routes that can be divided and changed as areas become more densely populated.Using ZIP codes to determine sales tax rates may prove accurate some of the time … however, using a rate from the wrong jurisdiction or leaving out a special district tax can lead to audits, penalties, and other costs or hassles.
- Consider Sales Tax Automation
Sales tax audits strike terror in the heart of small business because they can be a significant drain on limited time and resources. That’s why many Sage 100 ERP customers are turning to sales tax automation to minimize the risk of audit as well as the time and effort of compliance. Contact us if you’d like to learn more about Sage 100 ERP Sales Tax powered by AvaTax.
Want More Sales Tax Tips?
Contact us for a copy of the complete guide “12 Sales Tax Tips for Small Business.” Each tip is designed to help you stay on top of the ever-changing sales tax landscape.