Retail sales and use taxes are set by local jurisdictions. This means that state, county, and towns can add, subtract, or change tax rates. The only way for a business owner to know about such changes is to read communications from the taxation body, such as emails or letters, or to have a friendly accountant who proactively sends you updates.
For a business owner, it can be a big challenge. Fortunately, Avalara offers several tips to help you navigate the ever-changing waters of sales taxes.
Tips for Managing Sales Tax
- Find Your Nexus
A sales tax nexus refers to the “sufficient physical presence” requirement that dictates whether or not your business is subject to sales tax. The criteria for nexus include:
- Physical presence, such as owning a building, office, warehouse or another asset in a state or county.
- Employee location, especially if the employees conduct business with clients in an area. This may also include delivery drivers employed by your company, or employees conducting work at a client located in another state from your offices.
- Event attendance, such as regularly selling products at a major tradeshow, may be considered grounds for the nexus.
- Advertising and affiliates may trigger nexus. Check with advertising and affiliate laws in your state and in the affiliate or advertiser state, as this may vary considerably between jurisdictions.
It’s important to determine your taxation nexus to avoid penalties and fees. You may need the help of a CPA or tax specialist to determine proper nexus.
- Stay Up to Date on Laws and Regulations
Regularly check your state’s Department of Taxation website for news, updates, and changes to existing laws. Subscribe to their emails or blogs. Read your mail (you’d be surprised by how many people throw out mail from the DoT thinking it is junk mail.) Do your best to keep up with the laws so that you can follow them to the best of your ability.
Avalara’s blog offers a nationwide look at changes in taxation rates. You may want to bookmark it and check it regularly.
- Automate Tax Calculations
Software offers many advantages, including the advantage of automatically calculating tax rates. Avalara software offers automated tax rate calculation which takes the burden off your accounting department and helps you focus on what matters. By automating tax rates, you can use your time to focus on revenue generation.
- File on Time
Late filing can be the biggest headache of all for a small business. Set reminders in your calendar, and file all of your tax paperwork on time. If your state offers online filing, as most do these days, set up your account and link your bank account so that you can pay any taxes due quickly and easily.
- Understand Tax Exemptions
If your business has a tax-exempt certificate, keep it in a safe place and make a copy to keep on your computer. State tax exempt periods, such as tax exemption for clothing sales during back to school or other special events, should also be noted on your calendar and accurate records kept in the event you are questioned on them.
It doesn’t take a big effort to make managing your sales taxes easier. With planning, use of the proper accounting software, and reminders on your calendar, you can keep up to date with changes and file on time, every time. Consistent effort pays off when it comes to sales tax compliance.
Accounting Systems, Inc. (ASI)
Accounting Systems Incorporated (ASI) offers Avalara Tax software that integrates with accounting and financial management software, ERP and cloud-based ERP. Software such as Acumatica ERP and Sage 100 can provide the time-saving information that you need to grow your company. For more information, visit our website, or call us at 803-252-6154.