Plenty of businesses incorrectly assume they have sales and use tax handled because their sales tax process has worked for them in the past—and as a result have incurred penalties and fines. However, as a business grows its sales tax obligations become more difficult to manage effectively.
Some activities that increase the difficulty of complying with changing sales tax rules include:
• Selling into new states
• Selling over the Web
• Selling new products or services
• Deploying new ERP or POS software
• Failing to adapt compliance activities to changing rules and regulations
As Congress reconsiders federal legislation to require remote sellers (including online retailers) to collect sales tax, companies might find themselves on the wrong side of an audit notice. Keeping pace with the vast array of tax requirements requires determination, intelligence, and the right tools.
The following chart illustrates the process many companies go through before addressing the challenges of sales tax compliance. The truth is many don’t bother addressing it until the auditor appears or the tax notice is received.
Stages to Sales Tax Automation:
By underestimating the complexity of sales tax, many companies unwittingly increase their risk of audit. As businesses begin operating in several states, or providing taxable services, or discover through a tax notice that they’ve unknowingly overlooked a tax obligation, they quickly learn that managing sales and use tax compliance is far more complicated than it first appears.
We recommend the following:
1. Assess whether your current systems are properly addressing sales tax complexities. Have you had any negative audit findings, or paid any related fines or fees?
2. Follow best practices used by other similarly sized companies. Do they have a system for addressing sales and use tax compliance that you could replicate?
A few of the states that enacted related rule changes in 2012 & 2013: Texas, Colorado, Florida, New York, New Jersey.
To learn more about this topic, visit https://www.avalara.com/learn/whitepapers/10-tips-4-former-state-tax-auditors/
To learn more about automating sales tax in SAP Business One, visit: https://www.avalara.com/learn/videos/avatax-sap-business-one/
By Jordan Friedman,
Director of Channel Development, Avalara