The expanding and ever-shifting landscape of sales tax covers more than 11,000 taxability rules and jurisdictions. And it’s much more complex exceeding our imagination. Ensuring compliance and adhering to latest upgrades and updates in the sales tax arena may seem to be a nightmare.
Sales tax counts as the biggest source of revenue for states. If misunderstood and not complied properly then it can turn out to a tremendous burden. The nitty-gritty of compliance is not the wimp’s cup of tea. After all, compliance doesn’t just involve finding the right tax rate, number crunching and spreadsheets.
Sales tax brings up new stories and new chapters every day. Inefficient understanding of sales tax compliance and associated updates can injure some of the imperative business operations. The expansion of any business firm or organization is associated with the inclusion of new distributors and locations. Keeping up with the laws in each state and jurisdiction can be a time-consuming and risk prone endeavor.
Let’s take a look at vital elements of sales tax compliance in a nutshell:
Table of Contents
Smart tax managers need to thoroughly evaluate the sales tax constraints. It commences with the understanding of where the business is operated, where to register, compile and remit sales tax.
This involves following tasks:
- Recognize the current registered location.
- Ensure tax calculation system is enabled with tax collection.
- The expansion of company’s other functional areas that may need further tax registration and reporting constraints.
- Monitor and control modifications in products, market, location or geography that stimulate additional responsibilities.
Collecting the right and exact amount of sales tax is extremely important. The compliance and transactions can go erratic leading to unsatisfied customers and disturbed auditors with a stream of faulty charges.
Stay on track with the following suggestions:
- Existing avenues to tax exemption and calculation procedures must be reviewed.
- Recognize how services and products are levied upon – comprising the practice of tax vendor-provided system codes and tax categories.
- Recognize the procedure in which tax divisions are allotted to definite billing codes or tax mapping process.
- Identifying how tax credits are used and integrated into tax reporting procedure.
- Interpreting how customer exclusion and resale certificates are obtained and accessed, comprising the verification process of the relevant documents.
- Documentation of flow of tax charged from transaction to tax form.
The next and most crucial aspect of sales tax compliance is where, when and how to report and dispatch sales tax to the right authority. The best that works are exact collections and rigid systems validated by well-documented procedures, if the form is sent late.
Let’s take a look at some of the reporting suggestions:
- Record and organize the details of current ‘tax calendar’ – Company registered account of local and state jurisdictions, along with fundamental filing requirements (prepayment requirement, filing frequency, return type, etc.).
- Record how sales and use tax charged and reported is documented in financial reporting system(s), comprising GL accounting and distribution.
- Recognize supplemental reporting concerns such as consumers use tax reporting – comprising the nature of the data sources used and the existence of procedures to justify vendor-charged tax in the purchasing procedure.
In order to stay ahead of the sales tax graph add to your sales tax guidance cart some more tips:
Learn about your states:
If your business functions in several states, giving a comprehensive look on a semi-regular basis can help to earn profit. Keep a record of new compliances and rulings. Many states grant subscription to their websites.
Keep on exploring:
Scroll through the blogs, subscribe, and stay informed about important legislation to strengthen your sales tax logic muscle. Go off the Facebook, Twitter and LinkedIn page. Sometime googling sales tax can help you find a gem.