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Manufacturers: Cut Sales Tax Overpayments with Training & Teamwork

lecture_classThe best way for manufacturers to avoid overpaying sales or use tax is with training and teamwork. Why?

Sales tax laws are always being revised, especially since the Wayfair ruling in 2018. The enforcement of economic nexus by most states adds chaos to the already confusing world of sales and use tax. Manufacturers are likely finding that sales tax is appearing on more vendor invoices as these remote sellers comply with the new economic nexus requirements. Vendor invoices need to be carefully scrutinized to avoid the risk of overpaying sales tax.

The good news is that the solution is often not costly or time consuming. Training and teamwork should be the first steps to finding and fixing overpayment mistakes.

Here are five components that make up the most successful sales and use tax training for manufacturers, according to Cherry Bekaert’s sales tax experts.

Sales Tax Training for Manufacturers CHEAT SHEET (shhh!)

The main reason that manufacturers make overpayment mistakes is poor or lack of communication between the accounting department and purchasing and plant personnel.

An accounting department making sales & use tax decisions without proper input from purchasing or plant personnel is a recipe for disaster. How an item is used at the manufacturing facility is critical to determining if tax should be paid.

Often, manufacturers rely on A/P personnel to determine whether or not something is taxable. Tax appears on an invoice received by A/P and they decide if items are exempt. The fatal flaw in this theory is that more often than not, they do not know what is being purchased and how it is being used. For example, part #123 purchased from XYZ Company going to a Repairs Account is very arbitrary. Without knowing all the details, a good tax decision cannot be made. The more efficient approach would be to get purchasing’s involvement to make the tax decision and then A/P can pay the tax accordingly.

In order for purchasing personnel to be able to make good tax decisions or at least give relevant information to A/P, a focused effort needs to be given to train the purchasers on the basics of sales and use tax guidelines. Two or three hours of training by an experienced sales tax consultant can do the trick. Having key department personnel in sync will drastically improve every manufacturer’s bottom line.

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Lauren Stinson, CMI
Written by Lauren Stinson, CMI
As a Principal with Cherry Bekaert, Lauren serves as the National Leader for the Sales & Use Tax practice within the Firm’s State & Local Tax group. Based in Cherry Bekaert’s Atlanta practice, Lauren is an expert on sales and use tax issues that directly impact manufacturers, technology businesses and eCommerce sellers on the state and national levels.

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