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How to Be a Superhero in Sales and Use Tax


Companies are continuously looking for ways to add dollars to the bottom line. Half the battle can be cutting costs. Typically accounting and tax departments are considered overhead. What if you could find $100,000 of “lost money” for your company? Would you be a Superhero?

What if you adopted initiatives to save that kind of money? What if you changed the mentality within your company, taking sales tax from a pesky nuisance tax into a proactive initiative to save money. Would that make you a Superhero?

Cherry Bekaert works with manufacturers to reduce your sales tax burden but we also strive to give you the power to save the company significant tax dollars.

Be the First to Know
All too often we hear that the Sales Tax Department is the last to know. [We get it, you might not be the Sales Tax Department, but you may be the one responsible for sales tax.] Whether it is capital project expenditures or new products and services, much can be done proactively to lessen the sales tax burden if you get involved at the beginning of the purchasing process.

Capital Projects: Perhaps your capital project qualifies for an exemption. Do you have to apply for the exemption? Do you have to structure the transaction a specific way (break out labor and materials)? Or communicate to the supplier AND the AP department that it is exempt from tax.

New Products and Services: As your business grows, so typically do your products and services. If the Sales Tax Department is the last to know, do you have enough time to handle the due diligence and the upfront work that goes into new products and services? Are you creating new nexus obligations? Are you creating new taxable products & services? Are you now selling to a different customer base and need to collect exemption certificates? With business growth, sales tax obligations can rapidly change. Staying on top of what your business is doing is the best way to be proactive at managing your sales tax obligations.

Examining Processes on the Purchasing Side
When you are purchasing something, who is determining whether or not the purchase is taxable or exempt? Has that information been communicated to the supplier? The AP department? Has your staff been trained to know the different nuances of all the tax laws for your state?

Here’s what you can do to be proactive on the Purchasing Side.

Reverse Audits
The goal of a reverse audit is to specifically look for missed exemptions. And from our experience working with manufacturers, most companies miss a lot. Why? For many reasons: staff doesn’t understand what it is that is even being purchased, or they aren’t trained to understand the complexity of exemptions, sheer volume of transactions, and a number of other reasons.

Typically reverse audits are done on a contingency basis. It’s a win-win for you. If refunds are not identified and obtained, no cash comes out of your pocket. If money is just sitting there – overpaid, recapture it!

Process Reviews
Is your company waving sales tax red flags, attracting the attention of auditors? Wouldn’t you rather tell your CFO “we just fixed $50,000 worth of potential problems” instead of “Oops . . . we didn’t know we had problems. We just got hit with $75,000 for tax, penalty, and interest.” With process reviews, we conduct a full assessment of your sales & use tax compliance activities, giving you feedback and help to fix any lurking problems.

Have you ever trained all the people involved in the sales tax decision process? People all the way from planning & procurement, purchasing and accounts payable? Have they received the tools necessary to make good tax decisions? Have they participated in a state-specific, manufacturing-specific training for your company that addresses your processes and purchases? Consider being a Superhero for the day and give them the foundation and the education to make good tax decisions.

Being a Superhero doesn’t necessarily mean having super-human strength. But, it does mean having the vision to be proactive. Consider these steps to improve your sales and use tax processes and save your company money -- all Superhero achievements in the eyes of top management.

Here's a free checklist to help you determine if your company is making costly sales and use tax mistakes:

20 Signs It's Time for a Sales Tax Tune Up

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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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