How to Improve Your Sales Tax Procedures
When looking to save money and reduce risks with sales taxes, companies should focus on four basic areas of sales tax compliance—Sales Tax Collection, Purchasing, Audits and Technology and Outsourcing. Here are fast and full-proof sales tax tips to follow in each of these areas.
Sales Tax Collection
The three keys to managing your sales tax collection efficiently are sales tax nexus compliance, taxing accuracy and exemption certificate management. Be sure you know where you have nexus and register properly. Stay up to date on which products are taxable versus not taxable. Finally, have a process in place to manage exemption certificates, including how to collect them, store them and validate them.
Managing sales and use taxes on the purchasing side of the business should focus on four key areas. First, have a process in place to manage sales tax exemptions. For most industries, exemptions are complicated and many money-saving opportunities are missed by overlooking new or changing tax laws. Second, be sure you have a system for accruing use tax. More than one person should be trained to decide if a purchase needs to have use tax paid. Specific directions for remitting use tax need to be developed and followed. Third, stay on top of tax laws and train staff about new and changing regulations. Finally, if your company uses P-cards, be sure to have a process in place to pay use tax on transactions using P-cards.
Most companies have been and will continue to be audited. While there’s no easy audit, you can take steps, both before and during an audit, to make the process less painful. Put together an internal team to review your policies and procedures. Hire sales tax experts to conduct an annual review of your processes. Be actively involved in the audit process. Don’t be afraid to disagree with findings and speak to a supervisor about your concerns. Remember, they have the power to negotiate.
Technology and Outsourcing
Sales and use tax has gone high tech, but travel down this road cautiously. Understand your strengths and weaknesses and make sure the technology compliments your company’s needs. Remember that technology is only as good as the internal resources that manage it.
Sometimes the best decision is to hire sales tax specialists to get you on track and manage your processes. Sales tax firms offer a variety of services to fix problems and train personnel to manage procedures. Know which questions to ask and how to identify the right consultant for your unique needs.
If you are interested in learning more about improvements you can make to your company’s sales tax procedures, start by checking out these 20 signs that you may need a sales tax tune up.