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How to Keep Sales Tax Compliance from Draining Your Resources

Piggybank-Money_GI-508107746-BW-MDAlmost a year has passed since the Supreme Court issued the now infamous decision in the case of South Dakota v. Wayfair, Inc. (“Wayfair”) on June 21, 2018. Economic nexus is here to stay. To date, more than 80% of states with sales tax have enacted some type of legislation requiring remote sellers to collect and remit sales tax on behalf of the state. Many companies, small internet sellers in particular, are left wondering how to comply with these new requirements while keeping their doors open and remaining profitable.

How do companies keep sales tax compliance regulations from draining their resources? Here are a few tips to get you started toward adopting affordable and efficient sales tax compliance practices.

1) Keep up with the changing economic nexus threshold requirements
The majority of states have adopted the same thresholds as South Dakota – once a remote seller reaches $100,000 in sales or 200 transactions, the seller must register with the state and begin remitting sales tax. HOWEVER, several states are adopting new thresholds. The growing trend is to eliminate the transaction threshold and raise the sales threshold. Keep up with the new and changing economic nexus laws. Don’t get caught registering with a state and having to file sales tax returns if you don’t meet the most current thresholds.

Find out which states have new nexus requirements by downloading these charts:

Cherry Bekaert's Nexus Charts

2) If you use a marketplace facilitator, know if they are remitting sales tax for you
More states are requiring marketplace facilitators to collect and remit sales tax on behalf of their third-party sellers. Don’t make the mistake of remitting sales tax when your marketplace facilitator is doing it for you. This will lead to a compliance nightmare. Also remember, some states measure thresholds by combining your sales directly to customers AND sales made through your marketplace facilitator, even if that facilitator is remitting the sales tax.

3) Handle sales tax compliance in house ONLY if the responsibility lies with trained staff
Some businesses are attempting to handle compliance on their own. Taking on this burden means less time to promote and grow your business. Assigning the responsibility to an employee with limited sales tax compliance experience is dangerous. The result could be increased risks including missed or late filing penalties, loss of timely filing discounts, incorrect reporting, and more.

4) When looking for outside help, the cheapest isn’t always the best choice
Compliance outsourcing services are popping up everywhere. Make sure these consultants are sales tax experts with experience filing sales tax returns and knowledge of the new sales tax laws. Filing returns is only one piece of the sales tax compliance puzzle. More than 10,000 taxing jurisdictions exist in the United States. Your compliance team must know where and when to file to avoid interest and penalties.

At Cherry Bekaert, we are seeing more and more companies trying to split the difference. Hire someone who has expertise when it comes to compliance outsourcing, while still providing the “after compliance” services of addressing notices from jurisdictions, tracking sales data to ensure prompt registration in new jurisdictions where thresholds are being met, and providing peace of mind in knowing you are not going it alone. Most companies need more than a tax return filing service. They need a trusted advisor whose goal is to help you remain compliant, while simultaneously allowing you to focus on growing your business and increasing your profitability. Now that’s a win-win proposition.

If you have questions, ask the Cherry Bekaert sales tax experts:
Get Sales Tax Answers! Submit your questions.

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Terrisha Pulte, CMI
Written by Terrisha Pulte, CMI
As Tax Manager in Cherry Bekaert’s Washington, D.C. practice, Terri specializes in audit defense, reverse audits, refund reviews and sales tax compliance outsourcing matters. Focused particularly on state audits, Terri’s guidance in regard to reverse audit and refund reviews has led to multi-million dollars in savings for clients in the high-tech, manufacturing, transportation, and retail industries.

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