Sales Tax Compliance Pains

Sales Tax Compliance Pains

Sales tax compliance has become more demanding for companies that sell products across state lines due to the South Dakota v. Wayfair Inc. Supreme Court decision in 2018. That decision changed the rules for sales and use tax for companies selling online and offline.

What Was The Past Sales Tax Collection Process?

Historically, companies with a physical presence in one state were required to collect and remit sales taxes. However, most companies with only an online presence had no obligation to collect sales taxes for purchases made to customers in another state.

Has The Court Ruling Made The Process Easier?

Unfortunately, the rules for defining what establishes a sales and use tax obligation, known as Nexus, for each state are different. Previously online companies were not required to collect sales taxes outside their state’s jurisdiction.

Now, they are required to collect and remit sales and use taxes when a sales transaction takes place from outside their state. For any company trying to remain compliant and keep track of it all makes the process difficult.

What Has Changed With Sales Tax Collection?

With this case and its final ruling, companies must now collect and remit sales taxes to other states where they do not have a physical presence. But have enough sales revenue or online transaction volume that states they are now required to collect and remit sales taxes.

Are Taxable Sales Calculated Equally?

Some states look at sales value, sales volume, or both while others look at gross sales, yet others look at taxable sales. All of these various rules make it difficult for companies to track without proper systems in place. In fact, many companies are still doing this manually.

Unfortunately, they find it time-consuming and labor-intensive to track and file the various state sales tax returns. Besides that, companies need to keep track of which states they need to collect and remit sales taxes while keeping track of the rates each jurisdiction requires.

Why Is The Entire Sales Tax Collection More Complicated?

Different states use different rates per jurisdiction and different rates for other products. You can imagine the difficulty when a product has different tax rates in other parts of the state. It is taxable in one municipality but not taxable in another jurisdiction. How can companies keep track of all these rules?

Sales Tax Solutions

With all of these various rules, how are companies supposed to handle their sales tax needs? There are multiple ways that companies can address sales tax compliance. Some choose to do it manually, while others use some form of sales tax automation solutions.

The automated systems range from importing rates from a Service for zip codes to full-scale sales tax automation software. That helps determine which states a company must comply with and manage the taxability rules, for each product, in a different jurisdiction.

The last option is where the company’s accounting/ERP system gets integrated with a sales tax automation provider. The purpose is to get the proper sales tax rate for each transaction getting processed through the system. When the sales tax solution has all the transactions, some solutions can provide the State’s sales tax returns and may even file the returns on the company’s behalf.

Are You Using Microsoft Dynamics NAV or Microsoft Dynamics 365 Business Central?

We can help your company streamline its sales tax compliance issues. We will show you how to use seamless integration to Thomson Reuter’s OneSource™ Indirect Sales Tax solution. Intelice Solutions invites you to contact us with any questions.

DISCLAIMER

No Rendering of Advice. The information contained within this article was provided for informational purposes only. The content presented is not intended to be a substitute for obtaining accounting, tax, legal, or other professional consulting advice from a tax resolution professional (e.g., an Enrolled Agent, CPA, attorney, etc.). Presentation of the information via the internet was not intended to create, and receipt does not constitute a tax professional-client (or attorney-client) relationship. Online readers, users, and internet subscribers are advised not to act upon this information without seeking a tax resolution professional’s service first.