Contributor: Tiffany Rodi | Sales & Use Tax Senior Manager
Keeping Up With the Ever-Changing Sales Tax Landscape
Sales tax compliance is a complex and dynamic area that requires constant attention. Collecting and remitting sales tax can be time-consuming and confusing, especially if you operate in multiple states. Failing to do so can lead to errors, audits and fines that can be costly for businesses.
Many companies rely on sales tax software to help automate and streamline the process. However, even when using the most advanced technology, frequent attention is needed.
Sales tax software is a highly advanced program integrated into your ERP or shopping cart. It automatically calculates the sales tax due on a transaction based on a variety of factors, such as the location of the sale, the type of product or service being sold and any applicable exemptions. This can save businesses a lot of time and effort when evaluating sales tax compliance.
Why "Set It and Forget It" Is a Dangerous Mentality
Although adopting a "set it and forget it" approach may be tempting once the software is implemented, this mentality can be detrimental to a business. With business growth and evolution, the software should always reflect the company’s changes.
Not doing this can cause errors, audits and fines that may be expensive for your business. It can also lead to customer service problems, putting you at a competitive disadvantage. Regular sales tax software checks are important to prevent these issues.
Impact of Changing Nexus Footprint
A company's nexus footprint is one of the most significant changes that can impact sales tax. Nexus refers to the connection between your business and a state that allows that state to require you to collect sales tax.
Your Nexus footprint can change for a variety of reasons, such as hiring new employees in a state, expanding into new sales territories or simply revenue growth. Each of these impacts your sales tax responsibilities. Sales tax software needs to always reflect your current nexus footprint.
New Products & Services
As companies add new SKUs and services to their products and services, they must be mapped within the software to produce accurate sales tax calculations. Failure to map frequently leads to errors in tax calculations. These errors can either be under-collecting sales tax, which puts your company at financial risk, or over-collecting, which is a significant customer service issue.
New Customers
Many customers are exempt from sales tax for a number of reasons — resale exemption, product use exemption or even the type of customer they are. Once again, sales tax software needs to reflect customer exemptions; otherwise, your company is at a competitive disadvantage to competitors that are charging tax correctly.
Do Not Wait Until It Is Too Late
Implementing sales tax software is not a one-and-done solution. Without ongoing attention and maintenance, the company faces financial risk for under-collecting or customer service issues for over-collecting.
Your Guide Forward
Cherry Bekaert’s Tax Software Assessment evaluates your current configuration against your business model and identifies any changes that need to be made. Our team looks at sales tax collection, product taxability, accounting software and sales platforms integration, exemption certificate settings, tax return configuration, and more. With our help, you can have peace of mind knowing that your sales tax software accurately reflects your business operations. This allows you to focus on your business, not on sales tax management.
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