Your company’s sales tax compliance might not matter as much as your kid’s grades, or that Zumba class, or the price of gas, but sales tax errors can destroy narrow margins and obliterate hopes and dreams faster than Facebook changes privacy settings. Answer these four questions for a quick compliance check-up.
- Do you do business in more than one state? Various activities can trigger a sales tax obligation—even things that don’t seem relevant. These include: attendance at trade shows, utilizing a remote workforce, storage of inventory in another state, and selling indirectly using online affiliates.
- Are you correctly documenting tax-exempt transactions? Storing and managing accurate exemption certificates for tax-free transactions can give even Zen masters an ulcer. Most smart companies realize that dusty file cabinets and manual reviews no longer cut it. Inaccurate exemption certificates can trigger audit red flags, penalties and fines.
- Do you sell directly to consumers? Dude, where’s my package? Consumers are increasingly savvy to prices, inventory, shipping, and even sales tax costs. Errors at checkout (virtual or in person) can mean the difference between happy customers and a Twitter tirade or even a class action lawsuit.
- Do you calculate rates manually? ZIP codes are to accurate sales tax rates as a compass is to GPS. Speaking of GPS, related technology (geo-location) can hone in on addresses and applicable rates. ZIP codes on the other hand can vary from block to block or building to building. One ZIP code in Colorado has five different sales tax rates.
If, in reviewing this quick list, you find your blood pressure building and the cost of fuel receding into the dark recesses of lower priorities, it’s probably time to automate or outsource your sales tax tasks.
Take the first step by reading the handy infographic “The Perilous Path to Managing Sales Tax.”