How Big is Your Transactional Tax Footprint?
6 questions to assess if your sales activities are a compliance risk
At some point, you’ve probably pinpointed your company’s position on a 2x2 matrix to determine its strengths or weaknesses or its position relative to competitors. But have you ever rated your business on sales tax compliance?
Many companies get into trouble with state and local tax because they don’t know where they owe. Often, the business is growing in some way, either physically in terms of new locations or by expanding its product or service offerings, bringing on more field staff or selling through new channels such as online, at tradeshows or through affiliate programs. All of these are important growth strategies. They also carry sales and use tax implications. The more ways you engage a buyer, the more likely you are to create nexus — an obligation to collect and remit sales tax in a state where you’re now doing business. As nexus increases, sales tax gets exponentially more complex or laborious, and it can become difficult to manage with in-house resources, albeit people or systems.
Just as you are focused on bringing as much revenue as you can into your business, the states are doing the same thing. Indirect taxes makes up a large portion of the states’ coffers and they’re becoming more diligent about getting what’s coming to them. Miscalculations and failing to register or remit returns aren’t something they take lightly. Warnings are for traffic cops, not state auditors. Be found out of compliance and you’ll likely be looking at steep fines and penalties on top of any uncollected taxes.
To better understand where you may have sales tax complexity or nexus obligations, Avalara put together a self-assessment survey. Answer just a few questions about your business and sales activities and instantly get a score that will help you determine your transactional tax footprint and risk of non-compliance.
The self-assessment includes a guide to understanding how each of the four quadrants — and your score — impacts your business when it comes to sales tax. It’s a quick and easy way to uncover any vulnerabilities you may have that need addressing or even just provide peace of mind that you haven’t overlooked any obligations. You may also learn that you fall into a higher complexity, higher go-to-market risk area than you thought. Knowing where you fall on this spectrum can be helpful in determining if it’s time to add sales tax automation.
Bring the results to your technology provider and talk them about your concerns in managing sales tax. Ask about integrating Avalara AvaTax software into your billing system, ERP or ecommerce solution to handle these compliance functions automatically for you.
The 2021 sales tax changes report: midyear update
Your guide to navigating the complicated world of tax compliance and preparing for the future
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